vardhman

Summer internship project report on

“Export financing and foreign bank charges” Carried out at

Submitted towards the fulfillment of SUMMER TRANING (2008-2009)

SUBMITTED BY : VISHESH GARG

Information Sheet

Name of the company :- VARDHMAN TEXTILES LIMITED

Address of the company :- CHANDIGARH ROAD LUDHIANA-141001

Phone No. of the company :- 0161-2228943/44/45/46/47/48

Date of internship Commencement :- May 15th 2008

Date of internship Completion :- July 7,2008

Signatures & Name of the industry Guide :- Mrs. Seema Saggar

Designation of the industry Guide :-

Student’s Name :- Vishesh Garg

Student’s Roll Number :- 27078

Student’s E-mail ID :- [email protected]

Student’s Mobile/ residence numbers:- 09999091440

mailto:[email protected]

ACKNOWLEDGEMENT

I thank NIILM-CMS for giving me an opportunity to undertake my project work and for

giving me knowledge in field of finance during my two months Summer Internship Any

person can never do work of this nature alone.

I express my sincere and humble gratitude to Mrs. Seema Saggar for being my project

and Industry guide and educating me to make this project a Great Success

I would like to thank Mrs meenakshi for her valuable guidance and support in completion

of my project .I would express my sincere thanks to all the staff members of

VARDHMAN TEXTILES LIMITED (Mr. Rajeev , Mr. Pankaj, Mr. Rohit and many

more ………..without their support this project would not have been a success

Last but not least I would like those person This formal piece of acknowledgement may

not be sufficient to express the feeling of gratitude & respect for those who were

associated with the project & whose encouragement and ideas enriched my project

PREFACE

When everybody is providing what is expected from him, the person delivering the

unexpected to its customers succeeds in the long run. In today’s marketplace, it is no

longer enough to satisfy the customers, the manufacturer needs to delight them as well.

To conquer the modern business world one needs to be one- step ahead of its competitors.

All this might not be of any relevance if not managed properly and that is what a

management graduate is expected to deliver to the industry. However, studying the

theoretical cannot serve the purpose of young & learning managers & that’s why they are

placed in the corporate world to have its imminent view.

Summer training helps the students to view the real business world closely, which in turn

widely influences their conceptions & perceptions. I was fortunate to pursue my training

in a reputed, well established, fast growing & a professionally managed organisation.

This project report is the result of eight weeks training at Vardhmān Group, Ludhiana. It

gave me great deal of exposure & I found practical work very different from theoretical

one.

ABSTRACT

Vardhman is one of the largest textile producer in India having footprints in specialized

yarns, fabrics, sewing threads, acrylic fiber and steel

Every year Out of the total turnover of the Vardhman Group,

approximately 19.94% consists of exports amounting to Rs.489.23 crores. Majority of the

exports is L/C based with a usance period of 90 days to 120 days.

These charges are normally on account of Telex, re-imbursement and/or Discrepancies.

In the FY2007-08, Vardhman paid an amount of 154.83 lacs on account of foreign bank

charges

The Company prepares a Bank Charges Analysis Report every year to analyze the trend

in the amount of charges paid, here our main objective is to analyise these can further be

reduced .

This report contains the Bank Charges Analysis Report FY 2007-08.

http://www.vardhmansteel.com/

http://www.vardhmanacrylics.com/

http://www.vardhmanthreads.com/

http://www.vardhman.in/products_fabrics.asp

http://www.vardhman.in/products_yarns_overview.asp


METHODOLOGYBASIC METHODOLOGY:

EXPLORATORY RESEARCH USING SECONDARY DATA

TEXTLE INDUSTRY

Textile industry is primarily concerned with the design and/or manufacture of clothing as

well as the distribution & use of textiles.

During the late medieval period cotton become known as an imported fibre in Northern

Europe.

By the end of 16TH century, cotton was cultivated throughout America. In roman times

wool linen & leather clothes, was a curiosity that only naturalise had herd of & silk

imported along the silk road from china was an extravagant luxury. The use of flax fibre

& the manufacturing of clothes in northern Europe dates back to Neolithic times.

The process of making clothes depends slightly on the fibre being used, but there are

three main steps-

Preparation of fibres for-

Spinning

Weaving

& knitting.

The preparation of fibres differ the most depending on the fibre used. Flax requires

retting & dressing while wood requires carding & washing. The spinning & weaving

processes are very similar between fibres though.

Spinning wheels & spindles or part was invested in India between 500 & 1000 AD.

DURING THE INDUSTRIAL REVOLUTION:-

The textile industry grew out of the industry revolution in the 18TH century as mass

production of clothing became a main stream industry.

POST INDUSTRIAL REVOLUTION:-Power looms were shuttle operated but in early part of the 20TH century, the faster & the

more efficient shuttle less looms came into an existence. Today advances in technology

have produced a variety of looms designed to maximised production for specific types of

material. The most common of these are –

Air jet looms & water jet looms. Industrial looms can weave at speeds of six rows per

second & faster.

INDIAN TEXTILE INDUSTRY & ITS GLOBAL POSITION

The Indian textile industry witnessed growing investments during the last three years. It

is estimated that the textile industry received fresh investment of Rs. 50,000 crores during

2004 and 2006.the fresh investment will enable the industry to expand capacities and

achieve economies of scale. Our economy is largely dependent on textile manufacturing

and trade in addition to other major industries. About 27% of the foreign exchange

earnings are on account of export of textiles & clothing alone.

The textile & clothing sector contribute about 14% of the industrial production & about

3% to the gross domestic product of the country. Around 8% of the total excise revenue

collection is the contributed by the textile industry.

The textile industry in India has a strong multi-fibre raw material production base. A

technology SAVVY industry to meet the challenges ahead.

“India is presently exporting 6 billion U.S. dollars worth of garments, where as with the

WTO regime in place, we can increase the production and export of garment from 18 to

20 billion U.S. dollars within next 5 years.”

First time a separate policy statement was made in 1985 in regard to development of

textile sector.

With new investment flow, India’s cotton production increased by 57% over the last 5

years & 3 million additional spindles & 30000 shuttles less looms was installed.

The Indian Textile Industry is the second largest in the world.

It has the largest cotton acreage (9 million hectares).

It is the third largest cotton producer.

It ranks 4TH in terms of staple fibre production & 6TH in filament yarn production.

India accounts for (circa) 25% of the Global trade in cotton yarn.

It is the largest producer of Jute, the second largest producer of silk and the 5 th

largest producer of synthetic fibre / yarn.

THE INDIAN TEXTILE INDUSTRY WITHIN THE INDIAN ECONOMY

The Indian Textile and Apparel industry :

o contributes to circa 3.6% of India’s gross domestic product

o Accounts for 25% of India’s exports.(Ref 7).

The Textile Industry accounts for about 20% of industrial production.

The Textile Industry employs over 15 million people.

Textiles and Garment exports account for 39% of India’s total exports.

Globalisation has brought opportunities for Indian Textiles.

But Globalisation also brings threats which have to be addressed (particularly

from cheap imported fabrics).

If the WTO means better distribution of world trade, it will not be free for all and

only the fittest will survive.

WTO benefits for Indian Textiles will also apply to other developing countries.

The Indian Textile Industry has great potential, but great challenges ahead.

It must maximise its strengths and minimise its weaknesses.

INDIA’S COMPETITORS

India’s exports fall into the low risk category because of its well developed domestic

textile industry.

Despite this, India’s exports do face serious competition from the following countries

China

Bangladesh

Pakistan

Sri Lanka

Main markets of Indian textiles are:-

Australia

Mauritius

Bangladesh

New Zealand

Belgium

Russia

Canada

Saudi Arabia

China

Singapore

Columbia

Spain

Egypt

Sri Lanka

Germany

Switzerland

Greece

Syria

Hong Kong

Thailand

Indonesia

Ukraine

Israel

U.K

Italy

USA

Japan

Uruguay

Korea

Venezuela

Lebanon

Vietnam

Malaysia.

MULTI-FIBRE ARRANGEMENT (1974)

After the textile quota regime of quantitative import restrictions under the Multi- fibre

Arrangement (MFA) came to an end on Ist Jan 2005 under WTO agreement on textiles &

clothing.

MFA was designed to be a short term measure primarily to give industrialise countries

time to adjust to competition from imports from developing countries.

Aim of MFA was to allocate export quotas to low cost developing countries & limiting

the amount of imports to countries whose domestic industry’s faced serious challenges

from rapidly increasing imports. The expiration of MFA didn’t however mean the end of

quotas on textile & clothing exports from developing countries. The MFA is regime

served to protect newly industrialised countries like Korea, Taiwan & Hong Kong that

have now become non-competitive due to substantial increase in domestic wages.

It checks the decline of textile sector in the industrialised countries but failed to help it

revive

SWOT ANALYSIS

STRENGTHS:

Indian Textile Industry is an Independent & Self-Reliant industry.

Abundant Raw Material availability that helps industry to control costs and

reduces the lead-time across the operation.

Availability of Low Cost and Skilled Manpower provides competitive advantage

to industry.

Availability of large varieties of cotton fibre & has a fast growing synthetic fibre

industry.

India has great advantage in Spinning Sector and has a presence in all process of

operation & value chain.

India is one of the largest exporters of Yarn in international market & contributes

around 25% share of the global trade in Cotton Yarn.

The Apparel Industry is one of largest foreign revenue contributor & holds 12%

of the country’s total export.

Industry has large and diversified segments that provide wide variety of products.

Growing Economy and Potential Domestic & International Market.

Industry has Manufacturing Flexibility that helps to increase the productivity

WEAKNESSES:

Indian Textile Industry is highly Fragmented Industry.

Industry is highly dependent on Cotton.

Lower Productivity in various segments.

There is Declining in Mill Segment.

Lack of Technological Development that affect the productivity & other activities

in whole value chain.

Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and

transportation Time.

Unfavourable labour Laws.

Lack of Trade Membership, which restrict to tap other potential market.

Lacking to generate Economies of Scale.

Higher Indirect Taxes, Power and Interest Rates.

OPPORTUNITIES: Growth rate of Domestic Textile Industry is 6-8% per annum.

Large, Potential Domestic & International Market.

Product development and Diversification to cater global needs.

Elimination of Quota Restriction leads to greater Market Development.

Market is gradually shifting towards Branded Readymade Garment.

Increased Disposable Income & Purchasing Power of Indian Customer opens

New Market Development.

Emerging Retail Industry and Malls provide huge opportunities for the Apparel,

Handicraft & other segments of the industry.

Greater Investment & FDI opportunities are available.

THREATS:

Competition from other developing countries, especially China.

Continuous Quality Improvement is need of the hour as there are different

demand patterns all over the world.

Elimination of Quota system will lead to fluctuations in Export Demand.

Threat for Traditional Market for Power loom & Handloom Products & forcing

them for product diversification.

Geographical Disadvantages.

International labour & Environmental Laws.

To balance the demand & supply.

To make balance between price & quality

COMPETITOR STRENGTHS AND WEAKNESSES

Country Strengths Weaknesses

China

World’s largest Textile

Economy.

The largest exporter of textiles

& clothing (worth US $ 62

billion in 2002).

This accounts for 17% of

world trade (Textiles = 13%;

Clothing = 20%).

World’s largest producer of

Cotton.

Large obsolete production

capacities in the cotton

sector.

Low value addition.

World’s largest producer of

Synthetic fibres.

Textile sector generates 10%

of its GDP; and 20% of its

merchandise output.

Relatively low labour costs.

Bangladesh

One of the world’s largest

exporters of readymade

garments (exports of US $ 5

billion pa).

Significant presence in US

markets, due to a large quota.

Also enjoys quota free, & duty

free access to Australia;

Canada & Norway.

Its status as a least developed

country (LDC) will give it

favourable market access in

the post quota era

(01/01/2005); with preferred

facility for EU markets.

Raw material base; no

indigenous cotton

production; & relies

heavily on imported yarns

and fibres.

Inadequate infrastructure.

Leads to congestion &

delays at ports.

Inadequate

communications network.

Uncompetitive and

unreliable power supply

leads to production delays

& elevated costs.

Has mastered the garment

trade & has low cost / high

productivity in that sector.

Sri Lanka

Textile & Apparel Industry

has crucial part of country’s

economy.

It is the country’s biggest

employer in manufacturing; &

number 1 export earner.

In 2001 it accounted for 69%

of the country’s industrial

exports and 53% of its total

exports.

Relatively secure markets in

with USA; EU & Canada

through bilateral agreements.

Small domestic fabric

base.

Relies heavily on yarn &

fabric imports.

Industry is seeing decline

in competitiveness due to

its heavy reliance on quota

categories, concentration

on a few markets, inability

to develop new markets or

major purchasers because

of direct marketing

contacts.

Relatively small domestic

market, little cash

generation to support

investment in developing

export markets.

Fourth largest Cotton producer

in the world.

Highly developed garment

confection industry, & also

dyeing & finishing industry.

Limited manufacturing

base in clothing &

processing.

Limited research &

development restricting

Pakistan

Abundant labour force, which

relatively cheaper than China

& India.

diversity in product &

innovation.

CHALLENGES FACED BY TEXTILE INDUSTRY

Rising rupee brought the inherent structural weaknesses that have plagued the

industry for decades.

The textile industry suffers from low competitive position too with regard to the

availability of good quality cotton, low level of technology, poor automation, lack

of integrated supply chain, low brand image in overseas markets etc.

Infrastructural bottlenecks like the transaction time at ports, inland transportation

time, lack of initiatives by textile manufacturers to going for technological up

gradation, fragmentation of Indian textile industry etc.

Indian industry will have to become competitive by raising its level of efficiency

to meet the challenges both in international & domestic markets.

The speedy development of the technology in the world textile industry.

The substantial issues related to fibre resources i.e. energy, water, environment

etc.

And the increasing cost of HR and other.

A growing over supply pressure in the world market for apparel.

CHALLENGES:-

1. PRODUCT Products are inadequate to suit the demands of both

the international & domestic markets. The bulk of

products are medium & low quality between

Chinese made & those made in the developed

countries.

2. INEFFICIENT OPPERATION

Inefficient operation in the textile enterprises due to

historical reasons, which led to high cost

production, an excessive work force & poor

management skills, slow reaction on the customer’s

requests & old business operation made.

3. PROCESSING TECHNOLOGY

The low level processing technology- there is

excessive of production capacities for lower end

products & lack of creativity in product design.

4. AWARENESS Improve the awareness of the fashion in the textile

industry & keep up with the pace of the world.

5. RESPONSE Sharpen quick response awareness.

COMPANY’S PROFILE

Vardhman is one of the largest textile conglomerates in India having footprints in

specialized yarns, fabrics, sewing threads, acrylic fiber and steel.

HISTORY OF THE GROUP

The industrial city of Ludhiana, also known as the Manchester of India nestles the

corporate headquarters of Vardhman group. Vardhman, a household name in Northern

India, has carved out a niche for itself in textile industry. The Vardhman group was setup

in 1962 by late Lala Rattan Chand Oswal, father of present Chairman cum Managing

Director, Sh. S.P. Oswal.

At time of installation, the group had a modest capacity of 14,000 spindles which after

more than three decades of operations has increased manifolds. The group presently has

http://www.vardhmansteel.com/

http://www.vardhmanacrylics.com/

http://www.vardhmanthreads.com/

http://www.vardhman.in/products_fabrics.asp


Group Companies

GROWTH OF THE COMPANY

Company also has a strong presence in various countries like Japan, Hong Kong and EU

in addition to domestic market. Yet another forward integration project on readymade

garments is in the offing and is to be realized soon. Vardhman group is earning laurels by

exporting yarn and fabrics to international quality to several countries in west, Africa and

Far East earning valuable foreign currency for country. Vardhman group is first company

among textile industry to receive the 9002/ISO 14002 quality awards in India

PORTFOLIO

The Group portfolio includes manu11facturing and marketing of Yarns, Fabrics, Sewing

Threads, Fiber and Alloy Steel.

Various unit locations of Vardhman Group are as follows:

ST Steel

Y Yarn

C Cotton Yarn

F Fabric

MISSION

Vardhman aims to be world class textile organization producing diverse range of

products for the global textile market. Vardhman seeks to achieve customer delight

through excellence in manufacturing and customer service based on creative combination

of state-of-the-art technology and human resources. Vardhman is committed to be

responsible corporate citizen.

COMPANY’S PHILOSOPHY

Faith in bright future of Indian textiles and hence continued expansion in areas

“which we know the best”

Total customer focus in all operational areas.

Product to be of best available quality for premium market segments through

TQM and zero defect implementation

Global orientation targeting – at least 20% production for exports.

Integrated diversification / product range expansion.

World class manufacturing facilities with most modern R&D and process

technology.

Faith in individual potential and respect for human values.

Encouraging innovation for constant improvements to achieve excellence in all

functional areas.

Accepting change as a way of life.

Appreciating our role as a responsible corporate citizen.

MARKET PERFORMANCE

0

100

200

300

400

500

o Largest Spinning capacity in India - over half a million spindles.

o Largest producer of Cotton, Synthetics and Blended yarns in the country

o Largest Dyeing Capacity of Fibre and Yarn

o Largest Exporter of Cotton Yarn

o Market Leader in Hand Knitting Yarns in India

o Largest range of Textile products

o Second largest producer of Sewing Thread in the country

o Collaborations with specialist worldwide

o ERP enabled solutions for online order tracking

FINANCING OF EXPORT

The areas where finance would be essentially needed, after one gets an export order will

be:-

(1) Procuring raw material and components for manufacturing the product.

(2) Refinance facilities so as to get the proceeds of export bills at the time of negotiations

of export documents, soon after shipping the goods.

(3) Availability of funds until the export benefits are realized.

(4) Refinance facilities for long term credit are offered for the export of the product.

FINANCING OF SHORT TERM REQUIREMENTS:-

(A) PRE- SHIPMENT FINANCE:-

Pre- shipment finance is also known as “Packing credit”. It is the advance granted to the

exporter to procure, process, manufacture, pack and prepare the goods, before and till

the goods are shipped. Pre- shipment credit enables him to meet his working capital

requirement for the purchase of raw- materials and components, processing, packing,

transportation and warehousing. Packing credit is short term finance. In India pre-

shipment credit is provided by Indian and foreign commercial banks which are members

of the Foreign Exchange Dealers Association of India (FEDAI).

TYPES OF PRE- SHIPMENT FINANCE:-

The types of credit depend upon the nature of production and procurement system

concerning the commodity to be exported, which are as follows:-

(1) EXTENDED PACKING CREDIT LOAN:-

It is granted to the clients for making advance payment to the supplier for procuring

goods to be exported. Thus it is clean in nature and usually extended to the parties, who

are rated as first class, for a very short duration.

(2) PACKING CREDIT HYPOTHECATION:-

It is extended where raw materials, work in progress and finished goods meant for export

are available as security. The processing/manufacturing may be under taken by the

exporter himself or through sub contractors’ captive units.

(3) PACKING CREDIT LOAN:-

The PCI can be granted as loan in the form of pledge in cases where exporters are

required to collect/obtain the raw materials in odd o bunched lots or the raw material is

seasonal in nature and the actual & delivery schedules agreed upon by the overseas

buyer.

(4) SECURED SHIPPING LOAN:-

Once the goods are ready for shipment and exporter/supplier has handed over the goods

to the transport operator clearing & forwarding agent for dispatch and effecting the

Shipment, the advance can be granted as secured shipping loan. This is normally

sanctioned for a short period considering the time taken for dispatch of goods to port

towns and competition of shipping custom formalities. Secured shipping loan can also be

released on receipt/rail receipt from the supplier and after forwarding the same o the C&F

agent with shipping instructions from the party.

(5) COMBINATION OF CLEAN AND SECURED ADVANCE :-

Packing credit can also be given a combination of clean and secured advances

(6) INLAND/IMPORT LETTER OF CREDIT:-

Where the exporter procures goods from the sub- supplier or requires imported raw

materials, back to back letter of credit facility can be extended to him and goods/raw

materials so acquired can be taken under pledge/hypothecation by releasing pre-

shipment credit in due course.

(7) RUNNING ACCOUNT FACILITY:-

Banks may grant pre- shipment finance for exports of any commodity on the following

conditions:-

(a) The need for running account facility has been established by the exporter to the

satisfaction of the bank.

(b) The exporter track record continues to be good.

(c) The letter of credit or firm order should be produced within 30 days.

(d) The packing credit amount should be maintained separately and not mixed with

normal current account or cash credit account of the customer.

(8) LETTER OF CREDIT OR FIRM ORDER:-

Pre- shipment credit facility can be given on the products of sufficient evidence of export

order like cable, telex, irrevocable and confirmed letter of credit. It can also be given

under the ‘red clause letter of credit’ which means at the instance and responsibility of

the foreign bank establishing the letter of credit.

(9) ADVANCE AGAINST DUTY DRAWBACK:-

Duty drawback refers to the import duty paid on raw materials or components for export

or the excise duty paid on the items which are produced for export are repaid to the

exporter. The exporter’s funds are locked up during verification process by various

agencies. Normally, the exporter can claim the duty drawback amount (incentive) only

after the exports of goods by producing necessary documents. But bank may finance

against incentives permissible to the exporter at the pre- shipment stage or at the post-

shipment stage.

(10) PRE SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC) SCHEME:-

For providing pre- shipment credit to Indian exporters at internationally competitive rates

of interest from authorized dealers in foreign exchange, pre shipment credit in foreign

currency (PCFC) is provided in domestic currency or foreign currency. It is available on

the basis of Confirmed letter of credit or firm export order for a maximum period of 180

days.

POST- SHIPMENT FINANCE:-

Finance and credit are available to keep not only export production but also to export on

credit under various schemes for post shipment credit and for deferred payment. Post-

shipment finance means any loan or any other credit provided by any institution to an

exporter of goods from India from the date of extending the credit after shipment of

goods to the date of realization of export proceeds and includes any loan or advance

granted to an exporter, on consideration of or on the security of any drawback or any cash

receivable by way of incentives from the government forms. Post shipment finance is

provided against shipping documents. It is provided against duty drawback claims.

TYPE OF POST SHIPMENT FINANCE:

(1) PURCHASE OF EXPORT DOCUMENTS:

Purchase or discount facilities in respect of export bills drawn under confirmed export

order are generally granted to the customer who are enjoying bill purchase or discounting

bills from bank on the basis of security offered under letter of credit or depending upon

the credit worthiness of exporters as well as importers or generally on the basis of ECGC

(Export Credit Guarantee Corporation) guarantee fixes the limits for individual

customers. At the time of purchasing the bill bank has to ascertain that this drawee is not

exceeded so as to make ineligible for claim in case non payment.

(2) ADVANCE AGAINST EXPORT BILLS SENT ON COLLECTION:

This facility is another form of post shipment advance and is sanctioned by the bank on

the same terms and conditions as applicable to the facility of negotiation/ purchase/

discount of export bills. A margin of 10% to 25% is stipulated in such cases. In such

cases the export bills are sent by bank on collection basis. The bank may accommodate

him by allowing an overdraft or granting a loan up to a certain percentage of the value of

the bill under collection. The types of facility is however, not very popular. Post shipment

advance can be granted against bill of collection basis in the following situation:

(a)When the accommodation available under the foreign bills purchase limit is

exhausted.

(b) When same export bills drawn under L/C have discrepancies.

(c) Where it is customary practice in the particular line of trade and in case of export to

countries where there are problems of externalization.

(d) The currency in which the bill is denominated is ruling low, but expects it to gain

value soon.

(3) ADVANCE AGAINST GOODS SENT ON CONSIGNMENT BASIS:

When the goods are exported on consignment basis means where payment is receivable

subject to sale of goods. The goods are exported at the risk of the exporter for sale and

eventual remittances of sale proceeds to the exporter by the agent/ consignee, bank may

finance against which transaction subject to the customer enjoying specific limit to that

effect. The overseas branch/correspondent of the bank is instructed to deliver the

documents against “thrust receipt”.

(4) ADVANCE AGAINST UNDRAWN BALANCE:

In some trade, exporters do not draw bills for the full invoice value of goods and leave

some part undrawn for payment adjustment due to the difference in rates, weight, quality

which is ascertained after approval and inspection of goods. Banks keeping some margin

do finance against undrawn at 13% rate of interest up to 90 days that is maximum time

limit which the proceeds must be realized.

(5) ADVANCE AGAINST RETENTION MONEY:

Banks also grant advances against retention money, which payable within one year from

the date of shipment, at a concessional rate of interest which is 13% up to 90 days. If such

advances extend beyond one year, they are treated as deferred payment advances which

are eligible for concessional rate of interest.

(6) ADVANCE AGAINST CLAIMS OF DUTY DRAWBACK:

Custom houses at Delhi, Mumbai, Calcutta, Hyderabad have evolved a simplified

procedure under which claims of duty drawback are settled immediately against

shipment and no funds of exporters are blocked. However, where settlement is not

possible under the simplified procedure exporters may obtain advances claims of

duty drawback as provisionally certified at the rate of 13% p.a. for period of 90

days

HOW DOES VARDHMAN FINANCE ITS EXPORT???????

1) Packing Credit: It is the option available to the company in order to facilitate the

exports of the company . This consists of pre-shipment and post-shipment credit.

The bank offers different limits for both these loans . While the pre-shipment

credit is for filling the gap between the shipment and actually receiving the

payment from the customer . This may be in Indian rupees or foreign currency .

As soon as the shipment is made ,the pre-shipment is nullified and the same

amount is made outstanding as post shipment credit.This can be availed in two

forms:

Packing Credit: They take loan against the exports of the company. The export cell liquidates these loans by discounting the export bills from the bank.The interest at this loan is approx 7-8%.

Packing credit in foreign currency: This is exactly the same as PC .The

difference is just, that PCFC is in foreign currency. The interest at this

loan is approx 4.5%.But in this loan we need to face the foreign exchange

rate fluctuations.

The amount of loans raised for exports in last 2 years is given as under:

Amount of loans raised in 2006-07(in Rs. Crores)

Amount of loans raised in 2007-08(in Rs. Crores)

PC/PCFC 191 408

METHODS OF PAYMENT

To succeed in today’s global marketplace and win sales against foreign competitors,

exporters must offer their customers attractive sales terms supported by appropriate

payment methods. Because getting paid in full and on time is the ultimate goal for each

export sale, an appropriate payment method must be chosen carefully to minimize the

payment risk while also accommodating the needs of the buyer.

• To succeed in today’s global marketplace and win sales against International trade

presents a spectrum of risk, which causes uncertainty over the timing of payments

between the exporter (seller) and importer (foreign buyer). • For exporters, any sale is a

gift until payment is received. • Therefore, exporters want to receive payment as soon as

possible, preferably as soon as an order is placed or before the goods are sent to the

importer. • For importers, any payment is a donation until the goods are received. •

Therefore, importers want to receive the goods as soon as possible but to delay payment

as long as possible, preferably until after the goods are resold to generate enough income

to pay the exporter.

Cash-in-Advance

With cash-in-advance payment terms, the exporter can avoid credit risk because payment

is received before the ownership of the goods is transferred. Wire transfers and credit

cards are the most commonly used cash-in-advance options available to exporters.

However, requiring payment in advance is the least attractive option for the buyer,

because it creates cash-flow problems. Foreign buyers are also concerned that the goods

may not be sent if payment is made in advance. Thus, exporters who insist on this

payment method as their sole manner of doing business may lose to competitors who

offer more attractive payment terms.

Letters of Credit

Letters of credit (LCs) are one of the most secure instruments available to international

traders. An LC is a commitment by a bank on behalf of the buyer that payment will be

made to the exporter, provided that the terms and conditions stated in the LC have been

met, as verified through the presentation of all required documents. The buyer pays his or

her bank to render this service. An LC is useful when reliable credit information about a

foreign buyer is difficult to obtain, but the exporter is satisfied with the creditworthiness

of the buyer’s foreign bank. An LC also protects the buyer because no payment

obligation arises until the goods have been shipped or delivered as promised.

Documentary Collections

A documentary collection (D/C) is a transaction whereby the exporter entrusts the

collectionof a payment to the remitting bank (exporter’s bank), which sends documents to

a collecting bank (importer’s bank), along with instructions for payment. Funds are

received from the importer and remitted to the exporter through the banks involved in the

collection in exchange for those documents. D/Cs involve using a draft that requires the

importer to pay the face amount either at sight (document against payment) or on a

specified date (document against acceptance). The draft gives instructions that specify the

documents required for the transfer of title to the goods. Although banks do act as

facilitators for their clients, D/Cs offer no verification process and limited recourse in the

event of non-payment. Drafts are generally less expensive than LCs.

Open Account

An open account transaction is a sale where the goods are shipped and delivered before

payment is due, which is usually in 30 to 90 days. Obviously, this option is the most

advantageous option to the importer in terms of cash flow and cost, but it is consequently

the highest risk option for an exporter. Because of intense competition in export markets,

foreign buyers often press exporters for open account terms since the extension of credit

by the seller to the buyer is more common abroad. Therefore, exporters who are reluctant

to extend credit may lose a sale to their competitors. However, the exporter can offer

competitive open account terms while substantially mitigating the risk of non-payment by

using of one or more of the appropriate trade finance techniques, such as export credit

insurance.

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 purchased 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.

Elements of a Letter of Credit

A payment undertaking given by a bank (issuing bank)

On behalf of a buyer (applicant)

To pay a seller (beneficiary) for a given amount of money

On presentation of specified documents representing the supply of goods

Within specified time limits

Documents must conform to terms and conditions set out in the letter of credit

Documents to be presented at a specified place

PARTIES TO AND ASSOCIATED WITH THE LETTER OF CREDIT

1. Applicant

The applicant is the party who requests and instructs the issuing bank to open a letter of

credit in favor of the beneficiary. The applicant usually is the importer or the buyer of

goods and/or services. The applicant can also be another party acting on behalf of the

importer, such as a confirming house. The confirming house is equivalent to a buying

office, it acts as an intermediary between importer and exporter, and it can be located in a

third country or in the exporter’s country. The confirming house negotiates and books the

order on behalf of the importer and guarantees payment to the exporter, and often

finances the importer. When dealing with importers in a country with a foreign shortage,

for example Nigeria, the exporter may deal with the confirming house in the United

Kingdom or in other areas to ensure payment.

2.Beneficiary

The beneficiary is entitled to payment as long as he can provide the documentary

evidence required by the letter of credit. The letter of credit is a distinct and separate

transaction from the contract on which it is based. All parties deal in documents and not

in goods. The issuing bank is not liable for performance of the underlying contract

between the customer and beneficiary. The issuing bank's obligation to the buyer, is to

examine all documents to insure that they meet all the terms and conditions of the credit.

Upon requesting demand for payment the beneficiary warrants that all conditions of the

agreement have been complied with. If the beneficiary (seller) conforms to the letter of

credit, the seller must be paid by the bank.

3.Issuing Bank

The issuing bank's liability to pay and to be reimbursed from its customer becomes

absolute upon the completion of the terms and conditions of the letter of credit. Under the

provisions of the Uniform Customs and Practice for Documentary Credits, the bank is

given a reasonable amount of time after receipt of the documents to honor the draft.

The issuing banks' role is to provide a guarantee to the seller that if compliant documents

are presented, the bank will pay the seller the amount due and to examine the documents,

and only pay if these documents comply with the terms and conditions set out in the letter

of credit.

Typically the documents requested will include a commercial invoice, a transport

document such as a bill of lading or airway bill and an insurance document; but there are

many others. Letters of credit deal in documents, not goods.

4.Advising Bank

An advising bank, usually a foreign correspondent bank of the issuing bank will advise

the beneficiary. Generally, the beneficiary would want to use a local bank to insure that

the letter of credit is valid. In addition, the advising bank would be responsible for

sending the documents to the issuing bank. The advising bank has no other obligation

under the letter of credit. If the issuing bank does not pay the beneficiary, the advising

bank is not obligated to pay.

5.Confirming Bank

The correspondent bank may confirm the letter of credit for the beneficiary. At the

request of the issuing bank, the correspondent obligates itself to insure payment under the

letter of credit. The confirming bank would not confirm the credit until it evaluated the

country and bank where the letter of credit originates. The confirming bank is usually the

advising bank.

6.Negotiating Bank:

The bank which negotiates the draft or documents presented by the beneficiary or

bonafide holder is known as negotiating bank. When the bank negotiates the draft and

documentsi.e.the negotiation it gives value to such draft and documents ,not just

examination of the documents.

Bank Charges

Bank charges are the charges paid by the Company for availing various facilities from the

banks like Cash Management Service , Demand Draft Issue , Upfront Fees, Gurantee

Fees, Foreign Bank Facilities like L/C opening, L/C amendment, L/C advising, etc.. In

simple terms, these fees are called the Service Charges that the banks levy on its

customers for its operations.

The Vardhman Group is majorly into export of its thread and fabric material. Due to the

dollar depreciating in value, the company is facing a huge cost. The company is

constantly making efforts to reduce its expenses in all its other areas to compensate the

rising export cost. The Bank Charges Analysis is a major area of interest to reduce the

cost as negotiations can be done with the banks to reduce the charges levied seeing the

increasing size of the company and huge transactions. Moreover the banks also devise

new products/ facilities to make the dealings easy with the corporates and provide faster

funds.

A brief summary of all the charges paid by the company is explained below.

The bank charges levied by various banks are listed below, further with there detailed

explanation:

1. Credit Rating Charges

2. Debenture Trusteeship Fees

3. Up Front Fees

4. Forex Booking and Cancellation

5. Import L/C Bill Retirement /Collection Charges

6. Guarantee Charges

7. DD Issue

8. TT Issue

9. CMS Charges

10. Inland Bill Retirement Charges

11. Lead Bank Charges

12. Processing Charges

13. Export Negotiation Charges

14. Foreign Bank Charges

15. Early Delivery Charges

16. Other Financial Charges

The following data shows the above charges paid by the subsidiaries of Vardhman

Textiles along with the codes given to each charges for easy operation.

Credit Rating Charges: In order to avail finance from the open market, the credit

worthiness of a company needs to be rated by a recognized credit rating agency. These

agencies charge a fee for providing a credit rating, which is generally a percentage of the

amount rated subject to a minimum amount of fee.

Debenture Trusteeship Fees: Since debentures are transferable instruments, a single

contact point is needed for purposes of security creation, etc. The company appoints a

Debenture Trustee for this purpose, paying him an annual fees which might be fixed or a

%age of the outstanding amount of debentures.

Since the company has the facility of loan sanction under TUFS and the outstanding

debentures would be fully repaid in March,2008 , hence it doesn’t require funds from the

open market. This would act as a huge saving potential for the company.

Upfront Fees: When the company enters into the documentation for a term loan, the

bank charges an upfront fees, which is generally %age (usually around 1%) of the loan

sanctioned.

The company has to pay these charges only once i.e at the time of the inception of the

loan. As most of the loans had been tied up during the year against the coming

expansions, these charges are likely to be NIL in the FY2007-08.

Forex Booking and Cancellation: These are the charges levied by the banks on

booking/cancellation of the forward contarcts. Booking charges are generally between

Rs.250-1000/- per contract and cancellation charges are between Rs. 100-500/- per

contract.

The company has negotiated with the banks and these charges are likely to be Nil in the

FY2007-08.

Import L/C Bill Retirement/ Collection Charges: These charges are levied by the

banks for opening of a Letter of Credit. It basically include:

L/C Opening Charges

L/C Amendment Charges

L/C Advising Charges

L/C Transfer Charges

The company pays these charges on negotiated terms with the banks like 0.05% per

month for an average period of 3.25 months for SBOP and PNB and 0.06% per month for

an average period of 8 months against transactions in USD.

The charges can be reduced by settling with a lower flat rate for more number of

documents.

Guarantee Charges: The company is required to give gurantee for the purpose of

insurance of its properties and various statutory grarantee. The banks levy a charge for

giving such guarantees on behalf of the company.

These charges are given by the company mainly for insurance, power(HPSEB),

power(MPSEB) and for subsidy.

The corporation enjoys a concession of 50% in rates for all gurantees other than

insurance where it is 75% on grounds of higher amount involved.

DD Issue : These are the service charges levied by the bank against the issuance of

demand drafts. The charges are incurred for making various payments and also for

receiving various payments from the customers.

Currently the company is getting the DDs issued both in INR for various payments and in

foreign currency for payments of agency commissions, etc. the normal DD charges in

INR are Rs.2.50 to Rs.3.00 per thousand.

For the company to reduce its charges further, negotiations have been done with a few

private banks to issue the DDs free of cost.

TT Issue: These are the service charge levied by the bank against the telegraphic

transfer of funds which is both domestic and overseas fund transfer.

The normal TT issue charges for domestic transfers are in the range of Rs.2.50 to Rs.3.00

per thousand. In regards to TT issue charges for overseas fund transfer, a sanction of

Rs.900 to Rs.1000 per transaction is availed.

Seeking a saving potential in these charges, negotiations are been carried out with few of

the foreign/private/nationalized banks to transfer the funds free of cost. In regards to

overseas fund transfer, a flat rate of Rs.500 to Rs.750 per transaction is expected.

CMS Charge: Cash Management Service is associated with the collection of cheques

and cash. It provides its customer(s) speed, accuracy and efficiency. It ensures not only

unlocking of funds in transit, but also enhances liquidity in corporate system and enables

effective funds management. In simple words, CMS means anywhere banking. Under

this, money reaches the bank account of the company usually one day after the cheque is

issued by the customer for payment provided it is a Local Cheque. Well the beauty of the

CMS is that it makes most of the cheques a Local Cheque.

Inland Bill Retirement Charges: These are the inland bills which are sent on collection

basis to the customer’s bank for realization of payment.

The company has concessional rate of Rs.4.50 per thousand for all its documents with

SBOP in yarn and fabric business. In case of steel business, the charges has been reduced

to Rs.2.50 per thousand paid to HDFC as opposed to Rs.4.50 per thousand paid to SBOP.

Lead Bank Charges: Lead bank charges are levied by the lead bank who heads the

consortium of banks which provide working capital finance to the company through fund

based and non-fund based credit limits.

The normal lead bank charges are 0.1% of the limits sanctioned. The credit limits are

generally renewed in November every year and the charges are paid for the next one year.

The bank has agreed to give a concession of 75% on the normal bank charges.

Processing Charges : These are levied by the consortium banks towards working capital

limits( fund based and non- fund based). These expenses are levied as a fixed %age of the

limits sanctioned(as per the bank’s internal guidelines) or they are pre-negotiated with the

company.

As per the worked out terms with the banks, the company receives a concession of 75%

on the normal charges. SBOP has decided to waiver off these charges fully. Further

conciliations were made to make the charges inclusive of service tax.

Export Negotiation Charges: Export negotiation is a service offering by which the

exporter’s corresponding bank receives and authenticates the full set of export documents

submitted by the exporter, before paying for the bills and documents.

Foreign Bank Charges

Out of the total turnover of the Vardhman Group, approximately 19.94% consists of

exports amounting to Rs.489.23 crores. Majority of the exports is L/C based with a

usance period of 90 days to 120 days. Some other is on sight basis. In addition to that, a

small part of exports is on CAD/DA/DP/Advance payment basis.

The customer’s bank deducts certain charges on the realization of documents. These

charges are deducted from the amount received by the beneficiary, by an intermediary

bank and/or the beneficiary's bank. The charges relate to their role in transmitting and

processing the payment, and can vary. These are Foreign Bank Charges (FBC).

These charges are normally on account of Telex, re-imbursement and/or Discrepancies.

In the FY2006-07, Vardhman paid an amount of 154.83 lacs on account of foreign bank

charges.

NORMAL FBC

Reimbursement Charges (per document) US$30 US$40

Swift / Telex Charges (per document) US$30 - US$40

Total Charges for Clean Documents US$60 - US$80

Discrepancy Charges (only in case of discrepancy) US$50 - US$60

Total Charges for Discrepant Documents US$110 - US$140

DETAILS OF DISCREPANCIES

A significant portion of the foreign bank charges pertain to discrepancy charges.

Discrepancies Generally Observed In The Export Documents:

1. L/C expired.

2. Late shipment.

3. Photo copy of courier receipt presented

4. Late presentation

5. Certificate of origin not legalized.

6. Beneficiary differs

7. Name of the manufacturer not indicated on certificate of origin.

8. Bill of lading not showing L/C issuing bank’s name & actual port of loading.

9. Packing list not indicating that goods are packed in standard export packing.

10. Unauthorized carrier issues bill of lading.

11. Declaration of no wood material not presented.

12. Fumigation certificate not presented.

13. Shipping company not showing ship mark.

14. Beneficiary certificate not as per L/C.

15. Packing List not as per L/C.

16. Shipping certificate not presented.

17. Alteration on shipping company certificate not authenticated.

18. Partial shipment.

19. Gross weight and contract number differs from L/C.

TOP 20 CUSTOMERS

The top 20 customers of Vardhman group along with their respective countries

according to invoice total is as follows :

CUSTN COUNTRY

NISSHINBO INDUSTRIES INC. Total japan

PACIFIC OVERSEAS TEXTILES MACAO Total CHINA

SHINKO SANGYO CO. LTD. Total japan

PROMPTEX YARNS INC. Total canada

IM INTERNATIONAL Total australia

PROSPERLINK(MACAO COMMERCIAL Total SRI LANKA

MASUMA KHATUN TEXTILE INDUSTRIESLTD Total BANGLADESH

OCEAN LANKA (PRIVATE) LIMITED Total SRI LANKA

CHORI CO. LTD. Total japan

FOUNTAIN SET LIMITED Total HONGKONG

SERVIFIOS IMPORTACAO E EXPORTACAO- Total PORTUGAL

AUSTRALIAN WEAVING MILLS Total australia

SACOTEX YARNS N.V. Total BELGIUM

GOLDTEX LTD. Total BANGLADESH

STANDARD KNITTING MILLS PTY LTD Total australia

HOJET INDUSTRIES LTD Total HONGKONG

UNION TEXTILE DE TOURCOING Total BELGIUM

FABRIQUE DE FLANELLES SAMIR Total egypt

GULF DENIM FZE Total UAE

MARUBENI CORPORATION JAPAN Total japan

TOP 20 CUSTOMERS

.The top 20 customers of Vardhman group along with their respective countries according to FBC total is as follows :

CUSTN COUNTRY

PACIFIC OVERSEAS TEXTILES MACAO Total CHINA

NISSHINBO INDUSTRIES INC. Total JAPAN

IM INTERNATIONAL Total AUSTRALIA

AUSTRALIAN WEAVING MILLS Total AUSTRALIA

OCEAN LANKA (PRIVATE) LIMITED Total SRI LANKA

PROMPTEX YARNS INC. Total CANADA

SHINKO SANGYO CO. LTD. Total JAPAN

PROSPERLINK(MACAO COMMERCIAL Total SRILANKA

GULF DENIM FZE Total UAE

SERVIFIOS IMPORTACAO E EXPORTACAO- Total PORTUGAL

FOUNTAIN SET LIMITED Total HONG KONG

MASUMA KHATUN TEXTILE INDUSTRIESLTD Total BANGLADESH

MARUBENI CORPORATION JAPAN Total JAPAN

GENEVIEVE YARNS DYERS AUSTRALIA PTY Total AUSTRALIA

CDL FABRICS LTD. Total MAURITIUS

CHORI CO. LTD. Total JAPAN

PROEXSA S.A. Total SPAIN

MARUBENI TEXTILE ASIA PACIFIC LTD. Total HONG KONG

SACOTEX YARNS N.V. Total BELGIUM

GOLDTEX LTD. Total BANGLADESH

The Foreign Bank Charges are in totality customer based because these charges are paid

by them when they receive the desired material. Hence a separate report on these charges

customer wise along with recommendations with each gives a clear picture of the

discrepancies and ways to reduce them

OBSERVATIONSANDRECOMMENDATIONAFTERANALYSIS OFTOP 20 FOREIGN CUSTOMERS

CUSTOMER NAME: NISSHINBO INDUSTRIES INC.

IMPORTER BANK: MIZUHO CORPORATE BANK

OBSERVATIONS:

1) This customer has the highest share in the exports in value terms (i.e.

14267703.48 )

2) This customer has the second highest amount of FBC charges(i.e. $29032.45)

3) NO. OF INVOICES ARE ABOUT 262

4) Average FBC per document is $110.81

5) AVERAGE AMT OF INVOICE 491.44

FINDINGS:

1) MOST COMMON EXPENSES ARE all bank charges and

reimbursement ,advising ,amendment, commission

2) The main Discrepancies present in case of this customer are

Late shipment

L/C expired

Port of Discharge not as per L/C

RECOMMENDATIONS:-

If late shipment is on demand of the applicant then charges should be borne by the

applicant

If LC is opened through The Bank of Tokyo-Mitsubishi UFJ Ltd. then discrepancy

charges would be comparatively less

CUSTOMER NAME: PACIFIC OVERSEAS TEXTILES MACAO.

IMPORTER BANK: 1. THE HONGKONG AND SHANGHAI BANKING

CORPORATION LTD.

2. BNP PARIBAS MACAU BRANCH

3. HANG SENG BANK LIMITED

OBSERVATIONS:

1) This customer has the maximum share in the total FBC charges of the

organization i.e. 45829.24

2) FBC charges range from $147.53-$403.7

3) NO. OF INVOICES ARE ABOUT 212

4) Average FBC per document is $ 213.63

5) AVERAGE AMT OF INVOICE 219.92

6) This customer has the second highest share in business amounting to.

$9960115.4

FINDINGS:

1) MOST COMMON EXPENSES ARE

$40-$50 as Discrepancy fees,

$104-$80 as Cable charges

, Deferred payment Comm. $110.57-$353.15,

Reim. Fees $30

Acc. Fees $114.99-$243.08(variation due to diff. bank and diff. in

invoice amount)


Late shipment

L/C expired

Fumigation not showing L/C no., RMP no. etc.

Port of Discharge not as per L/C

AGE OF VESSEL EXCEED 20 YEARS

COURIER RECEIPT DTD. 5 DAYS AFTER SHIPMENT

RECOMMENDATIONS:-

We recommend our customer to open l/c with THE AGRICULTURE BANK OF

CHINA then the discrepancy charges will be less


applicant.

I Also recommend that VARDHMAN should take Care that fumigation will show

l/c no. and RMP no.

VARDHMAN have to care in the future that port of discharge will be according

to l/c

Company is recommended to either ask it’s customer to waive off the vessel age

norms from the l/c or contact shipping company regarding it

Bank charges will get reduced if the customer open l/c with one bank instead of

three.

CUSTOMER NAME: IM INTERNATIONAL

IMPORTER’S BANK : NATIONAL AUSTRALIA BANK LIMITED

OBSERVATIONS:

FBC charges range from $20-$308.13

Average FBC per document is $185.36

NO. OF INVOICES ARE ABOUT 101

AVERAGE AMT OF INVOICE 203.76

TOTAL FBC ARE ABOUT 18721.36

TOTAL VALUE OF CUSTOMER IS 3814572.07

FINDINGS:


Discrepancy fees $65 or AUD 85,

Reim. Comm. $65 or AUD 85

ACC. Comm. $66.52-$99.24 or AUD 80- AUD 122.78(variation due to

diff. in invoice amount)


Late shipment

Late presentation

L/C expired

L/C OVERDRAWN

RECOMMENDATIONS:-

The Beneficiary should present all the documents on time


applicant

Company should request its customers to extend the date of expiry

CUSTOMER NAME: AUSTRALIAN WEAVING MILLS

IMPORTER’S BANK : AUSTRALIA AND NEW ZEALAND BANKING

GROUP LIMITED

OBSERVATIONS:







FINDINGS:

MOST COMMON EXPENSES ARE

Discrepancy charges $83.43-$85.87

Rnb. Fees $100.12-$106.80

Acc. Fees $83.43-$133.50

OTHERS $20(variation due to diff. in invoice amount)

The main Discrepancies present in case of this customer are

Late shipment

Late presentation

L/C expired

L/C OVERDRAWN

DESCRIPTION OF GOODS NOT AS PER L/C

RECOMMENDATIONS:-

If late shipment is on demand of the applicant then charges should be borne by

the applicant

Beneficiary should present all the documents on time

If LC is opened through ST. GEORGE BANK LIMITED Limited then

charges will be less

COMPANY should send goods as per the description mentioned in l/c

CUSTOMER NAME: OCEAN LANKA (PRIVATE) LIMITED

DRAWEE BANK: STANDARD CHARTERED BANK (HONG KONG)

LIMITED

OBSERVATIONS:

FBC charges range from $56-$385






FINDINGS:


$60 Discrepancy fees

$60 Reimb FRR,

$120 TELEX

$55 others


L/C EXPIRED

COPY OF NO WOOD PACKING MATERIAL NOT PRESENTED

SHIPPING CO CERT NOT PRESEDTED

FUMI CERT NOT CERTIFYING AS PER LC

F/C IS NOT AS PER L/C

RECOMMENDATIONS:-


Company should attached certificate of fumigation as per l/c norms

Copy of no wood packing must be presented as per l/c norms so that

discrepancy charges can be reduced

CUSTOMER NAME: PROMPTEX YARNS INC.

DRAWEE BANK: THE TORONTO-DOMINION BANK

OBSERVATIONS:







FINDINGS:


$100 Cable charges



L/C EXPIRED

LATE PRESENTATION

L/C AMT. OVERDRAWN

LATE SHIPMENT

B/L NOT SHOWING DDC CHARGES PREPAID AS PER L/C

REQUIREMENT

QUANTITY OVERSHIPPED

B/L SHOWING NOTIFY PARTY TO INSTEAD ULTIMATE

CONSIGNEE

RECOMMENDATIONS:-



If late shipment is on demand of the applicant then charges should be

borne by the applicant

Company should try to avoid the over shipment as much as possible

If overdrawn is done on the request of customer then charges should be

borne by the customer not the beneficiary

If LC is opened through The Bank of Nova Scotia then charges will be

less

CUSTOMER NAME: SHINKO SANGYO CO. LTD.

DRAWEE BANK: THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.

OBSERVATIONS:

Average FBC per document is MINIMUM OF ALL i.e. 54.75





FBC CHARGES RANGES FROM $7 - $268.49

FINDINGS:


Discrepancy fees $45

All BANK CHARGES


L/C EXPIRED

LATE SHIPMENT

LATE PRESENTATION

RECOMMENDATIONS:-





CUSTOMER NAME: PROSPERLINK (MACAO COMMERCIAL

DRAWEE BANK: 1. STANDARD CHARTERED BANK (HONG

KONG) LIMITED

2. SUMITOMO MITSUI BANKING CORPORATION

OBSERVATIONS:

Average FBC per document is 188.38





FBC CHARGES RANGES FROM $70 - $295

FINDINGS:



$60 Reimb. Charges

$120 TELEX

$41 others CHARGES


L/C EXPIRED

LATE SHIPMENT

E- SHIPPING MARKS DIFFER

OVERSHIPMENT EFFECTED FOR GOODS ITEM NO. 1.

DESCRIPTION OF GOODS ON B/L NOT AS PER LC

RECOMMENDATIONS:-



the applicant


COMPANY should send goods as per the description mentioned in l/c

Bank charges will get reduced if the customer open l/c with SUMITOMO

MITSUI BANKING instead of two banks.

CUSTOMER NAME: GULF DENIM FZE

DRAWEE BANK: HSBC BANK MIDDLE EAST LTD.

OBSERVATIONS:






FBC CHARGES RANGES FROM $80.63 - $290

FINDINGS:


All bank charges

reimbursement

acceptance ,

discount charges


SHIPPING CO. CERT. - CERTIFICATION NOT AS PER DC

DC NO. NOT SHOWN. QUALITY APPROVAL CERT.

. QNTY. OF GOODS INCONSISTANT WITH INV

Late shipment

RECOMMENDATIONS:-


the applicant

Quantity of goods should be matched with invoice

CUSTOMER NAME: SERVIFIOS IMPORTACAO E EXPORTACAO-

DRAWEE BANK: BANCO ESPIRITO SANTO S.A.

OBSERVATIONS:






FBC CHARGES RANGES FROM $60 - $328.8

FINDINGS:


all bank charges

discount 70 usd

telex and cable usd 20

commision and advising charges


LATE SHIPMENT

L/C EXPIRED

B/L WITH UNAUTHENTICATED ERASURES

BENF. DECL. NOT EXACTLY AS PER LC TERMS

E- LC IS ISSUED AFTER INVOICE DATE

QTY. EXCEEDED

RECOMMENDATIONS:-



the applicant


Beneficiary declaration should be as per l/c terms

CUSTOMER NAME: FOUNTAIN SET LIMITED

DRAWEE BANK: STANDARD CHARTERED BANK (HONG

KONG)LIMITED

OBSERVATIONS:




TOTAL FBC ARE ABOUT 7018



FINDINGS:



$91 SWIFT charges

$24 others

2)The main Discrepancies present in case of this customer are

L/C EXPIRED

LATE SHIPMENT

DECL. OF NO WOOD PCKG. MATERIAL NOT PRESENTED

B/L DID NOT INDICATE NAME OF CARRIER

SHIPPING MAKES IN D/C IS NOT AS PER LC\

RECOMMENDATIONS:-



applicant

Copy of no wood packing must be presented as per l/c norms so that discrepancy

charges can be reduced

Bill of landing should indicate name of carrier


MITSUI BANKING instead of two banks.

CUSTOMER NAME: MASUMA KHATUN TEXTILE INDUSTRIESLTD

DRAWEE BANK: SOUTHEAST BANK LIMITED

OBSERVATIONS:







FINDINGS:


all bank charges

REIMBURSEMENT AND FUND TRANSFER


Beneficiary Extended the MATURITY DATE

RECOMMENDATIONS:-

If extension of maturity date is on demand of the applicant then charges

should be borne by the applicant

CUSTOMER NAME: MARUBENI CORPORATION JAPAN

DRAWEE BANK: THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

MIZUHO CORPORATE BANK LTD.,

OBSERVATIONS:






FINDINGS:



Cable charges $40

Acc. Commission $92.65-$138.05

Reimb. Fees of $50

others $18(varriation due to diff. bank and diff. in invoice amount)


LATE PRESENTATION

L/C EXPIRED

LATE SHIPMENT

POD IS NOT AS PER LC

RECOMMENDATIONS:-



applicant


CUSTOMER NAME: GENEVIEVE YARNS DYERS AUSTRALIA PTY

DRAWEE BANK: ST GEORGE BANK LIMITED

OBSERVATIONS:

FBC charges range from $82.5-$195





FINDINGS:


$75 Acc. Commission

$45 Reimb. Commission

$45 Discount charges

$18 others


L/C EXPIRED

LATE SHIPMENT

ALTERATION ON B/L NOT SIGNED

SHIPPING MARKS ON ALL DOCUMENTS DIFFER TO B/L

PARTIAL SHIPMENT

RECOMMENDATIONS:-



applicant

If there will be alteration then it should be signed by authorized person

If partial shipment is on demand of the applicant then charges should be borne by

the applicant

Shipping marks on documents should be matched with bill of landing

CUSTOMER NAME: CDL FABRICS LTD.

DRAWEE BANK: THE MAURITIUS COMMERCIAL BANK LIMITED

OBSERVATIONS:






FINDINGS:


Discrepancy fees $75-$160

Disc. Comm. $75-$340

Cable charges $510

others $30-$48(variation due to diff. in invoice amount)


MARKS AND NUMBERS DIFFER

FREIGHT PREPAID SUBJECT TO CHEQUE

REALISATION ON BILL OF LADING

COURIER RECEIPT: DATED MORE THAN 3 DAYS

AFTER SHIPMENT

Beneficiary differs

RECOMMENDATIONS:-

l/C should be transferred to the name of the beneficiary through which

shipment is done

Company should take due care that marks and number don’t differ

Bank charges will get reduced if the customer open l/c with STATE

BANK OF MAURITIUS instead of THE MAURITIUS COMMERCIAL

BANK LIMITED

CUSTOMER NAME: CHORI CO. LTD.

DRAWEE BANK: 1. MIZUHO CORPORATE BANK LTD.


3. BANK OF CHINA

OBSERVATIONS:







FINDINGS:


$50 Discrepancy fees,

$30 Cable charges

$7 others


BENEFICIARY DIFFER

L/C EXPIRED

LATE SHIPMENT

E- APPLICANT REF. NO. ON B/L IS NOT AS PER LC

B/L SHOWING UNAUTHENTIC CORRECTION.

RECOMMENDATIONS:-

l/C should be transferred to the name of the beneficiary through which shipment

is done



applicant



MITSUI BANKING CORPORATION

CUSTOMER NAME: PROEXSA S.A. Total

DRAWEE BANK: 1. DEUTSCHE BANK S.A.E.

2. BANCO DE SABADELL S.A.,

OBSERVATIONS:





FINDINGS:


all bank charges

,commission

Reimbursement CHARGES


LATE SHIPMENT

E- LC EXPIRES

BENEFICIARY DIFFER

QUALITY CER.- DOES NOT IDENTIFYING THE SIGNER AS THE

MILL MANAGER

RECOMMENDATIONS:-


is done



applicant

Bank charges will get reduced if the customer open l/c with DEUTSCHE BANK

S.A.E

CUSTOMER NAME: MARUBENI TEXTILE ASIA PACIFIC LTD.

DRAWEE BANK: 1. MIZUHO CORPORATE BANK LTD.

2. THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.


OBSERVATIONS:






FINDINGS:



Cable charges $40

Acc. Commission $92.65-$138.05

Reimbursement Fees of $50

others $18 (variation due to diff. bank and diff. in invoice amount)


LC EXPIRED

LATE SHIPMENT

LATE PRESENTATION

FUMIGATION CERT. NOT SUBMITTED

B/L NOT SHOWING BY WHOM THE CORRECTION

AUTHENTICATION IS MADE

RECOMMENDATIONS:-



applicant



Company should attached certificate of fumigation as per l/c norms

Bank charges will get reduced if the customer open l/c with MIZUHO

CORPORATE BANK LTD instead of three banks

CUSTOMER NAME: SACOTEX YARNS N.V.

DRAWEE BANK: CBC BANQUE S.A.

OBSERVATIONS:







FINDINGS:


$137.07 Discrepancy fees

$8.50 SWIFT charges


E- LATE SHIPMENT

LC EXPIRED

BENEFICIARY DIFFER

RECOMMENDATIONS:-



applicant


is done

Bank charges will get reduced if the customer open l/c with BANQUE

POPULAIRE DU NORD,

CUSTOMER NAME: GOLDTEX LTD.

DRAWEE BANK: 1. THE HONGKONG AND SHANGHAI BANKING

CORPORATION LTD.

2. STANDARD CHARTERED BANK

OBSERVATIONS:





TOTAL VALUE OF CUSTOMER IS 1428306


FINDINGS:



$50 Reimbursement

$20 Remittance

Cable $10

$18 others


LC EXPIRED

SHIPPING CO. NOT AS PER DC

BILL OF LADING NOT SHOWING THE CLAUSE AS PER L/C TERMS

B/L NOT CONSIGNED TO THE ORDER OF ISSUING BANK

E- LATE SHIPMENT

RECOMMENDATIONS:-




Shipping co. should be as per dc

LIMITATIONS OF THE STUDY

Details regarding some of the charges were not available with the banks.

Therefore, bifurcation of these charges was not possible because of which

recommendations to some of the foreign clients could not be given.

Because of time constraint all the foreign customers of Vardhman could not be

studied and given recommendations.

vardhman

Documents

project project prefacewhen

project work

industry guide

summer training

vishesh garg students

vardhman group

months summer internship

date of internship completion