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Export Import Procedure and Trade Documents Class 11

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Business StudiesCBSE Class 11 · International Business

Export and Import Procedure Class 11: Letter of Credit, Bill of Lading and Trade Documents

Updated 17 October 2026 · Fact-checked

An export transaction runs from enquiry, order and a letter of credit through production, pre-shipment inspection, certificate of origin, shipping order, customs clearance, mate's receipt and bill of lading to securing payment; an import transaction runs from enquiry, licence and foreign exchange through letter of credit and shipment advice to retirement of documents, bill of entry and customs clearance. Key documents are the indent, letter of credit, shipping order, shipping bill, mate's receipt and bill of lading.

Follow the arrows from enquiry to payment and notice that the orange boxes are the key documents: letter of credit, shipping order, mate's receipt and bill of l

Illustration drawn for QuestionBuddy.

Understand Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11)

Export procedure (main steps).
1. Receipt of enquiry and sending quotations (proforma invoice).
2. Receipt of order or indent.
3. Assessing the importer's creditworthiness and securing a guarantee of payment, usually a letter of credit.
4. Export licence where needed; Importer-Exporter Code (IEC) from the DGFT.
5. Pre-shipment finance (packing credit) from a bank.
6. Production or procurement of goods.
7. Pre-shipment inspection, where required.
8. Excise and tax clearance.
9. Certificate of origin (for tariff concessions).
10. Reservation of shipping space: the shipping company issues a shipping order.
11. Packing and forwarding to the port.
12. Insurance of goods (marine).
13. Customs clearance with the shipping bill.
14. Mate's receipt after loading.
15. Freight paid and bill of lading issued in exchange for the mate's receipt.
16. Preparation of the invoice.
17. Securing payment: documents go through banks with a bill of exchange, released against payment (DP, sight draft) or against acceptance (DA, usance draft); presenting documents to the bank to get payment is negotiation of documents.

Import procedure (main steps). (1) Trade enquiry; (2) import licence if needed and IEC; (3) obtaining foreign exchange through an RBI-authorised bank; (4) placing an order or indent; (5) obtaining a letter of credit from the importer's bank; (6) arranging finance; (7) receipt of shipment advice from the exporter; (8) retirement of import documents (paying a sight draft or accepting a usance draft); (9) arrival of goods and the import general manifest; (10) customs clearance and release: delivery order, dock dues, bill of entry, customs duty and release of goods.

Documents.

DocumentPrepared or issued byPurpose
IndentImporterOrder for goods with quantity, quality, price and terms
Letter of creditImporter's bankGuarantee of payment on presentation of specified documents
Shipping orderShipping companyInstruction to the captain to take goods on board after customs clearance
Shipping billExporter or C&F agentMain document for customs clearance of exports
Mate's receiptCaptain of the shipReceipt that goods are loaded; exchanged for the bill of lading
Bill of ladingShipping companyDocument of title, receipt for goods and contract of carriage

Letter of credit: the most secure payment arrangement for the exporter because the importer's bank guarantees payment if the named documents are presented.

DP versus DA. Under documents against payment (sight draft) the importer gets the documents only on paying. Under documents against acceptance (usance draft) he gets them on accepting the bill and pays on the due date, which is riskier for the exporter.

Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11): key facts

Export order of key steps
  • enquiry
  • order
  • letter of credit
  • production
  • shipping order
  • customs clearance
  • mate's receipt
  • bill of lading
  • payment
Seventeen steps in all.
Import key steps
  • enquiry
  • licence and IEC
  • foreign exchange
  • order
  • letter of credit
  • shipment advice
  • retirement of documents
  • bill of entry
  • release
Ten steps in all.
Documents
  • indent by importer
  • letter of credit by importer's bank
  • shipping bill by exporter
  • mate's receipt by captain
  • bill of lading by shipping company
Mate's receipt is exchanged for the bill of lading.
Payment modes
  • DP sight draft pay then get documents
  • DA usance draft accept then pay later
  • L/C bank guarantees payment
L/C is the most secure.

How to answer Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11) questions

For a sequence or document question, follow the goods from the order to the payment.

  1. 1Write the transaction in time order: enquiry, order, payment guarantee, production, shipping, customs, payment.
  2. 2Place each document at the step where it arises: the shipping order before loading, the mate's receipt after loading, the bill of lading after the mate's receipt.
  3. 3For payment risk compare L/C (bank guarantee), DP (pay before documents) and DA (pay later).
  4. 4For an importer follow: foreign exchange, L/C, shipment advice, retirement of documents, bill of entry, customs duty, release.
  5. 5For due dates count the usance days from the date of acceptance.

Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11) in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Choosing a payment mode

Suppose an Indian exporter of spices is selling to a new buyer abroad whom he has not dealt with before.

Which payment arrangement should he ask for?

Try it first, then show the solutionSolution
  1. The creditworthiness of a new buyer is not known.
  2. A letter of credit makes the buyer's bank guarantee payment if the exporter presents the documents named in it.

Answer: A letter of credit.

Memory hook: Unknown buyer, bank guarantee.

Tricks to remember Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11)

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Mate first, bill later

    The mate's receipt comes at loading; the bill of lading is issued against it.

    Use it when: Order of documents.

  • DP pays now, DA pays later

    DP: documents against Payment. DA: documents against Acceptance.

    Use it when: Payment terms.

  • Exporter ships, importer clears

    Shipping bill for exports, bill of entry for imports.

    Use it when: Customs documents.

Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11): solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Document of title · 1 mark · MCQBoard level

Which document is a document of title to the goods and a receipt for goods shipped?
(a) Shipping order
(b) Mate's receipt
(c) Bill of lading
(d) Indent

Try it first, then show the solutionSolution
  1. The bill of lading is issued by the shipping company and also serves as the contract of carriage.

Answer: (c) Bill of lading

Example 2: Purpose of documents · 3 marks · Short answerBoard level

State the purpose of an indent, a letter of credit and a shipping order. (3 marks)

Try it first, then show the solutionSolution
  1. Indent: an order placed by the importer for goods, stating quantity, quality, price, delivery and payment terms.
  2. Letter of credit: a guarantee by the importer's bank that payment up to a sum will be made when the specified documents are presented.
  3. Shipping order: an instruction to the captain of the ship that the goods may be taken on board after customs clearance.

Answer: Order for goods; bank guarantee of payment; permission to load after customs clearance.

Example 3: Right order · 4 marks · Short answerHarder board level

Arrange these steps of an export in the correct order. (4 marks)
(a) Bill of lading issued (b) Production of goods (c) Receipt of enquiry (d) Letter of credit received (e) Mate's receipt obtained (f) Customs clearance with the shipping bill (g) Receipt of order (h) Securing payment

Try it first, then show the solutionSolution
  1. Enquiry comes first: (c).
  2. Then the order (g) and the guarantee of payment, the letter of credit (d).
  3. Then production (b).
  4. After production the goods are cleared by customs with the shipping bill (f) and loaded, giving the mate's receipt (e).
  5. The bill of lading (a) is issued against the mate's receipt, and payment is secured last (h).

Answer: (c), (g), (d), (b), (f), (e), (a), (h)

Example 4: Export under DA · 5 marks · Case-basedHOTS / competency

Case: An exporter receives an order for 2,000 units at USD 15 each. Suppose the exchange rate is 80 rupees per USD (assumed). Production cost is 17,00,000 and other export costs (packing, forwarding, customs, insurance) are 1,50,000. The buyer asks for payment under documents against acceptance with a 60-day usance draft, accepted on 10 March. (5 marks)
(i) Find the sale value in rupees and the profit. (2)
(ii) Find the date of payment (ignore days of grace). (1)
(iii) Which payment mode would reduce his risk and why? (2)

Try it first, then show the solutionSolution
  1. (i) Sale value = 2,000 x 15 = USD 30,000; at 80 rupees = 24,00,000. Profit = 24,00,000 - 17,00,000 - 1,50,000 = 5,50,000.
  2. (ii) 60 days after 10 March: 21 days remain in March (to 31 March), 30 days in April (51 days), then 9 days of May: 9 May.
  3. (iii) A letter of credit (or documents against payment), because under L/C the importer's bank guarantees payment on presentation of the documents, while under DA the exporter waits 60 days and takes the buyer's risk.

Answer: (i) Sale value 24,00,000; profit 5,50,000. (ii) 9 May. (iii) Letter of credit.

Example 5: Retirement and customs clearance · 4 marks · Short answerHarder board level

Explain what is meant by retirement of import documents under a sight draft and under a usance draft, and state the steps of customs clearance on arrival of the goods. (4 marks)

Try it first, then show the solutionSolution
  1. Under a sight draft the importer pays the draft to receive the documents; under a usance draft he accepts the bill and pays later on the due date.
  2. On arrival the carrier files the import general manifest, on which the cargo is unloaded.
  3. The importer obtains the delivery order and pays dock dues.
  4. He files the bill of entry, pays customs duty and gets the goods released, often through a clearing and forwarding agent.

Answer: Pay or accept to retire the documents; then manifest, delivery order, dock dues, bill of entry, duty and release.

Where students lose marks in Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11)

The slips examiners see most often, and what to write instead.

  • Mistake: Mixing the shipping bill and the bill of entry

    Not linking the document with exports or imports.

    Wrong working

    An importer files a shipping bill

    Right working

    The exporter files the shipping bill; the importer files the bill of entry

    Do this: Export: shipping bill; import: bill of entry.

    Usually costs: 1 mark

  • Mistake: Placing the bill of lading before the mate's receipt

    Ignoring the exchange.

    Wrong working

    Bill of lading is issued before loading

    Right working

    The mate's receipt is issued on loading and exchanged for the bill of lading

    Do this: Mate first, bill later.

    Usually costs: 1 mark

  • Mistake: Thinking an L/C is given by the exporter's bank

    Confusing the issuing bank.

    Wrong working

    The exporter's bank issues the letter of credit

    Right working

    The importer's bank issues it at the importer's request

    Do this: The buyer's bank guarantees.

    Usually costs: 1 mark

Exam tips

  • Number the steps and keep the order exactly: the order of documents is a favourite question.
  • Draw the document table with the issuer and purpose.
  • State that a letter of credit is the most secure payment mode for the exporter.
  • For a due date count days month by month.

Practice questions on Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11)

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    The mate's receipt is issued by
    (a) the exporter
    (b) the importer
    (c) the captain of the ship
    (d) the customs officer

    Hint

    On loading.

    Answer

    (c) the captain of the ship

  2. Q2 · 1 mark · Assertion-reasonHarder board level

    Assertion (A): A letter of credit is the most secure payment arrangement for an exporter.
    Reason (R): The importer's bank guarantees payment provided the exporter presents the specified documents.
    (a) Both A and R are true, and R is the correct explanation of A.
    (b) Both A and R are true, but R is not the correct explanation of A.
    (c) A is true, but R is false.
    (d) A is false, but R is true.

    Hint

    Bank guarantee.

    Answer

    (a) Both A and R are true, and R is the correct explanation of A.

  3. Q3 · 4 marks · Short answerHarder board level

    Distinguish between the shipping order, the shipping bill and the mate's receipt in terms of who prepares each and its purpose. (4 marks)

    Hint

    Shipping company, exporter, captain.

    Answer

    Shipping order: issued by the shipping company; it is an instruction to the captain to take goods on board after customs clearance. Shipping bill: prepared by the exporter or C&F agent; the main document for customs clearance of exports. Mate's receipt: issued by the captain; a receipt that goods are loaded, later exchanged for the bill of lading.

  4. Q4 · 4 marks · Short answerHarder board level

    A usance draft for 90 days is accepted by an importer on 5 January. Find the due date (ignore days of grace). An exporter's sale is USD 20,000 at an assumed rate of 80 rupees per USD , with total costs of 14,20,000. Find the profit. (4 marks)

    Hint

    Count the days in January and February, then March.

    Answer

    From 5 January: 26 days left in January (to 31 January), 28 in February (54), 31 in March (85); 5 more days gives 5 April, which is 90 days. Due date = 5 April (in a non-leap year). Sale = 20,000 x 80 = 16,00,000; profit = 16,00,000 - 14,20,000 = 1,80,000.

  5. Q5 · 5 marks · Case-basedHOTS / competency

    Case: A Mumbai firm imports a machine. It has an IEC, but the machine needs foreign exchange for payment, and the exporter has sent the shipment advice. (5 marks)
    (i) From whom does the firm obtain foreign exchange? (1)
    (ii) Which document does the importer's bank send to the exporter? (1)
    (iii) What does the importer do to receive the documents under a sight draft? (1)
    (iv) Name the document filed for customs clearance and the payment made. (2)

    Hint

    Follow the import procedure.

    Answer

    (i) A bank authorised by the RBI to release foreign exchange. (ii) The letter of credit. (iii) He retires the import documents by paying the sight draft. (iv) The bill of entry is filed for customs clearance, and customs duty (with dock dues) is paid before the goods are released.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Who issues the bill of lading?Show answer

    The shipping company.

  2. 2.What does IEC stand for?Show answer

    Importer-Exporter Code.

  3. 3.What is a certificate of origin used for?Show answer

    To claim tariff concessions in the importing country.

  4. 4.What is retirement of import documents?Show answer

    Paying a sight draft or accepting a usance draft to get the documents.

  5. 5.What is negotiation of documents?Show answer

    Submitting documents to the bank to receive payment.

Export and Import Procedure, Letter of Credit and Documents Used in International Trade (CBSE 11): frequently asked questions

Is a shipping bill for imports?

No; the shipping bill is for exports and the bill of entry is for imports.

What is packing credit?

Pre-shipment finance given by a bank to the exporter.

What is a proforma invoice?

A quotation with price, quality and terms sent in reply to an enquiry.