<p>In 2019, <a href="https://www.statista.com/chart/20858/top-10-countries-by-share-of-global-manufacturing-output/" target="_blank">28.7 percent of the global manufacturing output came from China</a> compared with 16.8 percent from the US’, as per data from Statista. Considering that it stands as the world’s largest manufacturing nation - if you are a manufacturer, trader, or importer - it is highly likely that you source a number of your goods from China. &nbsp;</p><p>For those who do have such dealings with China, it is extremely crucial for you to ensure that your goods meet your required specifications and comply with certain quality standards that you set. Quality control (QC) and inspection enables you to do this. It is also a necessary process to avoid defective goods. In this guide, we will cover &nbsp;</p><ul><li>Why quality inspection is essential &nbsp;</li><li>Who can help you with quality inspection services in China </li><li>Types of quality inspections in China &nbsp;</li><li>Costs of a quality inspection </li><li>Things to include in your quality control checklist </li></ul><ul><li>What you should expect in a quality control report </li><li>Tips for choosing a third-party QC company in China </li></ul><p> Also read our article on the best practices for <a href="https://www.cogoport.com/blogs/best-practices-for-efficient-communication-with-your-chinese-supplier" target="_blank">efficient communication with your Chinese supplier</a>. &nbsp;</p><p><a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a></p><p>Putting in place quality control and inspection processes will give you confidence that your quality requirements will be fulfilled by your Chinese manufacturer or supplier. Quality control and inspections involves two steps – Quality Assurance (QA) and Quality Control (QC). QA involves setting in place processes and ensuring that the manufacturer follows them during production to maintain required quality standards, and reduce or eliminate defects. It includes training, changes control, documentation, audits, and investigation, among other steps. QC is done post-production, before the products are shipped. It includes batch inspection, sampling of products, identifying defects, validation, and lab testing. This process ensures that the completed products have met the defined standards. &nbsp;</p><h2><strong>Why quality inspection is essential </strong> </h2><ul><li><strong>Ensures production of quality goods – </strong>A combination of QA and QC will positively impact quality and adherence to your required specifications. </li></ul><ul><li><strong>Minimises variations in production – </strong>Duringmanufacturing, variations can occur in the items. Once you understand underlying reasons behind this, you can add steps and checks to your mandated QA processes to reduce these variations. </li><li><strong>Reduces your losses – </strong>By doing QC checks, you reduce the number of defective pieces you receive, which may not be sellable. The more defective pieces you have, the higher losses you make. &nbsp;</li><li><strong>Increases or maintains your planned sales margins – </strong>QC checksalso cuts down the chance of you receiving low quality pieces that you would have to sell at a discounted price. &nbsp;</li><li><strong>Leads to consumer retention – </strong>You would have determined your target customer group based on the quality you are expecting to supply. If you supply goods of lower quality, even if at a lower price, you risk the chance of losing that customer base. &nbsp;</li><li><strong>Increased consumer satisfaction – </strong>It allows you to assure and showcase to your customers that you are upholding the quality they expect from the products you are supplying them. Any certifications and accreditations you can offer them will increase their satisfaction and the likelihood that they will continue business with you long term. There is a direct correlation between assuring them quality and, them staying loyal to you. </li></ul><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/6114c4020b0df0383ec0d706_shutterstock_1106618336.jpg" loading="lazy" alt="Quality control and inspection processes will give you confidence that your quality requirements will be fulfilled by your Chinese supplier" width="auto" height="auto"></div><figcaption>Putting in place quality control and inspection processes will give you confidence that your quality requirements will be fulfilled by your Chinese supplier.</figcaption></figure><p>‍</p><h2><strong>Who can help you with Quality Inspection services in China?</strong> </h2><p><strong>Manufacturers </strong> </p><p>You can ask your manufacturer to do an in-house review and send you a report. While this approach is less expensive, manufacturers are more concerned with protecting their business interests than assuring the quality of their products. The in-house QC team may have experience and dedication when it comes to quality control, but they may not be in your favour. They aim to build and deliver the goods as quickly as possible, and that does not go hand-in-hand with quality control. &nbsp;</p><p><strong>Trading or sourcing partner </strong> </p><p>Another viable option is to <a href="https://www.chinaimportal.com/blog/sourcing-companies-china/" target="_blank">hire a trading or sourcing partner</a>. Such entities will not just help you source your products from appropriate manufacturers in China, but also assist you in quality inspections. They work on commissions and would want to retain you as a customer so you continue to give them business. Thus, you can count on them to give an unbiased evaluation of product quality. Additionally, they have business relationships with many manufacturers due to their trade, and can leverage that to your benefit. &nbsp;</p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-3.png" width="auto" style="width: auto; height: auto;"></a></figure><p><strong>QC or Third party inspection services in China</strong> </p><p>Another option is to <a href="https://www.chinaimportal.com/blog/quality-control-inspection-companies/" target="_blank">find a reputable third-party inspection service in China</a> to perform a quality control inspection per your standards. As they don’t work for the supplier, they have a neutral and unbiased outlook towards them. But this doesn’t imply that you leave the process entirely to them to handle. It is advisable that you work with them to specify your requirements and check that the process they follow is to your satisfaction. &nbsp;</p><p><strong>Self-inspection</strong> </p><p>You can always get your own team to visit for quality inspections However, it comes at a high cost. Training, accommodation, and travel expenses will add up to your import costs. </p><h2><strong>Types of quality inspections </strong> </h2><p><strong>Pre-Production Inspection (PPI)</strong> </p><p>All the components and raw materials are inspected and validated by the quality inspector or third party inspection companies. &nbsp;</p><p><strong>During Production Check (DUPRO)</strong> </p><p>Production inspection process is typically done after 50 percent of the goods are manufactured. First, quality inspectors visit the factory to identify problems in the product, if any. Then, units are randomly selected and compared against product specifications set by the customer or relevant inspection bodies. &nbsp;<strong>‍</strong></p><p><strong>Final Random Inspection (FRI)/ Pre-shipment Inspection (PSI)</strong> </p><p>FRI, also known as PSI is done when the production is complete and at least 80 percent of the goods are packed and ready to be shipped. Items are checked at random. It involves an on-site product inspection to ensure the products match your specifications, and are compliant with all country, industry, and other specified requirements. It also includes ensuring there are no major or minor defects in the products. </p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/6114c4b3ac49f2aaedf2efbf_shutterstock_1487914079.jpg" loading="lazy" alt="Pre-shipment inspection is done when production is complete and at least 80 percent of the goods are packed and ready to be shipped" width="auto" height="auto"></div><figcaption>Pre-shipment inspection is done when production is complete and at least 80 percent of the goods are packed and ready to be shipped.</figcaption></figure><h2><strong>Cost of a quality inspection</strong> </h2><p>If you hire a third-party QC inspection company in China, it will cost you between $199 and $299 per working day. This rate generally applies when the warehouse or factory is within 60 km from the inspection company’s office. If it is further away, the fee increases. &nbsp; </p><p>Factors that play an important role in determining inspection pricing in China are: &nbsp;</p><ul><li><strong>Level of expertise – </strong>Experience and expertise in quality inspection is the main reason for the price difference between QC agencies. </li><li><strong>Distance to the inspection site</strong> <strong>–</strong> Most inspection agencies are located in major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. If the location for inspection is in a small town, the inspector will need to travel to the factory. The increase in time taken and the additional travel costs will add to the total cost for inspection. </li><li><strong>Checklist –</strong> Some agencies only provide basic checks, while others are more comprehensive with site audits and certifications. Depending on the checks being done, the cost will vary. &nbsp;</li></ul><p>PPI, FRI/PSI, and DUPRO are done at an average of $199 per day, and a factory audit will cost between $300 and $400 per man day. </p><p><a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 1.png" width="auto" style="width: auto; height: auto;"></a></p><h2><strong>Things to include in your QC checklist</strong> </h2><p>Prior to finalizing your order or before the start of production, you must convey your product requirements to the supplier in a QC checklist. It should outline the product requirements and quality standards the supplier needs to meet along with objective criteria for inspection. Below are parameters you must include in your QC checklist - &nbsp;</p><ul><li><strong>Product requirements – </strong>Material, height, weight, among other aspects. &nbsp;</li><li><strong>Packaging &amp; labeling – </strong>Accurate packaging and labelling are essential compliance requirements in many industries. Some products need to be confirmed and labelled by certified labs. &nbsp;</li><li><strong>Visual inspection or on-site product tests and checks – </strong>This should be a part of your checklist to intimate your supplier that this will happen. &nbsp;</li><li><strong>Defect classification – </strong>There is a defect classification of three types during QC inspections - minor, major, and critical. Always provide an approved sample in the form of product, images or videos, to your quality control inspector. </li></ul><ul><li><strong>Functional testing – </strong>If you are importing a device, outline the guidelines for testing the product's use or function. &nbsp;</li><li><strong>Special tests – </strong>For some types of products, such as pharmaceuticals or chemicals, particular specimens are sent to the lab to determine their quality based on the importers' guidelines. &nbsp;</li><li><strong>Carton drop tests – </strong>This is done to check the durability and strength of the packaging, before the goods are transported. &nbsp;</li></ul><h2><strong>What you should expect in a quality control report</strong> </h2><ul><li><strong>Presented product quantity – </strong>The quantity of the finished products the supplier provides the inspector. The inspector will count the products to ensure that this is as per your order. </li><li><strong>Visual defects – </strong>These are imperfections visible on the product or its packaging. The maximum number of acceptable defects is determined by the defect tolerance level on your QC checklist. If it doesn’t meet the permissible limit, then the inspection will signal a fail. </li><li><strong>Conformity to requirements – </strong>These results validate that the goods meet the quality control requirements. Inspection on conformity requirements is done based on what your QC checklist constitutes. If the inspector discovers anything that isn't in accordance, they will note it in the final inspection report. </li><li><strong>On-site tests &amp; checks – </strong>This may be required to determine conformity to requirements depending on your product. The inspector issues a report covering all the areas after their quality control inspection. </li></ul><h2><strong>Tips for choosing a third-party QC company in China</strong> </h2><ul><li>Ensure thecompany holds the <a href="https://www.aqsiq.net/application" target="_blank">AQSIQ license</a> for providing quality control services in China, and has an <a href="https://www.iso.org/iso-9001-quality-management.html" target="_blank">ISO 9001 certification</a>. &nbsp;</li><li>A reliable QC company will offer a broad range of quality control inspection services, including the following pre-production inspection, online inspection, pre-shipment inspection, container loading supervision, and auditing services such as factory auditing, social auditing to environmental auditing. </li></ul><ul><li>Hire a company that has relevant experience and understanding of your product category. This will allow them to make the best quality control judgments. </li><li>Ask for previous reports they have given customers, preferably within a similar product category to evaluated their capability to provide professional and clear reports </li><li>Be sure they understanding your quality requirements. </li><li>Finally,hire a company that offers transparent <a href="https://www.chinaimportal.com/blog/quality-control-inspection-companies/" target="_blank">pricing for their quality control inspection services</a>. It allows you to know your total costs to import, and plan your budget accordingly. </li></ul><p> <img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 1.png" alt="" width="300px"></p><h2><strong>FAQS </strong></h2><p><strong>What type of quality checks can be carried out by the quality inspector?</strong> </p><p>The quality inspector can verify product quantity, scan for visual defects, ensure conformity to requirements (product weight, dimensions, materials, colour, design, etc.), and perform a range of other on-site tests and checks. </p><p><strong>When is the right time to book a quality inspection?</strong> </p><p>If your quality checklist has previously been approved, then most companies accept bookings made 72 hours prior. </p><p><strong>How do I know if the inspector is qualified to perform QC and check my products?</strong> </p><p>Any quality inspector must have a solid track record, prior experience, communication skills and expertise in QC and inspections. They should also understand the approved quality checklist, measurable techniques to identify defects, and technical knowledge. You will know if the inspector is qualified by checking their qualifications, certification, and experience. </p><p><strong>Is it useful to send pre-production samples to the agent?</strong> </p><p>Yes. Sending a pre-production sample will give the agent a better understanding of the required quality standards and allow more accurate assessment of the goods. </p><p><strong>Will the inspected samples in a quality inspection be destroyed?</strong> </p><p>The samples picked for testing usually generally get destroyed, unless necessary as part of the inspection process. It depends on the nature of the test undertaken. For example – tests like fire resistance, strength and water resistance, etc. may damage the sample if it is not as per requirements.  </p><p><strong>How long does it take to get an inspection report?</strong> </p><p>In China, inspection reports are sent out within 24 hours of completion. Some companies will give you the report on the same day for an extra fee. </p>

Guide to Quality Control and Inspections in China

Import Challenges in India, and Ways to Fix Them 

Solution to 4 Problems Exporters in India Face 

<p>The coronavirus continues to disrupt businesses and supply chains worldwide. Fresh<a href="https://www.aljazeera.com/economy/2021/1/13/global-recovery-at-risk-of-being-pushed-back-by-fresh-lockdowns" rel="noopener noreferrer" target="_blank"> lockdowns</a> and<a href="https://www.aljazeera.com/economy/2021/1/13/global-recovery-at-risk-of-being-pushed-back-by-fresh-lockdowns" rel="noopener noreferrer" target="_blank"> border closures</a> imposed recently amid threats of<a href="https://www.aljazeera.com/news/2020/12/21/which-countries-have-closed-borders-over-new-covid-strain" rel="noopener noreferrer" target="_blank"> mutant strains of Covid-19</a> continue to hinder economic activity. Add to that massive disruptions in the transport and logistics industry, and a major shift to digital in the way we work and buy. All of this means that global supply chains are being tested like never before.&nbsp;</p><p>Analysts and industry insiders are of the view that the current crisis presents both a challenge and an opportunity for businesses, especially those involved in the import and export of goods and services. An opportunity to build a more robust supply chain in preparation for other disruptive events. In this piece, we take a look at:</p><p><a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a></p><ul><li>How Covid-19 has impacted supply chains</li><li>What are the steps – short-term and long-term – that you can take to adapt and manage your supply chain?</li><li>The role of digitisation in addressing supply chain vulnerabilities</li></ul><h3><strong>What is a Supply Chain, and why is it Important?</strong></h3><p>But first, what do we mean by supply chain? A supply chain is made up of all the activities and processes involved in the manufacture and trade of goods (or services) – from the procurement of raw material and manufacture of the goods to their sale, transport and distribution. In terms of physical structures, a supply chain includes factories, warehouses, transportation hubs (ports, terminals, etc) and order fulfilment centres, among others. A robust and integrated supply chain is at the heart of successful trade. With supply chains now increasingly global and interdependent in nature, any major disruption can have a domino effect on the entire process.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><h3><strong>How has Covid-19 impacted supply chains?</strong></h3><p>The pandemic has presented the toughest challenge yet to global supply chains. Here are some ways in which they have been impacted:</p><ul><li><strong>Shifting demand:</strong> Demand has dropped drastically in some sectors (fuel, airlines, etc) and surged in others (medical equipment, healthcare and personal care products).</li><li><strong>Reduced productivity:</strong> Factories and workplaces shut down in early 2020 and gradually opened months later. Many of them are still operating at reduced capacity and with reduced manpower, resulting in lower productivity.</li><li><strong>Supply shortages</strong>: With factories producing less, supply is low. For example, the world faced an acute shortage of car parts when<a href="https://www.statista.com/chart/20913/chinese-exports-of-motor-vehicle-parts-and-accessories/#:~:text=China%20is%20among%20the%20world's,to%20the%20UN's%20Comtrade%20database." rel="noopener noreferrer" target="_blank"> market leader China</a> shut down in the first half of&nbsp;2020 (though the country has since made a remarkable recovery to post record exports for that year).&nbsp;&nbsp;</li><li><strong>Inventory challenges:</strong> With factories yet to reach full production levels, businesses must make do with existing inventory. But while stocks are limited, demand is soaring in some regions – such as the US and Europe, driven largely by the Christmas-New Year holiday season.&nbsp;</li><li><strong>Logistics crises:</strong> The pandemic has wreaked havoc across the logistics industry (read our blog on the subject here). In India, a manpower crunch in early 2020 saw customs clearance processes function at just 5% of their usual capacity, gravely affecting businesses with a supply base there. With the country still in a gradual phase of unlocking, the labour crunch continues to hobble <a href="https://www.cogoport.com/blogs/shipment-delayed-cant-find-a-container-blame-peak-season-rush-covid-19" rel="noopener noreferrer" target="_blank">port, rail and truck operations</a>. Furthermore, the record demand in and import volumes to the US and Europe have impacted logistics services worldwide, resulting in massive container shortages in Asia, a<a href="https://www.cogoport.com/blogs/shipment-delayed-cant-find-a-container-blame-peak-season-rush-covid-19" rel="noopener noreferrer" target="_blank"> chassis (trailer) crunch</a> in the US, port congestion in large parts of the world, disruptions to shipping schedules and<a href="https://www.cogoport.com/blogs/shipment-delayed-cant-find-a-container-blame-peak-season-rush-covid-19" rel="noopener noreferrer" target="_blank"> galloping freight charges</a>. <a href="https://www.hellenicshippingnews.com/bunker-prices-up-25-in-just-30-days-on-the-back-of-covid-19-vaccines-support-from-opec/" rel="noopener noreferrer" target="_blank">Bunker fuel prices</a> have also been rising in recent months, leading to fears of a hike in the <a href="https://www.cogoport.com/blogs/shipment-delayed-cant-find-a-container-blame-peak-season-rush-covid-19" rel="noopener noreferrer" target="_blank">bunker adjustment factor</a> (BAF). These challenging conditions are expected to persist till February and, maybe, even beyond.</li></ul><p>‍<a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-2.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>What can you do to adapt and manage your supply chain?</strong></h3><p>There are some immediate steps you can take to secure your supply chains:</p><ul><li><strong>Keep up with demand:</strong> Manufacture products that are in demand (but only if you can fulfil that demand). You can also create demand by offering discounts on your existing inventory. If your product is currently seeing a drop in demand, preserve your cash for when demand picks up. Keep a close eye on demand forecasts and updates at all times.&nbsp;&nbsp;&nbsp;</li><li><strong>Manage your inventory:</strong> Shift your existing stock away from areas with high infection rates to prepare for possible closures. Move them closer to ports and terminals so you can ship them out in a hurry, if the opportunity presents itself. If you need to buy inventory that is in short supply, buy in advance.</li><li><strong>Manage your workforce:</strong> Adapt to the new ways of working that have emerged, such as work-from-home, telework, flexible hours and shifts. Take care of your workers’ health and wellbeing to keep them productive. Set up dedicated teams to come up with ways to respond to the new challenges and come up with production, distribution and inventory strategy.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Consider other sourcing options:</strong> Don’t bank on a single supplier for your product, especially if it needs a unique component. However, remember that while you might be able to procure this component from several suppliers, the component in question might be made up of another part that is sourced from a single source. So, you might still face a shortage. The only way to counter such an emergency is through complete supply chain visibility.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Ensure end-to-end visibility:</strong> Set up a mechanism to enable end-to-end visibility into demand, supply, inventory, capacity and finances. One way of doing this is to form a core team with members from all sections of the supply chain. Use digital tools, such as applications that track shipments in real time, to improve visibility.</li><li><strong>Communicate regularly:</strong> Speak regularly with your workers, suppliers, customers, logistics service providers and other supply chain partners. The pandemic has prompted many businesses to switch to daily or weekly calls. Inform your customers about potential delays. While they might not welcome such an update, they will appreciate your honesty.&nbsp;</li><li><strong>Review your insurance policy:</strong> Take a good look at your insurance policy and see if it provides adequate coverage in an emergency, including a pandemic such as Covid-19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>Long-term solutions: Redefining supply chain strategies</strong></h3><p>Short-term measures aside, Covid-19 has put the spotlight on the need for businesses to think long-term. Consider these solutions, even if they require a heavy investment of time, effort and money:&nbsp;&nbsp;&nbsp;&nbsp;</p><ul><li><strong>Rethinking supply chains:</strong> When Covid-19 forced China into a lockdown, companies dependent on it for raw material and manufactured goods were hit hard. This set off a rethink to reduce dependence on China and look for suppliers elsewhere, including in<a href="https://www.thehindu.com/business/Industry/supply-chain-shift-from-china-may-benefit-india/article33439915.ece" rel="noopener noreferrer" target="_blank"> India</a>. With China being the “world’s factory” due to its infrastructure and workforce advantages, there is little likelihood of it being unseated as a major supplier. The lesson here is that it doesn’t hurt to reduce dependence on a single supplier/region and to diversify your supply base.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Risk monitoring:</strong> The challenges of Covid-19 underscore the need for risk management, which requires a comprehensive study of the supply chain, its stakeholders and their interrelatedness, the identification of hidden vulnerabilities and blind spots and ways to mitigate these risks. In the early days of the pandemic, a hidden risk companies involved in the production of “essential goods” faced was that their products were made up of “non-essential” components that were in short supply. This led to production and distribution delays. Had these companies invested in an in-depth risk assessment exercise early on, they might have been saved from being blind-sided.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Build resilience:</strong> Don’t wait for the pandemic to blow over and economic recovery to resume. You can plan now for a resilient supply chain network. And you can do this in a million ways – by securing your supply base as mentioned above, by rethinking your product design so that it gives you more sourcing options or does away with unique components, by building trust with your supply chain partners through transparency, or by adopting digital solutions.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><h3><strong>The Future is Digital</strong></h3><p>Companies that actively invest in digital operations can expect a 25% growth in revenue by 2023 compared to a 9% growth rate for companies with limited investment, according to this 2018<a href="https://www.pwc.com/us/en/services/consulting/business-transformation/operations-transformation/connected-supply-chain.html" rel="noopener noreferrer" target="_blank"> PricewaterhouseCoopers report</a>. While this report predates the pandemic, its findings hold true in the current climate. Analysts agree that the use of digital platforms can help you respond to disruptions faster and more effectively.</p><p>Here are some simple digital tools you can use to strengthen your supply chain:&nbsp;</p><ul><li><strong>Join the e-commerce boom:</strong> Take your products online as consumers increasingly opt for online shopping over in-store purchases.&nbsp;</li><li><strong>Track in real time:</strong> Cargo-tracking, automated warehouses, GPS (global positioning system) and RFID (radio frequency identification) are<a href="https://www.bdo.com/insights/industries/manufacturing/how-manufacturers-can-navigate-the-novel-coronavirus-supply-chain-impacts" rel="noopener noreferrer" target="_blank"> technologies</a> that allow you to track personnel, equipment and inventory, collate data and improve visibility and transparency.</li><li><strong>Get past logistics hurdles:</strong> Logistics problems cause delays. Many logistics providers now use artificial intelligence (AI) to analyse and pick the fastest and cheapest shipping routes. Then there are technologies such as the automated pallet handling system that are designed to reduce shipment processing time. In this system, the processes of storing pallets, transporting loaded pallets and integrating them with warehouse and production processes are completely automated. It can be used at a transportation hub but also in factories, warehouses and distribution centres.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Digital Supply Network:</strong> You can transform your traditional supply chain network into a<a href="https://www.bdo.com/insights/industries/manufacturing/how-manufacturers-can-navigate-the-novel-coronavirus-supply-chain-impacts" rel="noopener noreferrer" target="_blank"> more open and accessible digital supply network</a> (DNS) powered by AI, analytics, robotics, sensors and algorithms. A DNS works by collecting data from the physical world, creating a digital record of it, and allowing its exchange, enrichment and eventual translation into action that can be taken in the real world. It improves connectivity between stakeholders, enables rapid responses, aids in asset efficiency, lowers cost and increases revenue.</li></ul><p><strong>Go big on data:</strong> A digitised ecosystem is also capable of processing more information. And information is power, in times of crisis or otherwise.</p>

Supply Chain Challenges: For A Covid-19 World

<p>If you are an exporter in India, you might be aware of the two most important permits you need to send your goods out of the country. The first is an<a href="https://www.dgft.gov.in/CP/" target="_blank"> Import Export Code</a> (IEC), a business identification number issued by the Directorate General of Foreign Trade (DGFT). The second is an Authorised Dealer Code (AD Code), without which you cannot complete customs clearance of your goods.</p><p>In this quick and complete guide to the AD Code, we will be touching upon its importance in the export business in India. Read on to find out:</p><ul><li>What is an AD Code?</li><li>Why does an exporter need an AD Code?</li><li>How do you apply for an AD Code?</li><li>How do you register your AD Code with customs?</li><li>Can you modify an AD Code?</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>What is an AD Code (authorised dealer)?</strong></h3><p>An AD Code is a 14-digit numerical code you can get from the bank with which you have a current account to run your import-export business. The code comes printed on a document with the bank’s letterhead, in a format prescribed by the DGFT. A bank must deal in or be an authorised dealer of foreign currency in order to be able to grant an AD Code. This is in line with the purpose behind an AD Code, which is to ensure that foreign currency transactions in an exporter’s current account are from legal trade.&nbsp;&nbsp;&nbsp;&nbsp;</p><p>Exporters must register their AD Code with the port or airport from where they intend to ship their goods abroad. If the shipment is to be dispatched from an inland container depot (ICD), AD Code registration is required for that facility as well as the port attached to it. For example, if you ship from ICD Khodiyar in Ahmedabad, you will need to register there as well as at Mundra port in Gujarat and/or Nhava Sheva in Maharashtra as the cargo will be routed through either of these ports.</p><p>An AD Code registration has a lifetime validity. However, if an exporter ships from more than one port, whether in the same state or in different states, they must register the AD Code for each of these ports. In such a scenario, the AD Code for each of these ports will be different.</p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center" data-rt-max-width=""><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/5ff5a6abf963482fa23e5c96_060121_Cogoport_Infographic_AD%20Code_Intro%20_%202%20(1).jpg" loading="lazy" width="auto" height="auto" alt="What is an AD Code (authorised dealer)"></div></figure><h3><strong>Why does an exporter need an AD Code?</strong></h3><p>An AD Code is absolutely essential to the export process for the following reasons:</p><ul><li>A<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/shipping-bill-45" target="_blank"> Shipping Bill</a> is one of three<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/shipping-bill-45" target="_blank"> mandatory documents</a> required for export customs clearance. And without an AD Code registration, you cannot generate a Shipping Bill on<a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank"> Icegate</a>, Indian Customs’ electronic data interchange platform.</li><li>An AD Code registration with customs ensures that any government benefits you avail of – duty rebates and exemptions, GST (Goods and Services Tax) refunds, etc – are credited directly to your current account.&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><h3><strong>How do you apply for an AD Code?</strong></h3><p>You can approach your bank with which you have a current account and request an AD Code. Your application should be in this <strong>format</strong>:</p><p>To,</p><p>The Manager,</p><p>(Bank name),</p><p>(Branch name),</p><p>(Address and contact number)</p><p><strong>Subject:</strong> Request for AD Code</p><p>Dear Sir/Madam,</p><p>I, holder of current account (number) at the (branch name) of (bank name), wish to apply for an Authorised Dealer (AD) Code as I am in the process of exporting a consignment abroad (mention time frame). In order to ship the goods, I need to register the AD Code with customs at (port name).</p><p>Kindly issue the AD Code letter addressed to the commissioner of customs at (port name). I would also request you to issue the letter in the format prescribed by customs, which I am enclosing here (include format below).</p><p>My Import Export Code is (mention IEC number).</p><p>I would be grateful if you could treat this request urgently.</p><p>Thank you,</p><p>Yours sincerely,</p><p>(Your name/signatory)</p><p>After processing your request, the bank will issue an AD Code. The bank’s authorisation letter bearing the AD Code must be in Annexure-A in the following format:</p><p><a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-3.png" width="auto" style="width: auto; height: auto;"></a></p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center" data-rt-max-width=""><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/5ff5a46bb18d6f1aaa122ff6_tuAQaRlUwD8wLD83oW786f0SWTg055VUo4p-lTKze5LpID_25QrIrFKnDrXTxnXoRplr5nmZKaNgThIP2i0RJmRwYQ8gMYUQPRQGw3GX2nKh-ItaeoKgVogLAZVsbRKM2W5mSKy4.png" width="auto" height="auto" loading="auto" alt="Bank Authorisation Letter for AD Code"></div><figcaption>(Photo credit: jawaharcustoms.gov.in)</figcaption></figure><h3><strong>How do you register your AD Code with customs?</strong></h3><p>Once you’ve received the AD Code on the bank’s authorisation letter, the next step is to register it with customs. The process is entirely digital and contactless and must be completed on Icegate, the Indian Customs website. Here’s how the<a href="https://www.icegate.gov.in" target="_blank"> registration process</a> works:</p><ol><li>Log into Icegate</li><li>On the left panel, click on <strong>Bank Account Management</strong></li><li>On the <strong>Export Promotion Bank Account Management</strong> page that opens up, pick the <strong>Authorised Dealer Code Registration</strong> option</li><li>On the left panel, click on <strong>e-Sanchit</strong>. This leads to a page that allows you to e-file documents. Upload the necessary documents, which must be digitally signed and in the prescribed form, as listed on the page. You will need to upload the following documents:&nbsp;</li></ol><ul><li>Bank’s AD Code authorisation letter in Annexure-A (original)</li><li>Exporter’s letter on letterhead requesting/authorising registration of AD Code&nbsp;&nbsp;</li><li>Customs broker’s letter on letterhead requesting AD Code registration</li><li>GST registration (copy)</li><li>Import-Export Code (copy)</li><li>Permanent account number or PAN (copy)</li><li>Income tax returns for past three years (copy)</li><li>Bank statement/balance sheet for past year (copy)</li><li>Export House Certificate (if any, copy)</li><li>Manufacturing Licence (if any, copy)</li><li>PAN, Aadhaar, voter ID/passport and IT returns of export partner</li><li>PAN, Aadhaar and Voter ID/Passport of signatory</li></ul><ol start="5"><li>When the documents are successfully uploaded, an image reference number <strong>(</strong><a href="https://jawaharcustoms.gov.in/pdf/PN-2018/PN_083.pdf" target="_blank"><strong>IRN</strong></a><strong>) </strong>and document reference number <strong>(</strong><a href="https://jawaharcustoms.gov.in/pdf/PN-2018/PN_083.pdf" target="_blank"><strong>DRN</strong></a><strong>)</strong> are generated</li><li>If you face any recurring error in uploading the documents, you can send an email to saksham.seva@icegate.gov.in</li><li>Now, go back to the Export Promotion Bank Account Management page and under the Authorised Dealer Code Registrationdashboard, click <strong>Add New Account</strong></li><li>Enter the required bank details, IRN and port location code (<a href="https://jawaharcustoms.gov.in/pdf/PN-2018/PN_083.pdf" target="_blank">Nhava Sheva’s code is INNSA </a>, for example), then click submit</li><li>If the inputs are valid, a six-digit OTP (one-time password) is sent to your email ID and mobile number and you are directed to the OTP page</li><li>Verify the OTP. That completes your registration request. The request now goes to customs, who will approve/reject it after going through the documents</li><li>Exporters can track their <strong>request status</strong> on the Authorised Dealer Code Registration dashboard by clicking on the status icon</li><li>If your request has been approved, you can view your registered AD Code and bank details on the same dashboard. You can continue to <strong>add new AD Codes</strong>, accounts and locations by following the same process&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <strong>&nbsp;</strong>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ol><p><strong>Note:</strong> Before the process went online, exporters had to approach the customs house agent in person and submit physical copies of the documents. Unlike the current system that tells you if your request went through, exporters previously found out if their registration had been completed successfully only if they could generate a Shipping Bill on Icegate.</p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center" data-rt-max-width=""><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/5ff5a7140c7d946e54f10401_060121_Cogoport_Infographic_AD%20Code_How%20to%20_%202%20(1).jpg" loading="lazy" width="auto" height="auto" alt="Process to obtain an AD Code"></div></figure><h3><strong>Can you modify an existing AD Code?</strong></h3><p>Yes, you can. In addition to adding new AD Codes, the Icegate facility allows you to modify an existing one. (You&nbsp; might need to modify your AD Code when you change your bank account, for example). A modification request must be accompanied by:</p><ul><li>An exporter’s letter mentioning why you need to change the AD Code or cancel a previously registered one</li><li>The relevant bank branch’s email ID for verification</li><li>All other documents required at the time of registering an AD Code&nbsp;&nbsp;&nbsp;</li></ul><p>The process to modify an AD Code on Icegate:</p><ol><li>On the <strong>Authorised Dealer Code Registration</strong> dashboard, select the relevant&nbsp; location and click <strong>Modify Account</strong></li><li>On the <strong>Modify Account</strong> page that opens up, select bank name from the dropdown menu, enter the valid AD Code, IRN and Icegate ID, and click on <strong>Save Changes</strong></li><li>If the inputs are correct, a six-digit OTP is sent to your email ID/mobile number. Once the OTP is verified, the modification request has been made. You can view the status of your request on the dashboard&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ol><p>And that’s all there is to registering an AD Code. We hope you found this guide helpful. Try <a href="https://www.cogoport.com" target="_blank">Cogoport</a> for a whole range of freight and logistics services.</p><p>Are you an exporter? You may also like <a href="https://www.cogoport.com/blogs/export-incentives-types-benefits-and-everything-else-you-need-to-know" target="_blank">Export Incentives in India: Everything You Need To Know</a></p>

AD Code: What Is It And Why Do You Need It ?

<p>The process of getting your goods across international borders can be confusing and frustrating. Customs clearance not only requires a great deal of preparation and documentation, its procedures also differ from country to country. While international trade is simpler now than it was a few decades ago – thanks to the lowering of trade barriers, simplification of rules and introduction of new technology – customs clearance remains a challenge.</p><p>That said, this article aims to help you navigate the choppy waters of customs clearance and border security and will answer all the important questions on the subject, including:</p><ul><li>What are the factors impacting customs clearance?</li><li>What rules, regulations and policies should I be aware of?&nbsp;</li><li>What are the steps involved in customs clearance?</li></ul><p>&nbsp;<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a>&nbsp;&nbsp;&nbsp;</p><h2><strong>What are the factors impacting customs clearance?</strong></h2><p>The first requirement of international trade is to equip yourself with relevant information about the nature of the cargo you plan to ship as well as the trade laws, regulations and customs practices of the country of import/export:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><ol><li><strong>Nature of cargo:</strong> Are you shipping<a href="https://www.cogoport.com/blogs/hazardous-cargo-guide-to-dangerous-goods-and-how-to-ship-them-safely" target="_blank"> dangerous goods</a> (explosives, toxic substances, radioactive material, etc)? Or food products? Is your cargo categorised as restricted (firearms, animals, plants, etc) in the country of import/export? Such goods can cross international borders only if they fulfil specific conditions related but not limited to labeling, packaging, declaration, transport and storage. You can’t ship hazardous cargo without a<a href="https://www.cogoport.com/blogs/hazardous-cargo-guide-to-dangerous-goods-and-how-to-ship-them-safely" target="_blank"> Dangerous Goods Declaration</a>. Similarly, if you are exporting food or agricultural produce, you must satisfy the safety, quality assurance and certification requirements of both the importing and exporting country.</li><li><strong>Free trade agreements</strong>: Such an agreement between countries facilitates trade primarily by reducing tariffs. Trading within a free trade zone is advantageous. But to benefit from the tariff reductions, one must find out if one’s product qualifies for it. For example, does it meet the <a href="https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm" target="_blank">rules of origin</a> requirements? (Rules of origin determine the national source of a product and, by extension, whether it is eligible for duty cuts/exemptions or whether it is restricted). If your product is eligible, you will need to produce a<a href="https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm" target="_blank"> certificate of origin</a> as proof. You will also need to look up the correct<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/certificate-of-origin-co-6" target="_blank"> Harmonised System (HS) code</a> of your product, enter this correctly in your shipping documents and check the target country’s tariff schedule for the applicable customs duty.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Digital customs:</strong> With most countries digitising their customs systems, it is vital to know about the electronic data interchange (EDI) systems they use for customs clearance procedures and the activities that can only be conducted through these platforms. For example, many countries and free trade zones require importers to make an electronic cargo declaration before the goods enter their territory. This is largely for security reasons. In the US, such a declaration is called an Automated Manifest System filing while in the European Union, it is known as an Entry Summary Declaration. Failing to declare or declare on time means clearance delays. In India, important functions such as filing of the shipping bill and bill of entry can only be done on <a href="https://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system.aspx" target="_blank">Icegate</a>, Indian Customs’ EDI platform.</li></ol><h2><strong>What rules, regulations and policies should I be aware of?</strong></h2><p>The laws and regulations governing foreign trade in your particular market have a bearing on everything, from the goods you plan to ship to the documents that must accompany them. Here are the key rules you need to brush up on:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><ol><li><strong>Foreign trade rules:</strong> Each country has its own set of foreign trade laws. In India, the key laws governing imports and exports are the Foreign Trade Policy (updated every five years), Foreign Trade (Development and Regulation) Act, Foreign Trade (Regulation) Rules, Customs Act and Foreign Exchange Management Act. At least a basic understanding of the international trade laws relevant to your target market is a must.&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Export control regulations:</strong> If you deal in dangerous goods, some understanding of export controls is useful. International export control groups, which bring together multiple countries, monitor trade in arms, chemicals, nuclear material and other such high-risk goods. The Australia Group, one such regime, regulates the export of material, equipment and technology that could be used to develop chemical and biological weapons. If you wish to ship a consignment of chemicals included in the Group’s Control Lists, you might be denied an export licence if you don’t strictly follow its export rules.</li><li><strong>Exchange control regulations:</strong> Exchange controls are government restrictions on transactions in foreign exchange. Some exchange control methods employed by countries that impact the import-export business include:</li></ol><ol><li>Varying exchange rates for different categories of imports and exports</li><li>Letter of credit, which is a promise by a bank on behalf of the importer to pay the exporter an agreed-upon sum. Some countries might only accept payments made through this method</li><li>Clearing agreements, under which trading countries establish domestic accounts, importers pay for goods bought from a foreign buyer in the local currency and exporters get paid in their own currency as well&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ol><ol><li><strong>Quotas:</strong> These are government-imposed limits on the value or volume of specific goods that can be exported or imported. Quotas are usually implemented to keep the prices of these goods low for domestic users. Before you sign a contract, check if your target country restricts the import or export of your product.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Documentation:</strong> Customs clearance is a document-heavy process. It requires the importer and exporter to file a wide range of paperwork, including licences and certificates, and to make sure they are accurate, complete and submitted on time. Listed below are the mandatory and secondary documents key to customs clearance:</li></ol><ul><li><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank">Shipping Bill</a>: Also called a bill of export, you cannot export goods by sea, air or road without this document. In India, a shipping bill is submitted electronically on Icegate in the form of an application in a prescribed format.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank">Commercial Invoice cum Packing List</a>: When you e-file a shipping bill, it must be accompanied by a copy of the commercial invoice cum packing list. The commercial invoice is a contract of sale between the exporter and importer while the packing list contains cargo details such as description, quantity and weight.&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank">Bill of Lading</a>: Another must-have document, the bill of lading is a contract of carriage between the carrier and shipper, a receipt for shipped goods and a document of title (ownership) of the goods. It must be produced to customs at the port of destination for final clearance.</li><li><a href="https://www.cogoport.com/blogs/types-and-usage-of-bill-of-lading-meaning" target="_blank">Bill of Entry</a>: A mandatory document for import clearance, a bill of entry marks the entry of goods into a country before their consumption or warehousing and is a legal requirement. In India, it is filed on Icegate.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank">Import/export licences</a>: Certain goods cannot be imported or exported without a licence issued by the relevant authority of a country. In India, import and export licences are required for trade in restricted goods and they are issued by the<a href="https://www.cogoport.com/blogs/supporting-documents-in-shipping-exporters-and-importers-might-need-for-customs" target="_blank"> Directorate General of Foreign Trade</a> (DGFT). In addition to these, Indian exporters need two more permits – an Import Export Code or IEC (a unique business number issued by the DGFT) and an<a href="https://www.dgft.gov.in/" target="_blank"> Authorised Dealer (AD) Code</a> (which must be registered at the port of export and is mandatory for customs clearance).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/supporting-documents-in-shipping-exporters-and-importers-might-need-for-customs" target="_blank">Certificate of Origin</a>: Many countries demand a certificate of origin for customs clearance. It certifies that a product was acquired, produced, manufactured and/or processed in a particular country.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/supporting-documents-in-shipping-exporters-and-importers-might-need-for-customs" target="_blank">Health certificates</a>: Required mostly for food products, health certificates vouch that the goods are fit for human consumption and meet the required safety and quality standards.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><a href="https://www.cogoport.com/blogs/supporting-documents-in-shipping-exporters-and-importers-might-need-for-customs" target="_blank">Insurance certificate</a>: This certificate from an insurance company states that the goods are covered for any loss/damage during transit. Insurance certificates help customs ascertain the duty applicable on the goods.</li><li>Inspection certificate: This document confirms that the goods – which might include packaging material, especially wooden pallets – are free of pests.</li><li>Consular invoice: This invoice acts as proof that the shipped goods are authorised by the embassy of the country of destination. Many importing countries insist on a consular invoice.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li>Import/export declarations: These are declarations by the importer/exporter about the goods being imported/exported and are largely required by customs for the purpose of foreign trade data compilation.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><p><em>To know more about the mandatory and supporting documents required for customs clearance, read our blogs</em><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank"><em> here</em></a><em> and</em><a href="https://www.cogoport.com/blogs/mandatory-documents-for-import-export" target="_blank"><em> here</em></a><em>.&nbsp;&nbsp;</em></p><p><a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-3.png" width="auto" style="width: auto; height: auto;"></a></p><h2><strong>What are the steps involved in customs clearance?&nbsp;</strong></h2><p>With customs regulations and practices varying from country to country, there is no single set of guidelines to clearing customs. Furthermore, different cargo types require different handling by customs authorities. Given this reality, compiled below are the most common practices, procedures and requirements in customs clearance, divided into two stages – pre-departure and post-arrival:</p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/600adf38bdfec264b8e8d18d_220121_Cogoport_Infographic_Artboard%206%20(1).jpg" loading="lazy" width="auto" height="auto" alt="Step by step custom Clearance process "></div></figure><h3><strong>Pre-departure steps</strong></h3><ol><li><strong>Getting import/export ready:</strong> The first step, naturally, is to register with the customs department of your country and obtain the necessary import/export licences and permits as mentioned above.&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Filing the shipping bill:</strong> The export process starts with the exporter filing the shipping bill. But before this, the exporter needs to assess the HS code, value, weight and country of origin of the goods and the duty due on it, find out whether it qualifies as restricted/dangerous/prohibited or whether it is allowed by the importing country. The exporter must also acquire any cargo-specific certificates and permits that might be required, such as health/inspection/insurance certificates, dangerous goods declaration, consular invoice or certificate of origin. All of these details must be entered correctly in the shipping bill application and accompanying documents.</li><li><strong>Export customs clearance:</strong> After the shipping bill is filed, customs makes the necessary checks. This includes verifying the shipping bill to ensure the code, value, weight, duty rate, exemption sought and all other details as well as accompanying documents are correct, valid and in order. If the goods don’t raise an alarm, the shipping bill is endorsed with a Let Export Order, which is the final compliance requirement for export clearance. The goods can now be loaded for shipping. However, in some cases, customs might decide the goods require a deeper inspection, examination and scanning. This could be to verify the goods are as declared, to check for security risks such as radiation, or some such reason. Depending on the results of the examination, the goods might be cleared for export, detained or rejected.</li></ol><p><em>Read our step-by-step guide to the export process </em><a href="https://www.cogoport.com/blogs/export-process-from-india" target="_blank"><em>here</em></a><em>.&nbsp;</em></p><h3><strong>Post-arrival steps</strong></h3><ol><li><strong>Filing the Bill of Entry:</strong> After the goods arrive in the country of destination, the importer or their agent files the bill of entry.</li><li><strong>Import customs clearance:</strong> The goods once again go through a verification process with customs checking if the value, weight, HS code and duty are correct, whether the goods are restricted/prohibited for import, whether any required certificates are missing, and so on. If the goods are red-flagged for any reason, customs might request an examination, scanning or inspection of the goods. If not, it might endorse the bill of entry with a Pass Out Order, which means the importer can now take delivery of the goods after paying the applicable duty.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ol><p><em>Read our step-by-step guide to the import process </em><a href="https://www.cogoport.com/blogs/step-by-step-guide-to-the-import-process-everything-exporters-importers-need" target="_blank"><em>here</em></a><em>.</em></p><p><em>If you are looking for the services of verified customs agents and freight forwarders to help you with customs clearance, try </em><a href="https://www.cogoport.com/blogs/step-by-step-guide-to-the-import-process-everything-exporters-importers-need" target="_blank"><em>Cogoport</em></a><em>. </em></p>

Customs Clearance: Guide To Cross-Border Trade

<p>In the business of shipping goods from one country to another by air, sea or road, you often hear the term CBM being used. Short for “cubic meter”, CBM is a widely used unit of measurement in shipping and determines how much you pay for freight.</p><p>In this piece, we’ve compiled everything you need to know about CBM so that you can measure your cargo accurately and determine your shipping costs. Read on to know:</p><ul><li>What is CBM?</li><li>How do you calculate CBM?</li><li>What is Volumetric Weight and Chargeable Weight?</li><li>How do you calculate freight using CBM for ocean, air and road shipments?</li><li>How does CBM impact containers and pallets?</li><li>How do you calculate the CBM of cylindrical and irregular packages?</li><li>How does CBM influence your freight cost?</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>What is CBM?</strong></h3><p>Cubic meter or CBM is a measurement of volume of a shipment. It determines how much space your cargo will take up on a ship, aircraft or truck, which in turn will decide how much it will cost to transport.&nbsp;</p><h3><strong>How do you calculate CBM?</strong></h3><p><strong>Length x Width x Height = CBM</strong></p><p>This is the formula used to measure your cargo volume in CBM (m³).</p><p>Say, you have a carton that is 2 metres long, 2 metres wide and 2 metres high. Then, its volume is&nbsp; 2 x 2 x 2 = 8 m³.</p><p>And if you have 10 such identical cartons in a single consignment, you can simply multiply the CBM with the total number of cartons to arrive at the total volume –&nbsp; 8 x 10 = 80 m³.&nbsp;&nbsp;&nbsp;&nbsp;</p><p>If the cartons are not of the same size, calculate the CBM for each carton by using the same formula and add up the total.</p><h3><strong>What is Volumetric Weight and Chargeable Weight?</strong></h3><p>In shipping, volume (CBM) is one way of calculating freight. The other is weight. Traditionally, the weight of a shipment is said to decide its transportation cost. But what if the shipment is extremely light but has a large volume (a carton of styrofoam cups or a bale of cotton wool, for example)? Such a shipment would take up more space than, say, a shipment of small steel items. But if freight is charged on the basis of its light weight, the amount would be nominal. This is where a concept called dimensional or volumetric weight and chargeable weight comes in.</p><p><strong>Gross Weight: </strong>This is the actual weight of your cargo, including any packaging, cushioning and pallets.&nbsp;</p><p><strong>Dimensional/Volumetric Weight: </strong>The volume of cargo converted into its weight equivalent (CBM to kg) is called dimensional weight or volumetric weight. Depending on the freight mode (air, sea, road) and carrier, dimensional weight can be calculated using either of these formulas:</p><ol><li><strong>CBM x DIM Factor = Dimensional Weight</strong></li><li><strong>Length (cm) x Width (cm) x Height (cm) x Quantity / DIM Factor = Dimensional Weight</strong></li></ol><p>Quantity is the number of packages that makes up a single cargo consignment.&nbsp;</p><p>The DIM factor, or dimensional weight factor, varies according to freight mode (sea, air, courier, truck) and carrier. Generally accepted DIM factors are:</p><ul><li>Sea freight – 1:1,000 (1 m³ = 1,000 kg or 1 ton)</li><li>Air freight – 1:6,000 (1 m³ = 6,000 kg or 6 tons). But when we use the first formula (CBM x DIM Factor = Dimensional Weight), then the DIM factor is 1:167, where 1 m³ = 167 kg.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li>Courier/Express freight – 1:5,000 (1 m³ = 5,000 kg or 5 tons)</li><li>Road freight (less than truckload or LTL) – 1:3,000 (1 m³ = 3,000 kg or 3 tons.&nbsp;</li></ul><p><strong><em>Note: </em></strong><em>Though the DIM factors mentioned here are widely accepted, they might still vary across freight modes, service providers and regions, so check what is applicable in your case.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</em></p><p><strong>Chargeable weight: </strong>Once you have both your gross weight and dimensional weight, your freight service provider will charge you on the basis of whichever of the two is greater. This is called chargeable weight. If gross weight is greater than dimensional weight, you will be charged on the basis of the former. But if dimensional weight is greater, that will be the chargeable weight.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><p><a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-1.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>How to calculate freight using CBM</strong></h3><h3><strong>1. For LCL ocean freight</strong></h3><p>Say, you are sending a less than container load (LCL) shipment by sea. (<a href="https://www.cogoport.com/blogs/complete-guide-to-lcl-shipping-everything-exporters-importers-need-to-know">LCL shipping</a> is a mode of transporting moderate volumes of cargo in a shared container). Shipping lines charge freight on the basis of CBM mostly for LCL shipments, provided they weigh less than one ton (1,000 kg). If the cargo weighs over a ton, then freight is charged on the basis of weight.</p><h4><strong>Example 1</strong></h4><p>Package dimensions: 4 m x 4 m x 4 m</p><p>CBM: 4 x 4 x 4 = 64 m³</p><p>DIM factor: 1:1,000</p><p>Gross weight: 200 kg (0.2 ton)</p><p>Freight rate: $50 per CBM/ton</p><p>Since volume (CBM) is greater than actual weight, freight will be charged on the basis of CBM. Hence, freight cost: 50 x 64 = <strong>$3,200</strong></p><h4><strong>Example 2&nbsp;</strong></h4><p>Package dimensions: 2 m x 2 m x 1 m</p><p>CBM: 2 x 2 x 1 = 4 m³</p><p>DIM factor: 1:1,000</p><p>Gross weight: 5,500 kg (5.5 ton)</p><p>Freight rate: $50 per CBM/ton</p><p>Since gross weight is greater than volume, freight will be charged on the basis of gross weight. Hence, freight cost: 50 x 5.5 = <strong>$275</strong></p><h3><strong>2. For air freight</strong></h3><p>Here, we have used the second formula to calculate dimensional weight – Length (cm) x Width (cm) x Height (cm) / DIM Factor – and a DIM factor of 1:6,000 to arrive at freight cost.</p><h4><strong>Example 1</strong></h4><p>Freight rate: $150 per CBM/ton</p><p>Package dimensions: 150 cm X 100 cm X 100 cm</p><p>Gross weight: 200 kg (0.2 ton)</p><p>Dimensional weight: 150 x 100 x 100 / 6,000 = 250 kg (0.25 ton)</p><p>Chargeable weight is dimensional weight (250 kg), which is greater than gross weight (200 kg). Hence, freight cost: 0.25 x 150 = <strong>$37.50</strong></p><h4><strong>Example 2</strong></h4><p>Freight rate: $150 per CBM/ton</p><p>Package dimensions: 50 cm X 80 cm X 60 cm</p><p>Gross weight: 1,200 kg (1.2 ton)</p><p>Dimensional weight: 50 x 80 x 60 / 6,000 = 40 kg (0.04 ton)</p><p>Chargeable weight is gross weight (1,200 kg), which is greater than dimensional weight (40 kg). Hence, freight cost: 1.2 x 150 = <strong>$180</strong></p><p><a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>3. For road (truck LTL) freight</strong></h3><p>This calculation is based on the formula Length (cm) x Width (cm) x Height (cm) / DIM Factor for dimensional weight, using a DIM factor of 1:3,000.</p><p>Freight rate: $60 per CBM/ton</p><p>Package dimensions: 150 cm x 80 cm x 60 cm</p><p>Dimensional weight: 150 x 80 x 60 / 3,000 = 240 kg (0.24 ton)</p><p>Gross weight: 175 kg (0.175 ton)</p><p>Dimensional weight (240 kg), which is greater than gross weight (175 kg), is the chargeable weight. Hence, freight cost: 0.24 x 60 = <strong>$15</strong>&nbsp;</p><p><strong><em>Note:</em></strong><em> Freight rates mentioned in the examples above are representational. For actual and current rates, contact your freight forwarder or get instant quotes on </em><a href="https://www.cogoport.com" target="_blank"><em>Cogoport</em></a><em>.&nbsp;&nbsp;&nbsp;</em></p><h3><strong><br>How many CBMs in a container?</strong>‍</h3><p>With many of us using containers to ship our goods, it’s important to know how many CBMs can be accomodated in a standard 20-foot, 40-foot and 45-foot container:<strong>‍</strong></p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/6017d23ba7da91008fa86c81_Screenshot%202021-02-01%20at%202.53.04%20PM.png" loading="lazy" width="auto" height="auto" alt="How many CBMs in a container"></div></figure><p><strong>Note:</strong> HC means High Cube; Payload is the maximum cargo weight a container can hold&nbsp;&nbsp;<br></p><h3><strong>How many CBMs in a pallet?</strong></h3><p>Like containers, pallets – flat structures used to support and secure cargo – come in standard sizes. The most common ones are the 48’’ x 40’’, 42’’ x 42’’ and 48’’ x 48’’1 pallets. One of these standard pallets can accommodate 1.26 m³.&nbsp;</p><h3><strong>How do you calculate CBM for irregularly shaped packages?</strong></h3><p>All the dimensions and calculations mentioned so far in this article have been for packages with a regular shape, such as a cube or cuboid. A carton is a package with a regular shape, for which the formula is <strong>Length x Width x Height = CBM</strong>. But what if your package has an irregular shape? How do you measure its CBM?</p><p>1. <strong>Cylindrical package: </strong>A rolled carpet or a pipe, for example.Set the package upright and measure its height and radius (which is half of its diameter). Measurements should be in metres. Now use the formula <strong>π x r ² x h = CBM</strong>, where</p><ul><li>π is the symbol for pi, which is the ratio of the circumference to the diameter of a circle, conventionally equal to 3.14</li><li>r is the radius</li><li>h is the height (which is equal to the length)</li></ul><p>2. <strong>Irregularly shaped package: </strong>To measure the CBM of such a package, measure its longest length, longest width and longest height. Then use the formula <strong>Length (max) x Width (max) x Height (max) = CBM</strong>. &nbsp; <strong>&nbsp;&nbsp;&nbsp;&nbsp;</strong>&nbsp;</p><h3><strong>Measurements and conversions</strong></h3><p>Since CBM is calculated in metres, here’s how you can convert your cargo measurements into metres:</p><ul><li><strong>Foot to metre: </strong>1 foot equals 0.3048 metres, so multiply the foot value by 0.3048</li><li><strong>Inch to metre: </strong>1 inch equals 0.0254 metres, so multiply by 0.0254</li><li><strong>Centimetre to metre: </strong>1 centimetre equals 0.01 metres, so multiply by 0.01</li></ul><h3><strong>How does CBM impact freight rates?</strong></h3><p>When we say that cargo volume or CBM determines your freight cost, we’re not just talking about the carrier’s charges for transporting your goods. When you receive a freight quote, it includes many other charges and surcharges, all or some of which might also be calculated on the basis of CBM. These include:</p><ul><li><strong>Terminal handling charges:</strong> These are costs associated with the use of equipment and property owned by terminals at origin and destination and the use of labour provided by them for the loading/unloading of cargo and their transport.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Inland haulage charges:</strong> These are costs associated with the movement of cargo from the<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/bunker-adjustment-factor-baf-56" target="_blank"> inland container depot/container freight station</a> to the port of loading or vice-versa.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Bunker Adjustment Factor (BAF): </strong>Also called<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/currency-adjustment-factor-caf-41" target="_blank"> Fuel Adjustment Factor</a>, this is an additional charge levied by carriers to account for fuel price fluctuations.</li></ul><p><strong>Currency Adjustment Factor (CAF): </strong>This is a surcharge levied by carriers to<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/currency-adjustment-factor-caf-41" target="_blank"> compensate for currency rate fluctuations</a> to the base exchange rate.</p>

What Is CBM And How Do You Calculate It?

<p>Finance Minister Nirmala Sitharaman presented the Union Budget 2021-2022 on February 1. This Budget is special because it comes after a bruising year when Covid-19 sent the economy into a deep<a href="https://edition.cnn.com/2020/11/27/economy/india-recession/index.html" target="_blank"> recession</a>. The Micro, Small and Medium Enterprises (MSME) sector was hit particularly hard. With the pandemic far from over, the real work of recovery starts now. How India recovers depends greatly on how MSMEs recover. Why? Because this sector has always been crucial to India’s economic health, contributing<a href="https://edition.cnn.com/2020/11/27/economy/india-recession/index.html" target="_blank"> 29% to gross domestic product</a> (GDP) and<a href="https://www.livemint.com/news/india/msmes-the-growth-engines-of-the-indian-economy-11597923225239.html" target="_blank"> 40% to exports</a> and<a href="https://www.livemint.com/news/india/msmes-the-growth-engines-of-the-indian-economy-11597923225239.html" target="_blank"> employing 110 million people</a>.&nbsp;&nbsp;&nbsp;&nbsp;</p><p>For struggling small businesses, exporters and importers in India, it is the Budget that holds the greatest hope in these difficult times. What were their expectations of the Budget and what did they get from it? This piece tackles the following topics:</p><ul><li>How did Covid-19 affect MSMEs?</li><li>What did MSMEs do to survive the pandemic?</li><li>What did the government do to help MSMEs?</li><li>What expectations did MSMEs have of the Budget?</li><li>What did the Budget deliver?&nbsp;&nbsp;&nbsp;</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a></p><h2><strong>How did Covid-19 affect MSMEs?</strong></h2><p>In March 2020, India announced a nationwide lockdown and stopped all business activity barring trade in essentials. With stringent restrictions in place for close to half the year, demand dropped, labour became scarce with migrant workers heading home, and the global supply chain crashed. The MSME sector suffered multiple setbacks:&nbsp;</p><ul><li><strong>Demand down: </strong>A steep drop in customer orders was common across MSMEs.<a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/covid-19-impact-exports-plunge-60-28-pc-in-april/articleshow/75760239.cms?from=mdr" target="_blank"> Export order cancellations</a> hit 70%-80% in April, according to Federation of Indian Export Organisations chief Sharad Kumar Saraf.&nbsp;&nbsp;</li><li><strong>Business pause:</strong> A survey of 500 MSMEs in June, conducted by IT solutions firm Endurance International Group, said one-third of respondents had<a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/covid-19-impact-exports-plunge-60-28-pc-in-april/articleshow/75760239.cms?from=mdr" target="_blank"> halted their business activities temporarily</a> and expected to stay shut for at least six months. Many businesses shut down permanently.&nbsp;&nbsp;&nbsp;</li><li><strong>Revenue drop:</strong> In a survey of 14,444 MSMEs in May, half the respondents reported a<a href="https://www.financialexpress.com/industry/sme/covid-19-impact-intense-on-msmes-survey/2003744/" target="_blank"> 20%-50% drop in earnings</a>. Restrictions were gradually lifted and economic activity resumed in the second half of 2020 but revenues remained mute. The trend continues in 2021.&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Cash flow crunch:</strong> The resultant liquidity crunch made it difficult for MSMEs to repay loans and pay salaries. Many had to lay off employees and vacate their offices.</li><li><strong>Import-export hit:</strong><a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/covid-19-impact-exports-plunge-60-28-pc-in-april/articleshow/75760239.cms?from=mdr" target="_blank">Exports fell by a record 60%</a> and<a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/covid-19-impact-exports-plunge-60-28-pc-in-april/articleshow/75760239.cms?from=mdr"> imports by 59%</a> in April. After a slow revival, December data showed<a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/covid-19-impact-exports-plunge-60-28-pc-in-april/articleshow/75760239.cms?from=mdr" target="_blank"> exports down by a marginal 0.80%</a> year-on-year and imports up 7.6% year-on-year. But it’s too early to cheer. The Economic Survey 2021 – a report card of India’s financial health in 2020-2021 – predicts exports will contract by 5.8% and imports by 11.3% in the second half of the current financial year.</li></ul><h3><strong>What MSMEs did to stay afloat</strong></h3><p>The pandemic forced MSMEs to adapt in order to survive:&nbsp;&nbsp;&nbsp;</p><ul><li><strong>Trade in essentials:</strong> Many small businesses switched to the production of in-demand essential goods such as masks, hand sanitisers, face shields and personal protective equipment (PPE).</li><li><strong>e-commerce:</strong> Many branched out into e-commerce as brick-and-mortar stores shut down and online sales increased.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Digitisation: </strong>Businesses embraced other digital tools. According to the Endurance International Group survey, 50% of those surveyed said they started using video conferencing and WhatsApp for business.&nbsp;</li></ul><h3><strong>What the government did to help</strong></h3><p>The state response to Covid-19 was the Rs 20-lakh-crore Atmanirbhar Bharat Abhiyan (Self-Reliant India Mission) with key relief measures for MSMEs:</p><ul><li><strong>Collateral-free loans:</strong> A four-year loan with payments starting after 12 months was made available to MSMEs with a turnover of up to Rs 100 crore and an outstanding loan of up to Rs 25 crore. The borrowing limit was 20% of their total outstanding credit as of February 29, 2020. The government allocated Rs 3 lakh crore for this scheme. As of December,<a href="https://www.business-standard.com/article/pti-stories/fm-reviews-progress-of-various-schemes-under-3-packages-banks-sanction-rs-2-05-lakh-cr-to-msmes-120121300463_1.html" target="_blank"> loans worth Rs 2,05,563 crore</a> had been disbursed to 81 lakh accounts.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Partial credit guarantee:</strong> A further Rs 20,000 crore was set aside to allow banks to lend to MSMEs that were unable to repay existing loans. Should the MSME fail to repay the loan, the government would stand guarantee for a portion of it. This scheme was expected to benefit 2 lakh MSMEs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Fund of Funds:</strong> Another initiative was the creation of a Rs 50,000-crore fund to help struggling MSMEs with the potential to grow. The government contributed Rs 10,000 crore to the fund and the rest was to be sourced from institutions such as the State Bank of India and Life Insurance Corporation.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Revised definitions:</strong> Accepting a long-standing demand of the sector, the government approved a change in MSME definitions. As per the new definitions, a micro enterprise is a business with an investment of not more than Rs 1 crore and a Rs 5-crore turnover, a small unit is one with an investment of not more than Rs 10 crore and a Rs 50-crore turnover, and a medium unit is one with an investment not exceeding Rs 50 crore and a Rs 250-crore turnover.</li><li><strong>Global tenders disallowed:</strong> The government disallowed foreign tenders in government schemes of up to Rs 200 crore to give MSMEs a chance.&nbsp;</li><li><strong>Clearing dues: </strong>It promised to clear dues owed to MSMEs within 45 days.&nbsp;&nbsp;&nbsp;</li><li><strong>Others: </strong>Outside of Atmanirbhar Bharat, the Ministry of Micro, Small and Medium Enterprises announced financial relief in the form of special funds to artisans and a six-month moratorium on MSME loans with no change in credit rating during this period. It launched an initiative for the production of<a href="https://www.financialexpress.com/economy/india-poised-to-export-hand-sanitiser-bottle-dispensers-govt/2132366/" target="_blank"> hand sanitiser dispensers</a> not just to meet domestic demand but to promote export and reduce dependence on Chinese-made dispensers.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><p>‍<a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-3.png" width="auto" style="width: auto; height: auto;"></a></p><h2><strong>Budget 2021: Expectation versus reality</strong></h2><p>To navigate a difficult year ahead, MSMEs had clear expectations of the Budget. Did it deliver? We take a look at the main demands/expectations of the sector and what it got:</p><h3><strong>1. Credit and finance</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Easy collateral-free loans with borrowing limits increased to Rs 5 crore for micro, Rs 15 crore for small and Rs 35 crore for medium enterprises</li><li>Extension of interest subvention schemes (where government pays part of the interest on a loan)</li><li>Wider availability of credit from formal lending sources such as banks</li><li>Linking of the Trade Receivables Discounting System (TReDS) to the Goods and Services Tax (GST) regime to bring transparency to the lending process and thereby encourage banks to lend to MSMEs</li><li>Reduction in corporate tax rates</li><li>Easing of the Foreign Exchange Management Act to encourage foreign investment in MSMEs&nbsp;</li></ul><h4><strong>What Budget delivered:&nbsp;</strong></h4><ul><li>Rs 15,700-crore allocation to the sector, double the amount of the previous Budget</li><li>A special debt resolution framework for MSMEs to be incorporated in the National Company Law Tribunal</li></ul><h3><strong>2.&nbsp; Export promotion</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Simplification (rationalisation) of duties and tariffs</li><li>Extension of the<a href="https://indianexpress.com/article/explained/what-is-pli-scheme-which-sectors-will-be-under-it-7001985/" target="_blank"> Production-Linked Incentive (PLI) scheme</a> – which aims to boost domestic manufacturing and lower dependence on imports – to cover more export-oriented sectors, such as<a href="https://indianexpress.com/article/explained/what-is-pli-scheme-which-sectors-will-be-under-it-7001985/" target="_blank"> engineering MSMEs</a></li></ul><h4><strong>What Budget delivered:</strong></h4><ul><li>Mega Investment Textiles Parks (MITRA) scheme to boost textile production and export. Seven textile parks to come up within three years</li><li>Customs duty exemption on import of some leathers, produced in good quality and quantity in India, to be withdrawn to encourage domestic production and export&nbsp;</li><li>Customs duty increased for certain MSME products such as plastic builder wares (10% to 15%), steel screws and nuts (10% to 15%), cotton (0% to 5%), synthetic cut and polished stones (7.5% to 15%)</li><li>Customs duty on raw material for man-made textiles (caprolactam, nylon chips, nylon fibre, nylon yarn) uniformly reduced to 5% to simplify duties, promote export</li><li>Key amendments to the Customs Act proposed to facilitate trade. These include a) setting up a two-year timeline to complete customs investigations, b) allowing importers/exporters to make specific amendments on self-amendment basis without official approval, c) encouraging paperless processing through the use of a common portal to serve notices and orders and act as a one-point digital interface between traders and customs</li></ul><h3><strong>3. Inflation control</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Steps to shield small businesses from rising prices</li><li>Curbing the fiscal deficit (difference between the government’s income and expenditure)&nbsp;&nbsp;&nbsp;</li></ul><h4><strong>What Budget delivered:</strong></h4><ul><li>Customs duty on semis, flats, long products of non-alloy, alloy and stainless steel reduced to 7.5% to counter the<a href="https://www.moneycontrol.com/news/business/commodities/steel-sector-users-in-for-more-shocks-as-iron-ore-prices-rise-further-6352481.html" target="_blank"> steep rise in international iron and steel prices</a></li><li>Customs duty on steel scrap exempted till March 31, 2022, and customs duty on copper scrap reduced to 2.5% to protect metal recyclers</li><li><a href="https://www.moneycontrol.com/news/business/commodities/steel-sector-users-in-for-more-shocks-as-iron-ore-prices-rise-further-6352481.html" target="_blank">Anti-dumping duty</a> (ADD) and<a href="https://www.cogoport.com/en-IN/knowledge-center/resources/shipping-terms/anti-dumping-duty-96" target="_blank"> countervailing duty</a> (CVD) withdrawn on certain steel products</li><li><a href="https://economictimes.indiatimes.com/definition/countervailing-duties" target="_blank">Fiscal deficit</a> for 2020-2021 stands at 9.5% of GDP while that for 2021-2022 is projected at 6.8%&nbsp;&nbsp;&nbsp;</li></ul><h3><strong>4. Simplification of GST</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Lowering of GST rate on professional services from 18% to 5%&nbsp;</li><li>Easing of the requirement for<a href="https://economictimes.indiatimes.com/news/economy/policy/gst-registration-after-physical-verification-of-biz-place-if-aadhaar-not-authenticated-cbic/articleshow/77677066.cms?from=mdr" target="_blank"> physical verification of office address</a> for GST registration, which increases registration time and compliance costs for MSMEs</li><li>Addressing concerns over the<a href="https://economictimes.indiatimes.com/news/economy/policy/gst-registration-after-physical-verification-of-biz-place-if-aadhaar-not-authenticated-cbic/articleshow/77677066.cms?from=mdr" target="_blank"> powers of tax authorities to cancel GST registrations</a>, which MSMEs allege leads to harassment and corruption when officers act arbitrarily</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a></p><h4><strong>What Budget delivered:</strong></h4><p>The Budget announced amendments to the Central GST Act and Integrated GST Act, including the following:</p><ul><li>The requirement of getting annual accounts audited and reconciliation statement submitted has been withdrawn</li><li>Filing of appeal against seizure or confiscation of goods in transit to be allowed only on payment of a sum equal to 25% of the penalty imposed</li><li>Stricter compliance rules for availing of input tax credit</li></ul><h3><strong>5. Infrastructure push</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Development and improvement of infrastructure to support manufacturing and employment generation</li></ul><h4><strong>What Budget delivered:</strong></h4><h5><strong>On roads</strong></h5><ul><li>Rs 1.18-lakh-crore allocation for roads and highways sector&nbsp;</li><li>More than 13,000 km of roads to be built under Bharatmala Pariyojana project, of which 3,800 km is ready</li><li>Another project for 8,500 km of roads to be awarded by March 2022</li><li>Additionally, 11,000 km of national highway corridors to be completed by March 2022</li><li>Construction activity expected this year for flagship projects such as the Delhi-Mumbai Expressway, Bengaluru-Chennai Expressway, Kanpur-Lucknow Expressway and Delhi-Dehradun Economic Corridor</li></ul><h5><strong>On rail&nbsp;&nbsp;&nbsp;</strong></h5><ul><li>Rs 1,10,055-crore allocation for the Railways</li><li>Eastern and Western dedicated freight corridors to be commissioned by June 2022</li><li>Plans announced for East Coast Corridor (Kharagpur to Vijayawada), East-West Corridor (Bhusaval to Kharagpur to Dankuni) and North-South Corridor (Itarsi to Vijayawada)</li></ul><h5><strong>On ports and shipping&nbsp;</strong></h5><ul><li>Major ports to move to public-private partnership (PPP) mode of management. To this end, seven port projects worth Rs 2,000 crore to be launched in 2021-2022</li><li>Subsidy support to Indian shipping companies in global tenders floated by ministries and Central Public Sector Enterprises</li></ul><p>‍</p><h3><strong>6. Social security for workers</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Formalisation of employment benefits&nbsp;</li><li>Social security in the form of insurance benefits</li><li>Skill development programmes for workers&nbsp;</li></ul><p>‍</p><h4><strong>What Budget delivered:</strong></h4><ul><li>One Nation One Ration Card scheme allowing beneficiaries to claim their rations anywhere in India. Largely expected to benefit migrant workers</li><li>Website to be created for collection of data on construction and gig workers with the aim of formulating health, housing, skill, insurance, credit, and food schemes for migrant workers&nbsp;</li><li>Minimum wages to apply to all categories of workers</li><li>Women allowed to work in all categories and on night shifts with adequate protection</li></ul><p>‍</p><h3><strong>7. Digitisation</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Digital payments framework for easier access to financial services&nbsp;</li><li>Technological upgradation for small businesses</li></ul><p>‍</p><h4><strong>What Budget delivered:</strong></h4><ul><li>Rs 1,500-crore scheme to promote digital modes of payment</li></ul><p>‍<a href="[Tuesday 11:10 am] Raghav Sand     https://app.cogoport.com/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-2.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>8. Boost to start-ups</strong></h3><h4><strong>Expectations:</strong></h4><ul><li>Easier access to formal funds</li><li>Simplification of taxes</li><li>Easing up of tax scrutiny to stop start-ups from moving out of India&nbsp;</li><li>Easier compliance requirements</li><li>Encouragement to Indian investors to fund home-grown start-ups</li></ul><h4><strong>What Budget delivered:</strong></h4><ul><li>Eligibility for claiming three-year tax holiday extended by a year till March 31, 2022</li><li>Exemption from capital gains tax extended by a year till March 31, 2022, to incentivise investment in start-ups</li><li>Resident/non-resident Indians can set up One Person Companies (OPCs) without restrictions on paid up capital and turnover, and can convert these into any other type of company (public, private, etc) at any time&nbsp;</li></ul><p>Budget 2021 clearly put an emphasis on MSMEs in its bid to bring India out of a deep slump. Are the measures enough? It is perhaps too early to tell. What’s certain is that the recovery process will be long and hard. And this all-important sector will need a lot more assistance from the government going forward.</p><p><br></p>

Budget 2021: What MSMEs Expected And Received

<p><a href="https://www.maritime-executive.com/article/delays-are-growing-with-increasing-reports-of-rollover-cargo-worldwide" target="_blank">One in three containers</a> missed a scheduled sailing and was rolled in December, according to data analytics firm Ocean Insights. Container rollovers are just one of the <a href="https://www.maritime-executive.com/article/delays-are-growing-with-increasing-reports-of-rollover-cargo-worldwide" target="_blank">many challenges</a> the international shipping community is grappling with today. But they have the potential to wreck trading schedules and cripple businesses. Which makes it all the more important for importers and exporters to be aware of and prepared for this threat.</p><p>In this blog, we take a deep dive into the cargo rollover crisis, tackling the following topics:</p><ul><li>What is a container rollover?</li><li>What are its reasons and fallout?</li><li>What is the current crisis all about?</li><li>What is its impact?</li><li>How can you prevent your cargo from getting rolled?</li><li>What should you do if your cargo is rolled?&nbsp;</li></ul><p>&nbsp;&nbsp;<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p><h2><strong>What is a container rollover?</strong></h2><p>A container rollover, or cargo rollover, is when your container fails to get loaded onto its scheduled vessel and is accommodated on a subsequent ship. There are numerous reasons why containers get rolled, including but not limited to:</p><ol><li>Overbooking of cargo by the carrier</li><li>Vessel skipping the port of loading</li><li>Mechanical problems with vessel</li><li>Container exceeding the weight limit for a carrier</li><li>Incorrect documentation</li><li>Customs dispute</li><li>Shipments requiring transshipment (moving the cargo from one vessel to another in transit to its final destination) or those intended for lesser-known destinations have a greater likelihood of getting rolled&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ol><p>Rolled cargo has consequences for all parties involved – the importer, exporter, carrier and ports. It leads to:</p><ul><li>Delayed shipments and unhappy customers</li><li>Additional expense. If the carrier is responsible for the rollover, it covers the cost of rescheduling. But if the shipper is responsible, then he pays for the rescheduling</li><li>Steep <a href="https://www.cogoport.com/blogs/understanding-demurrage-and-detention-charges-and-how-to-avoid-them" target="_blank">demurrage and port storage charges</a> arising out of the container being stuck in a port</li><li>Port congestion, delays and scheduling problems&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><h2><strong>What is the current crisis all about?</strong></h2><p>For the past six months, global container rollover rates have not only stayed high, they have been rising steadily. In December, the average rollover rate at major transshipment ports surveyed by <a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank">Ocean Insights</a> was 37% while it touched 50% at some ports. This is up from an average of 35% in November, 28.5% in October and 26.9% in September. To calculate the rollover rate, Ocean Insights takes the percentage of cargo arriving at a port for transshipment and leaving on a different ship than originally scheduled.<strong>&nbsp;</strong></p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/60212ea28f84613834650dc6_1.png" loading="lazy" width="auto" height="auto" alt="Container rollover rate in 2020"></div></figure><p>“Of the 20 global ports for which Ocean Insights collates data, 75% saw an increase in levels of rollover cargo in December compared to the previous month,” Ocean Insights COO Josh Brazil was<a href="https://www.seatrade-maritime.com/containers/container-cargo-rollovers-major-ports-increase-75-december" target="_blank"> quoted</a> as saying.</p><p>The crisis is particularly bad in Asia, home to some of the world’s leading transshipment ports such as Singapore and Port Klang in Malaysia. In Colombo, Sri Lanka, 50% of cargo was delayed in December while Gioia Tauro in Italy recorded a 62% rollover rate that month.&nbsp;</p><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/60212f12b59c341d578efe67_2.png" loading="lazy" width="auto" height="auto" alt="Container Rollover percentages at top seaports in 2020 "></div></figure><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/60212f3146db5446c93ec83d_3.png" loading="lazy" width="auto" height="auto" alt="Container rollover percentage by Shipping line in 2020"></div></figure><h2><strong>Why the spike in container rollover rates?</strong></h2><p><a href="https://cogoport.com/signup/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-2.png" width="auto" style="width: auto; height: auto;"></a>‍</p><p>There is more than one reason for it:</p><ul><li>The primary reason is a huge jump in imports to the US and Europe in the second half of 2020 after the lifting of Covid-19 restrictions. High cargo volumes are normal during the August-November peak season preceding the Christmas-New Year holidays. But carriers are dealing with unprecedented volumes this time around and don’t expect any let-up till<a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank"> deep into 2021</a>.</li><li>Because most of the cargo headed West is being exported from Asia, particularly China, there is a massive container shortage in this region.</li><li>Shipping lines are operating at maximum capacity and can’t add any more vessels. Hapag-Lloyd CEO Rolf Habben Jansen said the company’s fleet is “fully deployed and stretched beyond capacity”.&nbsp;</li><li>All of this means ports across the world are congested, overwhelmed and unable to function at full efficiency. A labour shortage, which hasn’t eased due to the Covid-19 pandemic, has added to problems.&nbsp;&nbsp;&nbsp;</li></ul><p><em>Read our blog on ongoing disruptions to the global supply chain</em><a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank"><em> here</em></a><em>.&nbsp;&nbsp;&nbsp;</em></p><h3><strong>Impact of the rollover crisis</strong></h3><p>From delays to stranded cargo, the impact of rising container rollover rates is being felt in many ways.&nbsp;&nbsp;</p><ul><li><strong>Delays: </strong>Only<a href="https://theloadstar.com/containership-schedule-reliability-at-lowest-level-since-records-began/" target="_blank"> 44.6% of ships arrived on time in December</a>, down from<a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank"> 50.1% in November</a>, says SeaIntelligence Consulting’s schedule reliability data. December was the fifth consecutive month that global schedule reliability recorded its lowest level since SeaIntelligence started keeping records in 2011. In terms of<a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank"> trade routes</a>, on-time vessel arrivals in November stood at 28.6% for Asia-North America West Coast, 26.4% for Asia-North America East Coast, 43.1% for Asia-North Europe and 46.1% for Asia-Mediterranean.&nbsp;&nbsp;&nbsp;</li><li><strong>Reefers frozen at ports:</strong> A mandatory Covid-19 test on frozen fish imports into China has led to<a href="https://www.joc.com/article/demand-pressure-drives-cargo-rolling-asian-hubs_20210119.html" target="_blank"> refrigerated containers stacking up</a> in Dalian port, reportedly taking as long as 20 days to clear customs. As a result, reefers carrying seafood are now being diverted to Shanghai and Qingdao in China and even Busan in South Korea, leading to congestion there as well. What’s worse, ports in China are running out of the power required to keep these reefers running and cold, endangering their cargo. While some shipping lines have stopped accepting bookings to Dalian till the situation improves, others are levying a surcharge.</li><li><strong>Vessel sliding:</strong> With shipping lines maxed out, many (such as Maersk) are resorting to “sliding” – delaying sailings that had already been advertised – ahead of the Chinese New Year holidays starting February 12. The lunar festival is one of the busiest events in the shipping calendar.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><h3><strong>What to do to prevent your container from getting rolled</strong></h3><ul><li><a href="https://theloadstar.com/carriers-claim-sliding-services-will-help-them-recover-shattered-schedules/" target="_blank">Book in advance</a></li><li>Make sure your shipping documents are in order</li><li>Strictly comply with the rules (don’t mis-declare your goods or their weight, for example)</li><li>Have a flexible sailing schedule, especially if you’re shipping during the peak season</li><li>Work with an experienced and verified freight forwarder</li><li>Split your <a href="https://www.cogoport.com/blogs/types-and-usage-of-bill-of-lading-meaning" target="_blank">Bill of Lading</a> (B/L) if you have more than one container. In the event one container is rolled on the basis of a chosen B/L, the other container/containers might still make the sailing</li><li>Avoid transshipment routes as much as possible</li></ul><p>‍<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 1.png" width="auto" style="width: auto; height: auto;"></a></p><h3><strong>What to do if you cargo gets rolled</strong></h3><ul><li>Find out why it happened. If it’s because of a carrier-related issue (overbooking, missed port, etc), there’s nothing you can do about it. But if the problem can be resolved (missing paperwork, for example), fix it quickly.</li><li>Inform your partners in the supply chain that the shipment will be delayed and make emergency plans.</li><li>Have a contingency plan ready if the shipment is urgent, such as shipping it by air.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li></ul><p><em>Try</em><a href="https://www.cogoport.com" target="_blank"><em> Cogoport</em></a><em> for instant freight quotes and to connect with trustworthy freight forwarders and customs agents</em></p>

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