For MBA / PGDM Students

How to start an Export-Import Business

Sunil Garg B. Tech. M. Tech. MBA

Industry Consultant & Management Professor (IB, SCM & Strategy)E-mail: sunil.garg.edu@gmail.com

Export ManagementA multi-disciplinary functional area, extension of general management,dealing with non-routine activities, uncertainty of environment andmeeting commitments.

Essence:

Managing and coordinating of all activities of business with propercoordination and integration among various agencies involve in execution ofexport order.

Efficient networking, joint ventures and business partnerships leading to astrategic alliances.

Exporters Classifications

• Merchant Exporter: buying the goods from the market/manufacturer and selling toforeign buyers

• Manufacturer Exporter: manufacturing the goods for export

• Services Exporter: Hotels, Tourism, IT, Software, Health Care, Consultancy, etc.

• Project Exports: Contracts for Designing, manufacturing, supply, erection,commissioning, etc

• Deemed Exports: Global Tenders, Duty-free Licenses

• Buying Agent/Sales Agent/Commission Agent/Indenting Agent

Agencies Involved

Manufacturer, Exporter, Foreign Buyer, Buying Agents,

Inspection Agency, Insurance Company, ECGC, Local &

Foreign Banks, Packer, Transporter or Inland Carriers,

Consolidators, CHA, Stevedores, Shipping Company

Agent or Shipping Company, Protective Agents, Excise,

VAT, Shipping Company /Airlines, EPC, DGFT, Chamber

of Commerce, Custom and Port Authorities, RBI, etc.

Planning for Exports

Getting IEC Code No from DGFD: The first step for becomingeligible for export/import is to get registered as an authorizedholder of IEC Number.

Registering with an appropriate Export Promotion Council:obtaining Registration-cum-Membership Certificate to claimbenefits under FTP; Product not covered by any EPC - obtainRCMC from the concerned Regional Licensing Authority.

Procuring of Export Orders: Effective Business Communication,Internet Marketing, Personal Meeting, Engaging Agent,Negotiation, Entering in to Export Contract - Meeting ProductSpecifications, Delivery, After Sales-Service Conditions, etc.

Getting IEC Number

An application in the prescribed format to be made to the RegionalLicensing Authority with payment of the prescribed fee and followingdocuments:

1. Bank Receipt (in duplicate)/Demand Draft of application fee in terms of Appendix21B.

2. Certificate from the Banker.

3. Self-certified copy of Permanent Account Number (PAN) issued by Income TaxAuthorities.

4. Two copies of passport size photographs of the applicant duly attested by thebanker of the applicant.

5. Self-certified copy of RBI approval in cases where non-resident interest/holding inthe firm/company exists with repatriation benefits.

Export Promotion Councils (EPCs)http://exim.indiamart.com/reference-directories/directory-of-epcs.html

The Export Promotion Councils are non-profit organisations registeredunder the Indian Companies Act or the Societies Registration Act.They are supported by financial assistance from the Government ofIndia.

The role of the EPCs is to project India's image abroad as a council ofreliable suppliers of high quality goods and services.

The EPCs encourage and monitor the observance of internationalstandards and specifications by exporters.

The EPCs keep abreast of the trends and opportunities ininternational markets for goods and services and assist their membersin taking advantage of such opportunities in order to expand anddiversify exports.

Export Promotion Councils (Contd.)http://exim.indiamart.com/reference-directories/directory-of-epcs.html

• ENGINEERING EXPORT PROMOTION COUNCIL

Contact Person: Chairman

Address : World Trade Centre. 14/IB, Ezra Street, Calcutta-700 001.

Tel. : (91)33-263080/81/82/83/84/85, Fax : (91)33-2258968

E-Mail : eepc-ho@eepc.ho.cmc.net.in

Website: http://www.eepc.gov.in

• OVERSEAS CONSTRUCTION COUNCIL OF INDIA

Contact Person: Chairman

Address : H-118, Himalaya House, 11th Floor, 23,Kasturba Gandhi Marg, New Delhi-110 001

Tel. : (91)11-3312936/3327550, Fax : (91)11-3312936

Website : http://www.occi.org

• BASIC CHEMICALS, PHARMACEUTICALS AND COSMETICS EXPORT PROMOTION COUNCIL

• CHEMICALS AND ALLIED PRODUCTS EXPORT PROMOTION COUNCIL

• PLASTICS & LINOLEUMS EXPORT PROMOTION COUNCIL

• COUNCIL FOR LEATHER EXPORTS

• SPORTS GOODS EXPORT PROMOTION COUNCIL

• GEM AND JEWELLERY EXPOR PROMOTION COUNCIL

• SHELLAC EXPORT PROMOTION COUNCIL

• CASHEW EXPORT PROMOTION COUNCIL

Export Promotion Councils (Contd.)http://exim.indiamart.com/reference-directories/directory-of-epcs.html

• ELECTRONICS AND COMPUTER SOFTWARE EXPORT PROMOTION COUNCIL

Contact Person: Chairman

Address : PHD-House,Phase-II, 3rd floor,Opp.,Asian Games Village, New Delhi-110 0 16.

Tel. : (91)11-696103/696206/654463, Fax : (91)11-6853412

E-Mail : esc@giasdl01.vsnl.net.in

Website: http://www.indiansources.com

Textiles Sector:

• APPAREL EXPORT PROMOTION COUNCIL

Contact Person: Chairman

Address : NBCC Towers,15 Bhikaji Cama Place, New Delhi - 110 066.

Tel. : (91) 11-883351/ 6888505/ 6888656/ 6888300, Fax : (91) 11-6168584

Website : http://www.aepc.com

• CARPET EXPORT PROMOTION COUNCIL

• COTTON TEXTILE EXPORT PROMOTION COUNCIL

• EXPORT PROMOTION COUNCIL FOR HANDICRAFTS

• HANDLOOM EXPORT PROMOTION COUNCIL

• THE INDIAN SILK EXPORT PROMOTION COUNCIL

SYNTHETIC & RAYON TEXTILE EXPORT PROMOTION COUNCIL

• WOOL & WOOLENS EXPORT PROMOTION COUNCIL

Entering into ExportsExport Marketing:

Market research, collecting adequate information, analysing marketenvironments (opportunities & threats), identifying/selecting targetmarkets, undertaking trips to foreign markets and establishing personalrapport, participating in international trade fairs, selecting products &specifications, catalogue & sampling, selecting prospective buyers,negotiating pricing and delivery terms and entering into written contract.

Export Contract:

It is necessary to enter into an export contract with the overseas buyer.EC should be carefully drafted, comprehensive but in precise terms,incorporating all relevant and important conditions of the trade deal, noambiguity regarding specifications of the goods and terms of saleincluding export price, mode of payment, type of packaging, storage,port of shipment, delivery schedule, etc.

Export Contract (Essential Contents)

Product Description, Standards and Specifications Quantity Parameters Inspection Clause Total Value of Contract Terms of Delivery Taxes, Duties and Charges Period of Delivery/Shipment Packing, Labeling and Marking Terms of Payment-- Amount/Mode & Currency/ Credit Discounts and Commissions Licenses and Permits Insurance Documentary Requirements Guarantee, After Sale-service Arbitration Force Majeure

Targeting Customers by Internet Marketing

The quality of presence on the web is the first and only economical chance toproject credibility and earn initial respect for your product.

The people have infinite choices for providers of products or service presentedonline and make a snap decision–within seconds–whether or not they want toexplore a relationship with you.

Your Website should guarantee to display the product strength, value andopportunities to all your stack holders all over the world.

Extending reach to targeted customers requires Search Engine Optimization(SEO), Social Media Marketing and portfolios creation.

Social Media Marketing would be the ground-breaking reality for theinternational businesses product promotions in the coming decade, which can beachieved by profiles created on SM Networking sites link: Facebook, Twitter,Linkedin, Plaxo, Stumble upon, MySpace, YouTube, Flicker, Silicon India, e-magazines and blogs, etc.

Execution of Exports Procuring Order, Finalizing Written Contract.

Start Manufacturing or Procuring Goods, Quality Inspection, Sea-worthy- export packing, Stuffing in Container /FCL/LCL as per requirements,Insurance, Dispatch to ICD, Ports/Airport, Obtaining Certificate of Origin.

Appointing CHA, Processing Shipping Bill with Customs, Collecting Bill ofLading/Airway Bill.

Sending Shipment Intimation to Buyer, Preparing Set of ShippingDocuments, Sending advance Set to Buyer and submitting Negotiable Setof Documents to local Bank.

Exporter’s Bank to forward the documents to Buyer’s Bank fornegotiation and collecting payment, availing export financing/incentivesand preparing for next order/shipment.

Process of a Foreign Trade Transaction

Importer’s Bank Exporter’s Bank

Importer Exporter

Purchase order

Shipment of goods

Letter of Credit

Shipping Documents and time draft accepted

Payment-discounted value of B/E

Export FinancingRBI Policy:

No export order should suffer for want of funds.

Banks should finance up to 90% of FOB value at concessional rate ofinterest from 90 to 270 days, improving the competitiveness of Indianexports.

GOI provides facilities of Pre and Post-shipment Credits through commercialbanks under the various schemes of ECGC and EXIM Bank for whichmaximum rate of interests are limited to:

• Up to 180 days: Not exceeding PLR minus 2.5%

• Beyond 180 days and up to 270 days: Not exceeding PLR plus 0.5%

• Beyond 270 days and up to 360 days: May be fixed by bank

Export Financing• Pre-shipment Finance: Known as Packing Credit to purchase raw-materials

and making goods ready for export before shipment. This is over and abovethe normal permissible bank finance. A separate loan account for eachexport order can be opened.

• Post-shipment Finance: Facility for short term credit against exportsreceivable at concessional rate of interest to cover the time gap betweenshipment of goods and collection of payment. Bank offers post-shipmentadvance against: Negotiation of Export Documents or Bills Discounting orAdvance against Bills sent on Collection.

• Period of Finance: Normal Transit Period (25) + Usance Period as per thedraft + Grace Period (3)

• ECGC provides guarantees to the bank to cover risks of post-shipmentcredits to the exporters on individual order as well as whole turnover basis.

Process of Exports Financing

Obtaining Export Contract acceptable to bank >> Pre-

export incentives (if applicable) >> Pre-shipment credit

(finance) >> Purchase/Import of raw-material & processing

>> Central Excise Clearance >> Custom Clearance >>

Shipment >> Negotiation of shipping documents >> Post-

shipment credit (finance) >> Export proceeds realisation >>

Post-export incentives >> End of transaction.

Pre-shipment Inspection & Quality ControlExport Inspection Council (EIC) controls EIAs at five metro cities with a networkof 38 sub-offices and laboratories to back up pre-shipment inspection, qualitycontrol and certification activity.

Type of Inspections: EIA provides follows three systems of inspection:

• Consignment-wise Inspection

• In-process Quality Control (IPQC)

• Self-Certification Scheme

All manufacturer exporters should implement a Quality Management System toproduce a consistent quality product to meet buyers’ specifications and gainconfidence of buyer.

Exporters are required to apply to Export Inspection Agency (EIA) for deputingan inspector to conduct an inspection of the consignment at the factory orwarehouse of exporter and issue of inspection certificate.

Export IncentivesPre-export incentives - Duty Free Imports of raw-materials and related inputs –two schemes:

(a) Advance Authorization Scheme (AAS): Non-transferable, can be availed after

export obligation: products manufactured can be disposed of locally. Imports

allowed based on standard input-output norms (SION)

• (b) Duty Free Import Authorization (DFIA): Transferable, can be availed after

export obligation – inputs imported can be transferred. Minimum 20 % value

addition as per FTP.

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Post-export Incentives - Duty Pay-back on Inputs for replenishment of duties - two

schemes:

(a) Duty Drawback and

(b) Duty Exemption Pass Book (DEPB)

Risks Covers By Various Agencies

Category of Risk Insurance Agency

1 Credit Risk, Political Risk ECGC

2 Physical Risk, Cargo, Transit Risks, Loss, Damage,

Product Liability Risk

GIC (General Insurance

Company)

3 Foreign Exchange Risk Commercial Banks

(Forward Cover)

The role of the Global Manager is to identify and address all types of risk in

international business deals, establish support and control mechanisms, and set the

course for the risk management in terms of organization policies and objectives.

Export Promotion Drive

The Government has introduced several schemes to promote units dedicated to

exports. These include:

• Export Oriented Units (EOU): Hundred per cent export of manufactured goods.

• Technology Parks (TPs): For export of software and services

• Export Processing Zones (EPZ) or Special Economic Zones (ESZ) – For duty free Imports

and Exports from a specified area. The Government of India had in April 2000

announced the introduction of ‘Special Economic Zones’ policy in the country deemed

to be foreign territory for the purposes of trade operations, duties and tariffs. India

passed special economic zone act in 2005. Currently, India has more than 1022 units in

operations in over 9 functional SEZs, each an average size of 200 acres. 8 Export

Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All

these SEZs are in various parts of the country in the private/joint sectors or by the

State Government.

What Does Not Work

? • Outdated Product Knowledge and Skills

? • Lack of networking

? • Lack of Communication

? • Lack of Self Development

? • Lack of Motivation

? • Lack of Leadership

What Works

! • Continuous Learning

! • Focused Networking

! • Strong Communication

! • Gap Analysis and Self Development

! • The Right Attitude

! • Taking Control - Leadership

Skills That Work!!!

Supply Chain Management

Production Management

Inventory Management

Logistics and Distribution

Communication &

Leadership

IT-ERP/SAP

Business Processes

Improvement

Important Websites

http://www.ipfonline.com/

http://www.made-from-india.com/

http://www.tradeindia.com/

http://www.yellowpages.co.in/

http://www.alibaba.com/

Enterprise Systems

Collaboration

Learning Management Systems (LMS)

Cloud Computing

Technologies for Managers

Thank You,

Sunil GargB. Tech. M. Tech. MBA

Industry Consultant & Management Professor (IB, SCM & Strategy)

Advisory Board Member - ISCEA, USA – www.iscea.comCountry Head (India) - BRASI, Canada - www.brasi.org

Director – IKN, Canada - www.iknownetwork.orgPh: +91 98688 77774 / 98716 58884, USA: +1 815 349 6142

http://in.linkedin.com/in/skgarg