How to do the export

Dial4exportmarket.com, your ultimate export guide.

According to the Directorate General of Foreign Trade, an export is an act of transporting goods out of India either by land, sea or air via legal and proper transaction of money. Foreign trade rules in India are governed by Foreign Trade Policy 2015-20, effective from 1st April, 2015.

The term export is a wide concept itself and a prospective exporter has to go through a lot of steps and formalities before becoming a legit exporter.

Following steps are to be followed to start an export business

Registration of an organization

A sole proprietorship/Partnership firm/Company must be established according to procedure with an attractive name and logo to start the export business.

Opening a bank account

A current account has to be opened with a bank authorized to deal in foreign exchange.

Registration of an organization

A sole proprietorship/Partnership firm/Company must be established according to procedure with an attractive name and logo to start the export business.

Procuring Permanent Account Number (PAN)

It is mandatory for every exporter to obtain a PAN number from the Income Tax Department to start export-import business.

Procuring Importer-Exporter Code Number (IEC Number)

Since CNX number has been replaced by IEC number issued by Directorate General of Foreign Trade, the application form for obtaining the same has to be followed by a fee of INR 1000.

Obtaining registration cum membership certificate (RCMC)

Exporters must obtain RCMCs granted by the concerned Export Promotion Councils/ FIEOs/Commodity Boards/ Authorities before they can obtain an authorization to import/export or any other benefit or concession under the FTP 2015-20.

Picking the right product

An exporter has to choose the right product choosing from the items except for a few restricted/ prohibited items. It may be appropriate to select the product(s) to be exported after studying trends of India's exports.

Choosing the market

Comprehensive research covering competition, market size, payment terms, market based on export benefits and quality requirements should be carried out. Useful resources like- friends, colleagues, relatives, export promotion agencies and Indian missions abroad can help in gathering further information.

Determining the prospective buyers

To find prospective buyers, exporters should participate in trade fairs, exhibitions, B2B portals, buyer seller meetings etc. Also, creating a multilingual website consisting of product catalog, payment terms, price, and other information can be useful in finding prospective buyers too. overseas chambers of commerce, Export Promotion Councils, Indian Missions abroad, etc can provide some helpful leads too.

Sampling

Export orders can be obtained by providing customized samples according to the needs of foreign buyers. According to the FTP 2015-2020, the export of Bonafede goods and technical samples of freely exportable items shall be permitted without any limitation.

Pricing of products

Product pricing is very critical to run an export business successfully. The final price should be computed while considering costs starting from sampling till accomplishment of export proceeds depending on the terms of the sale, i.e., Cost and Freight, Cost, Freight and Insurance, Free on Board etc. Setting export costs should be aimed at selling maximum quantity at a competitive price with the highest profit margin. It is also advisable to prepare a costing sheet for each and every export product.

Agreement with buyers

The buyer's interest and future prospects in the product, as well as continuity of business, are considered before deciding to give a reasonable allowance/discount in price.

Masking the risks through ECGC

Internal business might contain some risk owing to buyer/ country insolvency. An applicable and relevant policy from Export Credit Guarantee Corporation Ltd (ECGC) can help cover and mitigate the losses eventually. A credit limit on the foreign buyer from ECGC is recommended when the buyer does not make advance payments or open letters of credit to protect against the possibility of non-payment.

How to process an export order?

Order confirmation

In order to confirm an export order, it must be thoroughly examined in terms of items, specifications, packaging, payment conditions, delivery schedule, etc. The exporter may enter into a formal agreement with the buyer accordingly.

Procuring the products

As soon as the export order is confirmed, steps can be taken to procure or manufacture the goods intended for export. This order has been obtained after much effort and competition, which means that the procurement should also be done according to the buyer's requirements.

Quality assurance

Procuring/ manufacturing products that can compete in international markets is very important. Pre-shipment inspection is compulsory for products like- certain chemicals, food and fishery, agriculture etc. Depending on the circumstance, foreign buyers may also stipulate their own standards/specifications and insist on inspection by a designated agency.

Financing

Exporters are usually eligible for pre and post shipment finance from commercial banks at concession. In the Pre-shipment stage, Packing Credit advances are granted to new exporters against the submission of a Letter of Credit or confirmed order for 180 days to meet working capital requirements for raw material/finished goods purchases, labor costs, packing, and transport. Usually, banks grant 75% to 90% of the value of the order and adjust packing credit advance from proceeds of export bill purchased, discounted or negotiated.
Maximum period for post-shipment advance is 180 days from the date of shipment and is granted up to 90% of the invoice value. If the export bill becomes overdue, banks charge a commercial rate of interest.

Labeling, marking and packaging

The goods should be packed and labeled strictly as per buyer’s requirements. Not only for buyer’s interests, careful packaging eases handling, loading and reduces shipping costs. Make sure to mention address, handling instructions, delivery destination etc. very attentively.

Insurance of products

The marine insurance policy covers the risks of loss or damage to goods while they are in transit. A CIF contract is usually arranged by the exporter, while a C&F or FOB contract is handled by the buyer.

Delivery of products

Effective planning is the key to fast and efficient delivery. Every exporter should adhere to the delivery schedule.

Customs process/ procedure

A PAN based Business Identification Number (BIN) needs to be acquired from the Customs prior to filing of shipping bills for the clearance of goods. Also, a current account in a designated bank is to be opened to credit any drawback amount.

Non-EDI shipping bills or bills of export must be filled out in the form prescribed by the Shipping Bill and Bill of Export (Form) regulations, 1991. For duty free goods, dutiable goods, and exports under drawback, exporters need to apply different forms of shipping bills/bills of exports.

In the EDI system, declarations in prescribed format are filed with Customs' service centers. An exporter/CHA is required to verify the data using a checklist. Once the data is verified, the Service Center operator submits the data to the System, which generates a Shipping Bill Number that is endorsed on the checklist and returned to the exporter. As a rule, the system processes a Shipping Bill based on the declarations made by the exporters without any human involvement. The Customs Officer may draw two samples from a consignment on order from the Appraiser Dock (export) and enter the details of the samples along with the testing agency in the ICES/E system when the Appraiser Dock (export) requests samples to be drawn and tested.

In case the documents have not been submitted in the system yet and the shipping invoice number has not yet been generated, then any corrections/amendments can be made at the service center. The following procedures are followed when corrections need to be made after the shipping bill number is generated or after the goods have been delivered to the Export Dock:

1. Currently the goods have not been slated for export, but they may be allowed by the Assistant Commissioner (Exports).

2. In cases where the "Let Export" order has already been issued, only the Additional/Joint Commissioner in charge of export can make changes.

In both cases, after the additional / joint commissioner has approved the amendment on the system, the Assistant Commissioner / Deputy Commissioner (Export) is responsible for approving the changes on the system. Whenever an exporter has already printed a Shipping Bill, he must first return all copies of the shipping bill to the Dock Appraiser for cancellation before the amendment can be approved.

Custom house agent

Custom house agents are licensed by the Commissioner of Customs. Their help can be availed regarding clearances of cargo from the customs office.

Documentation for export

Mandatory documents for export include- Bill of landing/ airway bill and commercial invoice. (Other documents including inspection certificate, certificate of origin may be necessary depending on the case.)

Submitting the documents to the Bank

After shipment, the documents must be presented to the Bank within 21 days for onward delivery to the foreign bank to arrange payment. Purchase/ Collection/ Negotiation under L/C documents should be drawn along with the following documents:

• Invoice

• Bill of Exchange

• Letter of Credit, if shipment is under the Letter of Credit

• Bill of landing/ airway bill

• GSP/ certificate of origin

• Packing list

• Inspection certificate, if required

• Declaration covered by foreign exchange

• Any other documents relevant to the dispatch

Accomplishment of export proceeds

According to FTP 2015-2020, FTP 2015-2020 requires that all export orders and invoices be denominated in either freely convertible currency or Indian rupees, but export proceeds be realized in freely convertible currency, except for exports to Iran. Realization period for export proceeds is 9 months.