EXPORT

The term export means shipping the goods and services out of the port of a country.

The seller of such goods and services is referred to as an "exporter" and is based in the

country of export whereas the overseas based buyer is referred to as an "importer".

In international trade, "exports" refers to selling goods and services produced in the home

country to other markets

DEFINITION of 'EXPORT'

A function of international trade whereby goods produced in one country are shipped

to another country for future sale or trade. The sale of such goods adds to the producing

nation's gross output. If used for trade, exports are exchanged for other products or services.

Exports are one of the oldest forms of economic transfer, and occur on a large scale between

nations that have fewer restrictions on trade, such as tariffs or subsidies.

HISTORY

The theory of international trade and commercial policy is one of the oldest branches

of economic thought. Exporting is a major component of international trade, and the

macroeconomic risks and benefits of exporting are regularly discussed and disputed by

economists and others. Two views concerning international trade present different

perspectives. The first recognizes the benefits of international trade. The second concerns

itself with the possibility that certain domestic industries (or laborers, or culture) could be

harmed by foreign competition

PROCESS

Methods of export include a product or good or information being mailed, hand-

delivered, shipped by air, shipped by vessel, uploaded to an internet site, or downloaded from

an internet site. Exports also include the distribution of information that can be sent in the

form of an email, an email attachment, a fax or can be shared during a telephone

conversation.

DIRECT EXPORTS

Direct exports represent the most basic mode of exporting made by a (holding) company,

capitalizing on economies of scale in production concentrated in the home country and

affording better control over distribution. Direct export works the best if the volumes are

small. Large volumes of export may trigger protectionism. The main characteristic of direct

exports entry model is that there are no intermediaries.

Passive exports represent the treating and filling overseas orders like domestic orders.

TYPES

SALES REPRESENTATIVES

Sales representatives represent foreign suppliers/manufacturers in their local markets for an

established commission on sales. Provide support services to a manufacturer regarding local

advertising, local sales presentations, customs clearance formalities, legal requirements.

Manufacturers of highly technical services or products such as production machinery, benefit

the most from sales representation.

IMPORTING DISTRIBUTORS

Importing distributors purchase product in their own right and resell it in their local markets

to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for

products that are carried in inventory, such as toys, appliances, prepared food.

ADVANTAGES

Control over selection of foreign markets and choice of foreign representative

companies

Good information feedback from target market, developing better relationships with

the buyers

Better protection of trademarks, patents, goodwill, and other intangible property

Potentially greater sales, and therefore greater profit, than with indirect exporting.

DISADVANTAGES

Higher start-up costs and higher risks as opposed to indirect exporting

Requires higher investments of time, resources and personnel and also organizational

changes

Greater information requirements

Longer time-to-market as opposed to indirect exporting.

INDIRECT EXPORTS

Indirect export is the process of exporting through domestically based export intermediaries.

The exporter has no control over its products in the foreign market.

TYPES

EXPORT TRADING COMPANIES (ETCS)

These provide support services of the entire export process for one or more suppliers.

Attractive to suppliers that are not familiar with exporting as ETCs usually perform all the

necessary work: locate overseas trading partners, present the product, quote on specific

enquiries, etc.

EXPORT MANAGEMENT COMPANIES (EMCS)

These are similar to ETCs in the way that they usually export for producers. Unlike ETCs,

they rarely take on export credit risks and carry one type of product, not representing

competing ones. Usually, EMCs trade on behalf of their suppliers as their export departments.

EXPORT MERCHANTS

Export merchants are wholesale companies that buy unpackaged products from

suppliers/manufacturers for resale overseas under their own brand names. The advantage of

export merchants is promotion. One of the disadvantages for using export merchants result in

presence of identical products under different brand names and pricing on the market,

meaning that export merchant’s activities may hinder manufacturer’s exporting efforts.

CONFIRMING HOUSES

These are intermediate sellers that work for foreign buyers. They receive the product

requirements from their clients, negotiate purchases, make delivery, and pay the

suppliers/manufacturers. An opportunity here arises in the fact that if the client likes the

product it may become a trade representative. A potential disadvantage includes supplier’s

unawareness and lack of control over what a confirming house does with their product.

NONCONFORMING PURCHASING AGENTS

These are similar to confirming houses with the exception that they do not pay the suppliers

directly – payments take place between a supplier/manufacturer and a foreign buyer.

ADVANTAGES

Fast market access

Concentration of resources towards production

Little or no financial commitment as the clients' exports usually covers most expenses

associated with international sales.

Low risk exists for companies who consider their domestic market to be more

important and for companies that are still developing their R&D, marketing, and sales

strategies.

Export management is outsourced, alleviating pressure from management team

No direct handle of export processes.

DISADVANTAGES

Little or no control over distribution, sales, marketing, etc. as opposed to direct

exporting

Wrong choice of distributor, and by effect, market, may lead to inadequate market

feedback affecting the international success of the company

Potentially lower sales as compared to direct exporting (although low volume can be a

key aspect of successfully exporting directly). Export partners that incorrectly select a

specific distributor/market may hinder a firm's functional ability.

Those companies that seriously consider international markets as a crucial part of their

success would likely consider direct exporting as the market entry tool. Indirect exporting is

preferred by companies who would want to avoid financial risk as a threat to their other

goals.

DOCUMENTS INVOLVED IN EXPORT

An obvious question arises is: why is documentation needed in export business? Answer to

this question lies in the nature of the business relations between the exporter and the importer

operating from two countries. One knows, unlike the domestic business, the commercial

practices and legal systems are different in the two countries the exporter and importer are

operating from.

Therefore, in order to protect the respective interests of the exporter and the importer

involved in export business, certain documentary formalities become essential. Such

documentation facilitates the smooth flow of goods and payments thereof across national

frontiers.

Export documents based on the functions performed by them are broadly classified into

four types:

1. Commercial Documents

2. Regulatory Documents

3. Export Assistance Documents

4. Documents required by Importing Countries.

Let us now discuss the specific documents and functions performed by them under each

category.

Commercial Documents:

1. Commercial Invoice:

This is the first basic and the only complete document in an export transaction. It is, in fact, a

document of contents containing information about goods. Harmonized System

Nomenclature (HSN), price charged, the terms of shipment and marks and numbers on the

packages containing the merchandise.

The exporter needs this document for other purposes also such as:

(i) Obtaining export inspection certificate

(ii) Getting excise clearance

(iii) Getting customs clearance and

(iv) Securing such incentives as cash compensatory support (CCS) and import license.

This document is prepared at both the pre-shipment and post-shipment stages.

Besides commercial invoice, there is a proforma invoice also. It is a temporary commercial

invoice which is sent by the exporter to the importer. It covers contemplated shipment which

may or may not be made in future.

The importer requires this document for obtaining an import license and opening a letter of

credit in favour of the exporter. With such obvious importance of proforma invoice, the

exporter should cultivate a habit of sending proforma invoice to the importer, even if the

same is not demanded.

2. Bill of Lading:

Bill of lading (B/L) is a document which is issued by the shipping company acknowledging

that the goods mentioned therein are either being shipped or have been shipped. This is also

an undertaking that the goods in like order and condition as received will be delivered to the

consignee, provided that the freight specified therein has been duly paid.

Bill of lading serves three distinct functions:

(i) It is an evidence of the contract of affreightment (transport).

(ii) It is a receipt given by the shipping company for cargo received by it.

(iii) It is a document of title to the goods shipped.

The bill of lading gives the details about the exporter, carrying vessel, goods shipped, port of

shipment, destination, consignee and the party to be notified on arrival of the goods at

destination. Bill of ladings is made the sets.

3. Airway Bill:

In air carriage, the transport document is known as the airway bill. This document performs

three functions of a forwarding note for the goods, receipt for the goods tendered, and

authority to obtain delivery of goods. Since it is non-negotiable, so it does not carry the same

validity as a bill of lading for sea transport carries.

4. Bill of Exchange (B/E):

Bill of exchange is an instrument or draft used for the payment in international / export

business. It is an instrument in writing containing an unconditional order, signed by the

marker, directing a certain person to pay a certain sum of money only to or to the order of a

person or to the bearer of the instrument. The person to whom the bill of exchange is

addressed is to pay either on demand or at a fixed or a determinable future.

There are three parties involved in a bill of exchange:

(i) The Drawer (Exporter):

The person who makes and executes the B/E or say, the person to whom payment is due.

(ii) The Drawee (Importer):

The person on whom the B/E is drawn and who is required to meet the terms of the

document.

(iii) The Payee (Exporter or Exporter’s Bank):

The party to receive the payment.

5. Letter of Credit:

It is a written instrument issued by the buyer’s (importer’s) bank, authorising the seller

(exporter) to draw in accordance with certain terms and stipulating in a legal form that all

such bills (drafts) will be honoured. Letter of credit provides the exporter with more security

than open accounts or bills of exchange.

A commercial letter of credit involves the following three parties:

(i) The opener or importer – the buyer who opens the credit

(ii) The issuer – the bank that issues the letter of credit.

(iii) The beneficiary – the seller in whose favour the credit is opened.

Based on differing conditions, letters of credit may be of the following types:

(a) Revocable and Irrevocable:

In case of revocable letter of credit, the buyer or issuer can cancel or change an obligation at

any time prior to payment without prior notice to the exporter or seller. When the letter is

irrevocable, the buyer cannot cancel or change obligation without the exporter’s permission.

(b) Confirmed and Unconfirmed:

In case of confirmed letter of credit, the payment is guaranteed by the issuing bank. When the

letter is unconfirmed, no such guarantee is given by the bank.

(c) With and Without Recourse:

With recourse means if the buyer fails to pay the bank after a specified period, the bank can

have recourse on the exporter. There is no such provision in the letter of credit without

recourse.

Regulatory Documents:

1. Legal Documents for Export from India:

There are two types of regulatory documents:

(i) Documents needed for registration, and

(ii) Documents needed for shipment.

The first category documents include applications and other supporting documents for

obtaining:

(i) Code number from the Reserve Bank of India (RBI),

(ii) Importers and exporters’ code numbers from the Chief Controller of Imports and Exports,

(iii) Registration-cum-membership certificate (RCMC), etc.

The documents needed for shipment of goods include the following:

(i) GR Form:

It is required to be filled in duplicate for all exports other than by post. Both of the copies

have to be submitted to the customs authorities at the port of shipment. They will retain the

original copy to be sent to the Reserve Bank of India directly.

They will return the duplicate copy which is submitted to the negotiating bank along with

other documents after shipment of goods. The negotiating bank sends the duplicate copy to

the RBI after the export proceeds have been realised.

(ii) PP Form:

Exports to all countries by parcel post (PP), except when made on ‘value payable’ or ‘cash on

delivery’ basis should be declared on PP forms.

(iii) VP/COD Form:

It is required to be filled in one copy for exports to all countries by post parcel under

arrangements to realise proceeds through postal channels on ‘value payable’ or ‘cash on

delivery’ basis.

(iv) EP Form:

Shipment to Afghanistan and Pakistan other than by post should be declared on EP forms.

(v) SOFTEX Form:

It is required to be prepared in triplicate for export of computer software in non-physical

form.

2. Shipping Bill:

The shipping bill is the main document on the basis of which the custom’s permission for

export is given. Post parcel consignment requires customs declaration form to be filled in.

There are three types of shipping bills available with the customs authorities.

These are:

(i) Free Shipping Bill:

It is used for export of goods for which there is no export duty.

(ii) Dutiable Shipping Bill:

Printed on yellow paper, it is used in case of goods which are subject to export duty/cess.

(iii) Drawback Shipping Bill:

It is usually printed on green paper and is used for export of goods entitled to duty drawback.

3. Marine Insurance Policy:

It is the basic instrument in marine insurance. A marine policy is a contract and a legal

document which serves as evidence of the agreement between the insurer and the assured.

The policy must be produced to press a claim in a court of law. An exporter must also put up

the marine insurance policy as a collateral security when he gets an advance against his bank

Credit.

Exports Assistance Documents:

For availing of a number of incentives and assistance, an exporter is required to fill in a

number of documents.

Some of the important ones of these are discussed here:

1. Application Form for Registration:

Exporters desirous of availing themselves of the benefits of the import policy are required to

register themselves with the appropriate registering authority such as Export Promotion

Councils (EPC), Commodity Boards and Chief Controller of Imports and Exports (CCIE),

New Delhi.

The application for registration should be accompanied by a certificate from the exporter’s

bankers in regard to his financial soundness. In case of a firm having branches, the

application for registration shall be submitted only by the Head Office.

2. Allotment of Indigenous Raw Materials on Priority Basis:

Manufacturer- exporters may apply to the Director of Export Promotion, Ministry of

Commerce, for replenishment of the indigenous materials used in the manufacture of goods

for export.

3. Duty Drawback:

For claiming this incentive, the main document is the customs attested drawback copy of

shipping bill. This is to be accompanied by other documents such as drawback payment

order, final commercial invoice and a copy of bill of lading or airway bill, as the case may be.

4. REP License and CCS:

For claiming REP license and cash compensatory support (CCS), the exporter is required to

prepare and file a number of documents.

The main documents in this regard are:

(i) Application in the prescribed form

(ii) Acknowledgement slip

(iii) Bank challan issued by the treasury for the application fee paid.

(iv) Advance receipt for cash assistance amount

(v) A duly certified copy of shipping bill.

(vi) Non-negotiable copy of bill of lading/airway bill.

Documents required by importing Countries:

In case of export business, the importing countries need some documents because of the legal

necessity. These documents are obtained by the exporter and are sent to the importer.

Some of the well-known documents are as follows:

1. Consular Invoice:

It is usually issued on the specified form by the consulate of the importing country situated in

the exporting country. It gives a declaration about the true value of goods shipped. The

customs authorities of importing company charge valorem based on the value mentioned on

consular invoice.

2. Certificate of Origin:

This certificate is issued by the independent bodies like chamber of commerce or export

promotion council in the exporting country. This is a certification that the goods being

exported were actually produced in that particular country.

3. GSP Certificate of Origin:

Goods which get the benefit preferential import-duty treatment in countries which implement

the Generalised System of Preferences (GSP) should be accompanied by the GSP certificate

of origin. This certificate is given on the forms prescribed by the importing countries.

4. Customs Invoices:

It is also made out on a specified form prescribed by the customs authority of the importing

country. The details given on the document will enable the customs authority of the

importing country to levy and charge import duty.

5. Certified Invoice:

This is the self-certified invoice by the exporter about the origin of the goods.

EXPORT PROCEDURE

STEP1: Enquiry :

The starting point for any Export Transaction is an enquiry.

An enquiry for product should, inter alia, specify the following details or provide

the following data

Size details - Std. or oversize or undersize

Drawing, if available

Sample, if possible

Quantity required

Delivery schedule

Is the price required on FOB or C& F or CIF basis

Mode of Dispatch - Sea, air or Sea/air

Mode of Packing

Terms of Payment that would be acceptable to the Buyer - If the buyer proposes

to open any Letter of Credit, any specific requirement to be complied with by the

Exporter

Is there any requirement of Pre-shipment inspection and if so, by which agency

Any Certificate of Origin required - If so, from what agency.

STEP 2: - Proforma generation :

After studying the enquiry in detail, the exporter - be it Manufacturer Exporter or

Merchant Exporter - will provide a Proforma Invoice to the Buyer.

STEP 3: Order placement :

If the offer is acceptable to the Buyer in terms of price, delivery and payment

terms, the Buyer will then place an order on the Exporter, giving as much data as

possible in terms of specifications, Part No. Quantity etc. (No standard format is

required for such a purchase order)

STEP 4: Order acceptance :

It is advisable that the Exporter immediately acknowledges receipt of the order,

giving a schedule for the delivery committed.

STEP 5: Goods readiness & documentation :

Once the goods are ready duly packed in Export worthy cases/cartons (depending

upon the mode of despatch), the Invoice is prepared by the Exporter.

If the number of packages is more than one, a packing list is a must.

Even If the goods to be exported are excisable, no excise duty need be charged at

the time of Export, as export goods are exempt from Central Excise, but the AR4

procedure is to be followed for claiming such an exemption.

Similarly, no Sales Tax also is payable for export of goods.

STEP 6: Goods removal from works :

There are different procedures for removing Export consignments to the Port,

following the AR4 procedure, but it would be advisable to get the consignment

sealed by the Central Excise authorities at the factory premises itself, so that open

inspection by Customs authorities at the Port can be avoided.

If export consignments are removed from the factory of manufacture, following

the AR4 procedure, claiming exemption of excise duty, there is an obligation cast

on the exporter to provide proof of export to the Central Excise authorities

STEP 7: Documents for C & F agent :

The Exporter is expected to provide the following documents to the Clearing &

Forwarding Agents, who are entrusted with the task of shipping the

consignments, either by air or by sea.

Invoice

Packing List

Declaration in Form SDF (to meet the requirements as per FERA) in duplicate.

AR4 - first and the second copy

Any other declarations, as required by Customs

On account of the introduction of Electronic Data Interchange (EDI) system for

processing shipping bills electronically at most of the locations - both for air or

sea consignments - the C&F Agents are required to file with Customs the

shipping documents, through a particular format, which will vary depending on

the nature of the shipment. Broad categories of export shipments are:

Under claim of Drawback of duty

Without claim of Drawback

Export by a 100% EOU

Under DEPB Scheme

STEP 8: Customs Clearance :

After assessment of the shipping bill and examination of the cargo by Customs

(where required), the export consignments are permitted by Customs for ultimate

Export. This is what the concerned Customs officials call the ‘LET EXPORT’

endorsement on the shipping bill.

STEP 9: Document Forwarding :

After completing the shipment formalities, the C & F Agents are expected to

forward to the Exporter the following documents:

Customs signed Export Invoice & Packing List

Duplicate of Form SDF

Exchange control copy of the Shipping Bill, processed electronically

AR4 (original duplicate) duly endorsed by Customs for having effected the

Export

Bill of Lading or Airway bill, as the case may be.

STEP 10: Bills negotiation :

With these authenticated shipping documents, the Exporter will have to negotiate

the relevant export bill through authorized dealers of Reserve Bank, viz., Banks.

Under the Generalized System of Preference, imports from developing countries

enjoy certain duty concessions, for which the exporters in the developing

countries are expected to furnish the GSP Certificate of Origin to the Bankers,

along with other shipping documents.

Broadly, payment terms can be:

DP Terms

DA Terms

Letter of Credit, payable at sight or payable at... days.

Step11: Bank to bank documents forwarding :

The negotiating Bank will scrutinize the shipping documents and forward them to

the Banker of the importer, to enable him clear the consignment.

It is expected of such authorized dealers of Reserve Bank to ensure receipt of

export proceeds, which factor has to be intimated to the Reserve Bank by means

of periodical Returns.

STEP 12: Customs obligation discharge :

As indicated above, Exporters are also expected to provide proof of export to the

Central Excise authorities, on the basis of the Customs endorsements made on the

reverse of AR4s and get their obligation, on this score, discharged.

STEP 13: Receipt of Bank certificate :

Authorized dealers will issue Bank Certificates to the exporter, once the payment

is received and only with the issuance of the Bank Certificate, the export

transaction becomes complete.

It is mandatory on the part of the Exporters to negotiate the shipping documents

only through authorized dealers of Reserve Bank, as only through such a system

Reserve Bank can ensure receipt of export proceeds for goods shipped out of this

country.

HOW TO EXPORT

Introduction

India’s Foreign Trade i.e. Exports and Imports are regulated by Foreign Trade Policy notified

by Central government in exercise of powers conferred by section 5 of foreign trade

(Development and Regulation) Act 1992. Presently Foreign Trade Policy 2015-20 is effective

from 1st April, 2015.  As per FTD & R act, export is defined as an act of taking out of India

any goods by land, sea or air and with proper transaction of money. 

STARTING EXPORTS

Export in itself is a very wide concept and lot of preparations is required by an exporter

before starting an export business.  To start export business, the following steps may be

followed:      

1) Establishing an Organisation

To start the export business, first a sole Proprietary concern/ Partnership firm/Company has

to be set up as per procedure with an attractive name and logo.

2) Opening a Bank Account

A current account with a Bank authorized to deal in Foreign Exchange should be opened.

3) Obtaining Permanent Account Number (PAN)

It is necessary for every exporter and importer to obtain a PAN from the Income Tax

Department. (To apply PAN Card Click Here)

4) Obtaining Importer-Exporter Code (IEC) Number

An IEC is a 10 digit number which is mandatory for undertaking export/ import. Application

for obtaining IEC Number can be submitted to Regional authority of DGFT in form ANF 2A

along with the documents listed therein.

Applicants can also apply for e-IEC on the DGFT website (http://dgft.gov.in/). Only one IEC

can be obtained against a single PAN.

5) Registration cum membership certificate (RCMC)

For availing authorization to import/ export or any other benefit or concession under FTP

2015-20, as also to avail the services/ guidance, exporters are required to obtain RCMC

granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.

6) Selection of product

All items are freely exportable except few items appearing in prohibited/ restricted list.

After studying the trends of export of different products from India proper selection of the

product(s) to be exported may be made.

7) Selection of Markets

An overseas market should be selected after research covering market size, competition,

quality requirements, payment terms etc. Exporters can also evaluate the markets based on

the export benefits available for few countries under the FTP. Export promotion agencies,

Indian Missions abroad, colleagues, friends, and relatives might be helpful in gathering

information.

8) Finding Buyers

Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web browsing are an

effective tool to find buyers. EPC’s, Indian Missions abroad, overseas chambers of commerce

can also be helpful. Creating multilingual Website with product catalogue, price, payment

terms and other related information would also help.  

9) Sampling

Providing customized samples as per the demands of Foreign buyers help in getting export

orders. As per FTP 2015-2020, exports of bonafide trade and technical samples of freely

exportable items shall be allowed without any limit.

10) Pricing/Costing

Product pricing is crucial in getting buyers’ attention and promoting sales in view of

international competition. The price should be worked out taking into consideration all

expenses from sampling to realization of export proceeds on the basis of terms of sale i.e.

Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of

establishing export costing should be to sell maximum quantity at competitive price with

maximum profit margin.  Preparing an export costing sheet for every export product is

advisable. 

11) Negotiation with Buyers

After determining the buyer’s interest in the product, future prospects and continuity in

business, demand for giving reasonable allowance/discount in price may be considered. 

12) Covering Risks through ECGC

International trade involves payment risks due to buyer/ Country insolvency. These risks can

be covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd (ECGC).

Where the buyer is placing order without making advance payment or opening letter of

Credit, it is advisable to procure credit limit on the foreign buyer from ECGC to protect

against risk of non-payment.(To know more about ECGC Click Here) 

Processing an Export Order

i. Confirmation of order

On receiving an export order, it should be examined carefully in respect of items,

specification, payment conditions, packaging, delivery schedule, etc. and then the order

should be confirmed. Accordingly, the exporter may enter into a formal contract with the

overseas buyer.

ii. Procurement of Goods

After confirmation of the export order, immediate steps may be taken for

procurement/manufacture of the goods meant for export. It should be remembered that the

order has been obtained with much efforts and competition so the procurement should also be

strictly as per buyer’s requirement.

iii. Quality Control

In today’s competitive era, it is important to be strict quality conscious about the export

goods.  Some products like food and agriculture, fishery, certain chemicals, etc. are subject to

compulsory pre-shipment inspection. Foreign buyers may also lay down their own

standards/specifications and insist upon inspection   by their own nominated agencies.

Maintaining high quality is necessary to sustain in export business.

iv. Finance

Exporters are eligible to obtain pre-shipment and post-shipment finance from Commercial

Banks at concessional interest rates to complete the export transaction. Packing Credit

advance in pre-shipment stage is granted to new exporters against lodgment of L/C or

confirmed order for 180 days to meet working capital requirements for purchase of raw

material/finished goods, labour expenses, packing, transporting, etc.   Normally Banks give

75% to 90% advances of the value of the order keeping the balance as margin.  Banks adjust

the packing credit advance from the proceeds of export bills negotiated, purchased or

discounted.

Post Shipment finance is given to exporters normally upto 90% of the Invoice value for

normal transit period and in cases of usance export bills upto notional due date. The

maximum period for post-shipment advances is 180 days from the date of shipment. 

Advances granted by Banks are adjusted by realization of the sale proceeds of the export

bills. In case export bill becomes overdue Banks will charge commercial lending rate of

interest.

v. Labeling, Packaging, Packing and Marking

The export goods should be labeled, packaged and packed strictly as per the buyer’s specific

instructions.  Good packaging delivers and presents the goods in top condition and in

attractive way. Similarly, good packing helps easy handling, maximum loading, reducing

shipping costs and to ensuring safety and standard of the cargo.  Marking such as address,

package number, port and place of destination, weight, handling instructions, etc. provides

identification and information of cargo packed.

vi. Insurance

Marine insurance policy covers risks of loss or damage to the goods during the while the

goods are in transit. Generally in CIF contract the exporters arrange the insurance whereas for

C&F and FOB contract the buyers obtain insurance policy.

vii. Delivery

It is important feature of export and the exporter must adhere the delivery schedule. Planning

should be there to let nothing stand in the way of fast and efficient delivery.

viii. Customs Procedures

It is necessary to obtain PAN based Business Identification Number (BIN) from the Customs

prior to filing of shipping bill for clearance of export good and open a current account in the

designated bank for crediting of any drawback amount and the same has to be registered on

the system.

In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format

as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter

need to apply different forms of shipping bill/ bill of export for export of duty free goods,

export of dutiable goods and export under drawback etc.

Under EDI System, declarations in prescribed format are to be filed through the Service

Centers of Customs. A checklist is generated for verification of data by the exporter/CHA.

After verification, the data is submitted to the System by the Service Center operator and the

System generates a Shipping Bill Number, which is endorsed on the printed checklist and

returned to the exporter/CHA. In most of the cases, a Shipping Bill is processed by the

system on the basis of declarations made by the exporters without any human intervention.

Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs

Officer may proceed to draw two samples from the consignment and enter the particulars

thereof along with details of the testing agency in the ICES/E system.

Any correction/amendments in the check list generated after filing of declaration can be made

at the service center, if the documents have not yet been submitted in the system and the

shipping bill number has not been generated. In situations, where corrections are required to

be made after the generation of the shipping bill number or after the goods have been brought

into the Export Dock, amendments is carried out in the following manners.

1.    The goods have not yet been allowed "let export" amendments may be permitted by the

Assistant Commissioner (Exports).

2.  Where the "Let Export" order has already been given, amendments may be permitted only

by the Additional/Joint Commissioner, Custom House, in charge of export section.

In both the cases, after the permission for amendments has been granted, the Assistant

Commissioner / Deputy Commissioner (Export) may approve the amendments on the system

on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has

already been generated, the exporter may first surrender all copies of the shipping bill to the

Dock Appraiser for cancellation before amendment is approved on the system.

ix. Customs House Agents

Exporters may avail services of Customs House Agents licensed by the Commissioner of

Customs.  They are professionals and facilitate work connected with clearance of cargo from

Customs.

x. Documentation

FTP 2015-2020 describe the following mandatory documents for import and export.

·         Bill of Lading/ Airway bill

·         Commercial invoice cum packing list

·         shipping bill/ bill of export/ bill of entry (for imports)

(Other documents like certificate of origin, inspection certificate etc may be required as per

the case.)

xi. Submission of documents to Bank

After shipment, it is obligatory to present the documents to the Bank within 21 days for

onward dispatch to the foreign Bank for arranging payment.  Documents should be drawn

under Collection/Purchase/Negotiation under L/C as the case may be, along with the

following documents

-      Bill of Exchange

-      Letter of Credit (if shipment is under L/C)

-      Invoice

-      Packing List

-      Airway Bill/Bill of Lading

-      Declaration under Foreign Exchange

-      Certificate of Origin/GSP

-      Inspection Certificate, wherever necessary

-      Any other document as required in the L/C or by the buyer or statutorily.

xii. Realization of Export Proceeds

As per FTP 2015-2020, all export contracts and invoices shall be denominated either in freely

convertible currency of Indian rupees, but export proceeds should be realized in freely

convertible currency except for export to Iran.

Export proceeds should be realized in 9 months.

RENDS IN INDIA'S FOREIGN TRADE

 

After witnessing an impressive growth during the year 2002-03, export growth continued to

maintain momentum during the year 2003 04. According to provisional data available for

April-March 2003-04, exports stood at Rs.283605 crores  ( US $ 61845 million) as against

Rs. 255137 crores ( US $ 52742 million) in the corresponding period of last year, recording a

growth of 11.16% in Rupee terms and 17.26 % in Dollar terms . Imports also witnessed a

robust growth of 19.01%, having increased to Rs. 346474 crores ( US $ 75209 million) from

Rs. 291133 crores ( US $ 60189 million )during April to March, 2003-04. The trade deficit

during April-March 2003-04 is estimated to have widened to Rs.62870 crores ( $ 13364

million) from Rs. 35996 crores ($ 7447million)during the corresponding period of the

previous year. The aggregate foreign trade data in Rupee terms and Dollar terms for the

period April to March, 2002-03 as well as April to March 2003-04 are given in Table 1(a)

and 1(b) respectively.

TRENDS IN EXPORTS

The details regarding India's export of principal products/groups during, 2001-02 ,2002-03

and April to December, 2002-2003 and April to December, 2003-2004 are given in Table II.

During April - December, 2003-2004, commodities/commodity groups registering significant

increase in exports over the corresponding period of the previous Details of India's Foreign

Trade

(Value in Rs. Crore)  

 

year included Tea, Coffee, Wheat, Seasame & Niger Seeds Groundnuts, Oilmeals, Guargum

Meals, Shellac, Floriculture Products, Processed Foods, Mica, Coal, Gems & Jewellery,

Sports Goods, Chemicals & Allied Products (except Residual Chemicals), Engineering

Goods, Electronic Goods, Manmade Textiles, Made Ups etc., Jute Manufactures, Hand Made

Carpets (excluding Silk), Cotton Raw including waste and Petroleum Products. Major

commodities registering a decline in exports were Rice, Tobacco, Spices, Nuts & Seeds,

Marine Products, Iron Ore, processed Minerals, Residual Chemicals and Allied Products,

Project Goods, Readymade Garments, Cotton Yarn Fabrics Made ups, etc., Wool & Woolen

Manufactures, Coir, Handicrafts and Carpets.

The export performance of some principal commodity groups during the period April to

December, 2003-2004 are given below :

Plantation Crops

Export of Plantation Crops increased by 6.7% in Rupee terms during the first 9 months of

2003-2004 compared with the corresponding period of the previous year. The increase in the

export of Plantation Crops was mainly due to reasonably good performance of Tea and

Coffee. Export of Tea increased by 6.7% from Rs. 1137 crores during the first 9 months of

last year to Rs. 1211 crores during the same period in the current year. Exports of Coffee also

increased from Rs. 710 crores last year to Rs. 761 crores this year registering a growth of

7.2%.

Agriculture and Allied Products

Agriculture and Allied Products comprises a wide variety of agricultural products covering

Cereals, Pulses, Tobacco, Spices, Nuts and Seeds, Oil Meals, Guargum Meals, Castor Oil,

Shellac, Sugar and Molasses, Processed Food, Meat and Meat Products, etc. During April to

December 2003-2004, the exports of this group recorded a decline of 4.5% from Rs. 16435

crores in the previous year to Rs. 15691 crores during the current year. Cereals (except Rice)

Groundnuts, Guargum Meals, Shellac, Processed Food & Spirit & Beverages registered

growth in exports.

INDIA'S EXPORTS OF PRINCIPAL COMMODITIES

(Value in Rs. Crore)

 

Marine products

The exports of Marine Products stood at Rs. 4785 crores during April to December, 2003-

2004 , recording a decline of 11.7% over Rs. 4785 crores during April- December, 2002-2003

. The USA, EU and Japan continued to be the major destination of marine exports from India.

Ores and Minerals

Traditional export items like Iron Ore, Manganese Ore, Chrome Ore, Aluminum, Mica and

Coal are included in this product group. Exports of Ores and Minerals were estimated at

Rs.6644 crores during this period recording a decline of 7.2% over the same period of last

year. While exports of Mica, Other Ores & Minerals and Coal recorded a growth of 77.4%,

6.7% and 9.6% respectively, Iron Ore and Processed Minerals dipped by 16.8% and 7.5%

respectively.

Leather and Leather Manufactures

Exports of Leather and Leather Manufactures registered a fall of 2.2% from Rs.6808 crores

during April to December, 2002-2003 to Rs. 6661 crores during April to December, 2003-

2004. Exports of Leather Footwear increased by 0.7% during April to December, 2003-2004

as compared to the corresponding period of the previous year. Exports of Leather and

Manufactures also declined by 3.4% during the same period.

Gems and Jewellery

The export of Gems and Jewellery during April to December, 2003-2004 stood at Rs. 35975

crores as compared to Rs.31745 crores during the corresponding period of last year, showing

a modest growth of 13.3%.

Chemicals and Allied Products

Exports of Chemicals and Allied Products registered a growth of 12.6% during April to

December, 2003-2004 over the same period of the previous year in Rupee terms. Three out of

the four sub-groups under this head viz. Basic Chemicals, Pharmaceuticals & Cosmetics,

Plastics & Linoleum, Rubber, Glass & Other Products have registered positive growth during

April to December, 2003-2004 as compared to the corresponding period of previous year.

However, Residual Chemicals and Allied Products showed a negative export growth of 8.0%.

Engineering Goods

Export of items under this group comprising Manufactures of Metals, Machinery and

Instruments, Primary and Semi-finished Iron & Steel and Transport Equipment, showed a

commendable growth as compared to most of the sectors. Exports of Engineering Goods

amounted to Rs. 32980 crores during April to December, 2003-2004 as against Rs. 26356

crores during April to December, 2002-2003 showing an impressive growth of 25.1%.

Electronic goods

Exports of Electronic Goods during the first 9 months  of the current year were estimated at

Rs. 5641 crores as compared to Rs.4455 crores during April to December, 2002-2003, thus

recording a growth of 26.6%.

Textiles and handicrafts

The total value of Indian textiles exports during April to December, 2003-2004 went down to

Rs. 36752 crores from Rs.39097 crores during the corresponding period of previous year

showing a decline of 6%. Jute Manufactures (17.2%), Natural Silk Textiles (6.3%), Man-

made Textiles, Made ups, etc., (16.5%) and Wool and Woollen Manufactures (6.0%)

recorded a positive growth. Other sub-groups viz. Readymade Garments (7.3%), Cotton

Yarn, Fabrics, Made ups, etc., (15.4%), and Coir & Coir Manufactures (8.9%) showed

negative trends.

The main items of exports of Handicrafts are various types of works of art, such as Metal

Artware, Textiles (hand printed), Woodwares and Zari goods. Exports of Handicrafts dipped

to Rs. 1367 crores during April to December, 2003-2004 from Rs.2504 crores during the

corresponding period of the last year registering a fall of 51.3%. Export of Carpets decreased

during April to December, 2003-2004 to Rs. 1870 crores from Rs. 1933 crores during April

to December, 2002-2003 registering a decline of 3.3%.

TRENDS IN INDIA'S IMPORTS

The trends in India's imports for the entire year 2002- 2003 and from April to December

2003-2004 as compared with the corresponding period of the previous year are reflected in

Table-III.

Import of items under bulk category as a whole comprising inter-alia Fertilizers, Cereals,

Sugar, Edible Oil, Iron and Steel and Petroleum Crude and Products recorded a substantial

increase during April to December, 2003-2004 compared with the corresponding period of

the previous year. It is notable that the commodity group recording the highest growth in

imports was Machinery.

As far as import of individual items is concerned, significant growth was registered by Paper

Board and Manufactures (47.59%) followed by Iron & Steel (43.76%), Crude Rubber

including Synthetic (43.31%), Edible Oil (36.71%), Non-ferrous Metals (33.07%), News

Print (29.72%), Fertilizer (15.60%) Pulp & Paper Waste (13.76%), Metalliferrous Ore &

Scrap (11.66%) and Petroleum Crude and Products (4.44%).

Import of some items during this period registered a fall. These included Crude Fertilizer

(25.55%). Import of Rice & Wheat came down to nil during the period under review.

Import by major product categories :

Fertilizers

During the first 9 months of 2003-2004 the total import of Fertilizers increased to Rs. 2742

crores from

INDIA'S IMPOTRS OF PRINCIPAL COMMODITIES

(Value in Rs. Crore)

 

Rs. 2372 crores in the corresponding period of last year recording an increase of 15.60%.

However import of Crude Fertilizer decreased by 25.55%.

Petroleum Crude & Products

The import of Petroleum Crude & Products was valued at Rs. 67920 crores during April-

December 2003-2004 as against Rs. 62059 crores during April to December , 2002-2003

showing a growth of 9.44%.

Pearls, Precious and Semi-Precious Stones

Import of Pearls and Precious and Semi-precious Stones increased by 5.55% to Rs. 23109

crores during April to December, 2003-2004 as compared to Rs. 21893 crores during the

corresponding period of the previous year.

Capital Goods

Import of Capital Goods, largely represented by machinery, including Transport Equipment

as well as Project Goods recorded a notable increase during April to December, 2003-2004

over the same period of last year. Machine Tools segment saw a significant rise of 64.03% in

imports. Import of Project Goods, however, decreased from Rs. 1807 crores in April to

December , 2002-2003 to Rs. 1221 crores in April to December, 2003-2004 registering a fall

of 32.43%. Other items that showed positive import growth were Transport Equipments

(62.06%) Non-Electrical Machinery (24.17%) , Electric Machinery (19.34%), and

Professional Instruments (1.56%).

Chemicals and Chemical Materials

Organic and Inorganic Chemical Materials and Medicinal and Pharmaceuticals Products

constituted the major components of imports under this category. The imports of organic and

inorganic chemicals increased to Rs. 13149 crores during April to December , 2003-2004

from Rs. 10794 crores during April to December, 2002-2003, registering a growth of 21.82%.

Import of medicinal and pharmaceutical products marginally declined to Rs. 2073 crores

during April to December, 2003-2004 from Rs.2087 crores during the corresponding period

of last year registering a fall of 0.67%

FEATURES OF EXPORTING

ncreasing sales

Exporting is one way of increasing your sales potential; it expands the "pie" that you earn

money from, otherwise you are stuck trying to make money only out of the local market. In

the case of South Africa, our market is relatively small in comparison to the markets of North

America, Europe and Asia. While the local market may represent enough sales potential for

smaller firms, for medium and larger companies the local market is just too small and the

only way to expand sales is to export.

It should be said, however, if you are not yet selling regionally and nationally, then you

should first aiming at expanding your market share within the local market. Once you have

saturated the national market, only then should you look beyond the borders of South Africa.

It has been said that there are no sales barrier that automatically begins where your border

ends. Increased sales also impact upon your profitability (although not always positively),

your productivity by lowering unit costs, and may increase your firm's perceived size and

stature, thereby affecting its competitive position compared with other similar-sized

organisations. What is more, research and development (R&D) and other costs can also be

offset against a larger sales base, or the move into exports may contribute to the company's

general expansion. For others, exports may be a way of testing the opportunities for overseas

licensing, franchising or production.

Increasing profits

Clearly, you are not likely to enter the export market in order to make a loss. Companies

generally strive to make profits and the bigger the profits the better. In many instances,

exports can contribute to increased profits because the average orders from international

customers are often larger than they are from domestic buyers, as importers generally order

by the container instead of by the pallet (thereby affecting both total sales and total profits).

Some products - especially those that are unique or very innovative in nature may also

command greater profit margins abroad than in the local market. Having said this, it is also

not uncommon - indeed, it is highly likely - that you may receive smaller profit margins from

your export sales compared with the local market. The reason for this is the highly

competitive nature of global markets that forces exporters to lower prices, squeeze profits and

reduce costs. You may also find that in some markets you generate higher profit margins,

while in other markets your profit margins are considerably lower.

Reducing risk and balancing growth

It is risky being bound to the domestic market alone. Export sales to a variety of diverse

foreign markets can help reduce the risk that the company may be exposed to because of

fluctuations in local (and foreign) business cycles. At any one time, the UK, Australia and

Germany will be enjoying different growth rates. By selling in all of these countries, the risk

of low growth in one or more of these countries will be offset by increased growth in the

others, thus resulting in a balanced portfolio of growth overall. In addition, with the

challenging labour conditions that many firms in South Africa face today, exports may help

to create and/or maintain jobs thus reducing the risk of a labour dispute that could otherwise

cripple the company.

Lower unit costs

Exports help to put idle production capacity to work. This is generally achieved the more

efficient utilisation of the existing factory, machines and staff. What is more, because you are

now selling more products without increasing total costs to the same extent, this has the effect

of lowering your unit costs which represents a more productive overall operation. Lower unit

costs make a product more competitive in the local marketplace as well as in foreign markets,

and/or can contribute to the firm's overall profitability.

Economies of scale

Exporting is an excellent way to enjoy pure economies of scale with products that are more

"global" in scope and have a wider range of acceptance around the world (in other words,

they can be used in other parts of the world without much adaptation). This is in contrast to

products that must be adapted for each market, which is expensive and time consuming and

requires more of an investment. The newer the product, the wider range of acceptance in the

world, especially to younger "customers," often referred to as the "global consumer".

With increased export production and sales, you can achieve economies of scale and spread

costs over a larger volume of revenue. You reduce average unit costs and increase overall

profitability and competitiveness. Long-term exports may enable a company to expand its

production facilities in order to achieve an economic level of production. (This should not be

confused with increased throughput on existing capacity, as discussed above.)

Minimising the effect of seasonal fluctuations in sales

Being in the Southern Hemisphere, South Africa has seasons that are opposite to those in the

Northern Hemisphere. For companies that sell seasonal goods such as fruit growers, and

swimwear or suntan lotion manufacturers, being able to sell these goods in the Northern

Hemisphere when our season ends, helps achieve a longer and more stable sales pattern. This

increases the sales potential for these goods and also helps reduce risk.

Small and/or saturated domestic markets

One good reason to begin exporting is when the local market is too small to support a firm's

output or when the market becomes saturated. For companies that produce heavy industrial

machinery or that have invested in large factories, they need to be able to sell enough of their

manufactured goods to justify the investment and to insure that the unit price of goods are

kept acceptably low. With relatively small markets such as South Africa, it is usually not long

before the local market becomes saturated and offers limited additional opportunities for

sales. Many of South Africa's larger manufacturers have had to turn to foreign markets to

justify their existence. Examples include most of the motor vehicle manufacturers such as

Opel, VW and BMW; the paper producers such as Mondi and Sappi; and mining houses such

as Anglo-American and De Beers. The same is true of international firms such as Volvo,

Philips and Roche. They only way firms such as these can justify their investment is to sell

abroad because their respective local markets are just too small.

Overcoming low growth in the home market

It is not uncommon for a recession in the local market to act as a spur for companies to enter

export markets that may offer greater opportunities for sales. While this may have the benefit

of offering ongoing sales potential for the firm in question, the danger with this approach is

that when the local market improves, these companies abandon their export markets to focus

on the now buoyant local market. Overseas importers become disillusioned with this type of

exporter and often see all firms from South African being the same and will want nothing

more to do with South African exporters, even if they are serious.

Extending the product life-cycle

All products go through a product life-cycle. In the beginning they are novel and sales

increase quite dramatically, then sales level off and they become what is referred to as mature

products and eventually sales start to decrease and the product goes into decline. Now, a

product that has entered its decline stage may have a life elsewhere in the world and by

finding a market where this product could be sold anew, you are essentially extending the

life-cycle of the product. Alternatively, even if it is a fairly common product, it may also be

nearing the end of its life cycle in other overseas markets (particularly in bigger markets such

as Germany, the UK and the US) and they may decide to discontinue the product. Although

the market may have declined to a point that makes it uneconomical for these companies to

continue manufacturing the product in question, the market may still be big enough for you to

supply the declining market. This has the effect of making more efficient use of the existing

factory infrastructure and other investment spent on producing the product. This extends

sales, lowers the unit costs even further and may allow for higher margins to be generated.

When you have a product that is nearing its life cycle, you should always strive to see if you

can find a market for the product abroad.

Improving efficiency and product quality

The global market is a highly competitive place and by participating in this marketplace, you

need to become equally efficient and quality conscious. It is generally the case that successful

exporters are also very successful in their home markets because of their heightened

efficiency and focus on product quality.

Untapped markets

A company may have a very unique product that is not yet available elsewhere in the world.

In this instance, these untapped markets are likely to drive the firm's export activities. Other

firms may want to take advantage of high-volume purchases in large markets overseas, such

as in the US, Europe and Asia.

Addressing customer, competitor and cost factors

The more formal theory of internationalisation discusses customer, competitor and cost

factors that drive the internationalisation process. The theory argues that in some cases

companies may go global in response to their customers moving abroad. Alternatively, they

may follow their competitors abroad, or may decide to enter a particular foreign market in

order to attack an overseas competitor that has entered the firm's domestic market, in the

competitor's own home market. Finally, companies may go international to take advantage of

lower labour costs, skilled workers or other cost factors (such as lower telecommunication or

energy costs) that are much better in a particular foreign market. For example, expanding into

India to take advantage of programming skills and lower salaries could translate into a major

advantage for a local software development firm. It should be said, however, that these

factors are more likely to be relevant to larger firms, instead of small scale export operations.

Status as an exporter

For some companies, the status of being involved in international trade is very important to

them.

The wrong reasons for exporting

Too often, however, many local South Africa companies simply follow their domestic

competitors into exports or they turn to export markets because of the difficulties encountered

in the local marketplace(see low growth in home market mentioned above). Alternatively, a

company may use exports as means of offloading excess production capacity. None of these

reasons are very solid reasons for moving into exports. In the latter case, when local sales

pick up again the "fair-weather" export firm then ignores its export markets to concentrate on

domestic sales again, often leaving foreign companies in the lurch thereby creating a bad

impression and a resistance to future export sales.