Basic Steps for Exporting

1. Basic Steps for Exporting Dr. VijayaKatti Chairperson (MDPs) Indian Institute of Foreign Trade New Delhi For Niryat Bandhu Scheme (Session on 18.05.2016)

2. The course on “Export & Import Business” has 7 segments Basic steps for Exporting Marketing related issues (Identification of Product and Market) WTO Related Issues FTP related issues Finance/Risk Management issues Customs and Excise interface/Sales contract Preparation & Execution of Export Business Plan

3. Export Preliminaries • Export-Import is totally free with very limited restriction (96% items are free items) • To find Buyers-Seller is your decision • To decide Product and its Price-Qty are your decision • You must prepare Export Business Plan

4. Export • Take Order • Find CHA (Custom House Agent) • Find mode of export (Sea/Air) • Find Carrier • Fill Shipping Bill • Take payment • Request for Bank Realisation Certificate • Register for Export Scheme

5. Basic Steps for Exporting Step 1 • Those interested in EXIM business need to apply to the regional office of the Director General of Foreign Trade (DGFT) for getting Importer-Exporter Code (IEC) Number. This is true for any individual or company willing to undertake export or import in India. IEC number is not mandatory in the case of imports for personal use. The DGFT has regional offices in many states. Step 1 is applicable in the case of first-time exporters. Step 2 • The exporter has to register with the concerned export promotion council. For example, in case of garments, it is essential to obtain registration-cum-membership certificate (RCMC) from the Apparel Export Promotion Council (AEPC). Registration is essential in order to obtain various permissible benefits given by the government.

6. Step 3 • The exporter can now go in for procuring orders, by first sending a sample, if required. Both exporter and importer will have to agree upon the terms and conditions of the contract such as pricing, documents, freight charges, currency and so on. After this, the importer send a purchase order. Step 4 • With export orders in hand, the exporters starts manufacturing goods or buying them from other manufacturers.

7. Step 5 • The exporter makes arrangements for quality control and obtains from the inspector of quality control, a certificate confirming the quality of goods, depending upon the requirement. Step 6 • Exportables are then dispatched to ports/airports for transit.

8. Step 7 • The exporter asks the importer to take marine/air insurance under cost and freight, free on board etc., terms of contract. Step 8 • After the completion of these formalities, the exporter contacts the clearing and forwarding agent (C&F agent) for storing the goods in warehouses. (The exporter can also store the goods personally). The forwarding agent presents a document called the Shipping Bill, which is required for allowing shipment by the Customs Authority.

9. Step 9 • After loading the goods in to the ship, the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the ship superintendent of the port. The superintendent calculates the port charges and gives it to the exporter/C&F agent). Step 10 • When the port payments are made, the C&F agent or exporter gets the Bills of Lading or Airway Bill from the official agent of the shipping company or the airline.

10. Step 11 • The exporter applies to the relevant Chamber of Commerce for obtaining Certificates of Origin, stating that the goods originated from India. (This is not a mandatory document in all cases.) Step 12 • The exporter also sends a set of documents to the importer, stating the date of shipment, name of vessel, etc. Moreover, it is desirable to send certain documents like the Bills of Lading, Custom Invoice, and Packing List to their foreign counterparts.

11. Step 13 • The exporter now presents all the important documents at his bank. (This has to be done within 21 days after the shipment. Step 14 • The exporter’s bank sends these documents to the importer’s bank. The importer’s bank should make the payment on or before the due date. Although these steps give a clear picture about how to export, some steps are not essential.

12. EXPORT–IMPORT DOCUMENTATION Proforma Invoice • The Proforma Invoice, as the name suggests, is a proforma of the invoice. It is prepared by an exporter and sent to the importer for necessary acceptance. Packing List • It is a consolidated statement in a prescribed format, detailing how the goods have been packed. It is informative and itemizes the material in each individual package, such as drum, box, or carton. It is a very useful document for customs at the time of examination and for the warehouse keeper of the buyer to maintain a record of inventory and to effect delivery.

13. Commercial Invoice • An invoice is a fundamental document of prime importance. • It contains the name of the exporter, importer, and the consignee, and the description of goods. • It is a requisite for the invoice to be signed by an exporter or his agent. • Normally, the invoice is prepared first, and several other documents are then prepared by deriving information from the invoice.

14. Certificate of Origin • The Certificate of Origin is a very useful document in export-import trade. This certificate indicates that the goods, which are being exported, are actually manufactured in a specific country mentioned therein. This certificate is sent by the exporter to the importer. • It is useful for the clearance of the goods from the customs authority of the importing country. However, it is worth noting that the certificate of origin is required by some countries only.

15. Generalized System of Preference Certificate of Origin • As its name indicates, the generalised system of Preferences (GSP) certificate of origin certifies that the goods being exported have originated/been manufactured in a particular country. It is mainly useful for taking advantage of a preferential duty concession, if available.

16. Shipping Bill/Bill of Entry • The Shipping Bill is a reuisite for seeking the permission of customs to export goods by sea/air. It contains a description of export goods, the number and kind of packages, shipping marks and numbers, value of goods, the name of the vessel, the country of destination, etc.

17. ARE-I Form • The ARE-I Form is an application for the removal of excisable goods from the factory premises, for export purposes. For example, if you are exporting a ball point pen or a magazine, on which there is no excise applicable, you do not need to fill in this form.

18. Mate’s Receipt • After the cargo is cleared from the customs examination and other formalities are over, it is handed over to the shipping company for loading. The Mate’s Receipt is issued by the captain of the ship. It contains the name of the vessel, shipping line, port of loading, port of discharge, shipping marks and numbers, packing details, description of goods, gross weight, container number, and seal number. The mate’s receipt is exchanged for the Bill of Lading.

19. Exchange Declaration Form (GR/SDF Form) • One of the main functions of the Central Bank is to control and monitor the foreign exchange reserves of the country. Since exports directly relate to the country’s foreign exchange earnings, it becomes essential for nations to regulate an export transaction. • The Reserve Bank of India (RBI) has prescribed a GR form (SDF), a PP form, and SOFTEX forms to declare the export transactions.

20. Distribution/Disposal of Copies of GR Form • GR forms, covering the export of goods, should be completed by the exporter in duplicate, and both copies should be submitted to customs at the time of shipment. • Customs will verify all particulars of all goods and the value will be declared in the GR form. • After the shipment has been sent, the original of the GR form will be retained by the customs for onward submission to the RBI.

21. Statutory Declaration Form • Some offices in the customs department are now computerized. To meet the requirements of electronic data interchange system, the GR form has been replaced online by a new form known as Statutory Declaration Form (SDF). Post Parcel Form • When goods are exported by post, then instead of the GR form, the exporter has to fill up a Post Parcel (PP) form in triplicate.

22. SOFTEX Forms • The declaration in SOFTEX form, in respect of export of computer software and audio/video/television software, shall be submitted in triplicate to the designated official at the Department of Electronics of Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) on Export Processing Zones (EPZs) in India.

23. Bills of Exchange • The Bill of Exchange is commonly known as draft. It is ‘an instrument in writing, containing an order, signed by the maker, directing a certain person to pay a certain sum of money only to the order of a person to the bearer of the instrument’. Sight Draft • When the drawer, that is, exporter expects the drawee, that is, importer to make the payment immediately upon the draft being presented to him, the draft involved is called a Sight Draft.

24. Usance Draft • When the exporter has agreed to give credit to the foreign buyer, he draws the Usance Bills of Exchange. Inspection Certificate • The Inspection Certificate is required by some importers and countries in order to attest the specifications of the goods shipped. The attestation is usually performed by a government agency or by independent testing organizations.

25. Bill of Lading • The Bill of Lading (B/L) is a document issued by the shipping company or its agent. It acknowledges the receipt of the goods mentioned in the bill for shipment on board of the vessel. • The B/L is the legal document to be referred in case of any dispute over the shipment. Contd….

26. It contains the following information: • The shipping company’s name and address • The consignee’s name and address • The port of loading and the port of discharge • Shipping marks and particulars • Number of packages shipped with date-rubber stamp • Description of packages and the goods • Gross weight and net weight • Freight details and name of the vessel • Signature of the shipping company’s agent

27. Airway Bill • Airway Bill is a contract between the owner of the goods and the career or its agent. The receipt issued by the airlines company or its agent for carriage of goods is called an airway bill. • Insurance Certificate • The Insurance Certificate is used to assure the consignee that insurance will cover the loss or damage to the cargo during transit (marine/air insurance).

28. Consular Invoice • The Consular Invoice is a document required by certain countries. This invoice is an important document that needs to be submitted for certification to the embassy of the country concerned.

29. Marketing related issues

30. Marketing – The Concept • Marketing, in the simplest of terms, can be defined as the process which profitably meets the need for products. • The more formal definition of marketing" is that it is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

31. Marketing activities have been traditionally depicted in terms of a marketing mix, which can be defined as the set of marketing tools needed to pursue marketing objectives. The marketing mix consists of four broad groups, popularly referred to as the four Ps of marketing. These are: • Product • Price • Place • Promotion

32. INTERNATIONAL MARKETING • Marketing as a concept is universal, but the markets and behaviour of consumers vary across countries and can be quite different. This makes it essential for any student of international marketing to gain knowledge in three critical areas: • Cross-cultural knowledge • Country/regional knowledge • Cross-border transactions knowledge

33. EXPORT MARKETING-GOING GLOBAL This section addresses the all-important question: Why should a firm enter the international market? Some of the more obvious reasons for firms to enter overseas markets are: • Profitability • Growth • Achieving economies of scale • Risk spread • Access to imported inputs • Uniqueness of products and services • Marketing opportunities due to life cycle • Spreading R&D costs

34. Find Buyer • Experience • Business Promotion: Website • Distributor, Dealers, Commission Agents • Reference • Visits, Exhibition, Event Participation • Advertise and Marketing • Surfing

35. Deciding on Pricing • Price and Pricing Strategies • Profit-Oriented Pricing Objectives • Sales-Oriented Pricing Objectives

36. Product Specific Issues

37. Find Item for Export • Your background : Education, Job Experience, Family Business • Understand Export/Import Database • Supply/Demand • Price • Profitability • Example: Embroidery Machine, Pressing Machine, spinning machine

38. Find HS Code • HS Code – Harmonised System Code • Type in google : Find (item) HS Code • Example : Vitrified Tiles (69071010) • See Chapters, sub heading • Match with your item • Match with 8 digit HS Code

39. Find your Item Type • Three type of items : Free, Prohibitive, Restrictive • Free : Without any restriction, no license, no certificate • Prohibitive: Total ban • Example: All wild animal, animal articles including their products and Derivatives • Restrictive : Under specific condition • Example : Live Horses – Kathiawari, Marwari and Manipuri breeds 96% items are free items

40. Foreign Trade Policy related issues

41. INDIA’S FTP 2015 - 2020 • India’s new five year FTP 2015 – 2020 provides a stable and sustainable policy environment ; overarching framework and architecture to catalyse exports and facilitate nay rationalise imports; generate employment and increase value addition in the country. • India’s FTP – Domestic Trade Policy is anchored in the Domestic Policy framework (symbiotic relationship and synergy) Export Promotion Mission to be created that would be synergised with the National Missions of ‘Make in India’; ‘Digital India’ – e Governance - Improve the ‘ease of doing business’ index; ‘Skill India’.

42. INDIA’S FTP 2015 – 2020 – SUPER ORDINATE GOAL (bHAG) • India’s FTP Statement explains the Vision ,Mission. Objectives and Goals ; Market and Product strategy; Structure and Architecture to achieve the goals. • VISION - Super Ordinate Goal – big Hairy Audacious Goal (b HAG ) of doubling India’s exports of merchandise and services from about USD 450 Billion in FY 2013 -14 to USD 900 Billion in FY 2019 – 2020 and to raise India’s share in world exports from 2% to 3.5%. • Every thing hangs together in International Trade – so ‘Whole of Government’ approach - State Governments ; Other Central Government Ministries to be also involved rather than just the role of Department of Commerce in the export value chain (both up stream and down stream activities in terms of Michael Porter’s value chain)

43. Definition of SEZ • Special Economic Zone is a duty free enclave and is treated as a deemed foreign territory outside the Customs Territory of India for the purposes such as tariffs, trade operations, and duties. • A Special Economic Zone (SEZ) has liberal laws than that of country's conventional laws for the general trade & business. • The category 'SEZ' covers a broad range of multi-product or sector specific zones. Department of Commerce, Govt. of India

44. HIGHLIGHTS OF SEZ SCHEME • Manufacturing, services as well as trading is allowed in the SEZs. • Free Trade & Warehousing Zones (FTWZ) also permitted as stand alone SEZ or a part of another SEZ. • FDI up to 100% is permitted under the automatic route for setting up of SEZ after the approval by BOA. • Supply from SEZs to DTA treated as imports. • Supply from DTA to SEZs is treated as exports. • Units in SEZ qualify for FDI approval through automatic route subject to sectoral norms.

45. FISCAL BENEFITS FOR SEZs UNITS • Exemption from Customs duty, Excise Duty, service tax and central sales tax on authorized activity which includes building material etc. for setting up, maintenance & operation SEZ unit. • Exemption from Central Sales Tax (CST). • Exemption from payment of Stamp Duty, VAT, Electricity duty, Work Contract Tax, Entry Tax, Mandi Tax etc. • 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. • DTA Supplier eligible to avail duty drawback for the supplies effected into SEZ.

46. EASE OF DOING BUSINESS • Work Disposal Timelines have been implemented in the SEZs across the country w.e.f. 14.08.2014. • Online modules have been implemented w.e.f. 01.11.2014 for more effective digitization and online processing of applications. • Harmonization of procedures, simplification of practices & standardization of Forms in all SEZs has been implemented w.e.f. 28.10.2014. • Govt. of India vide GSR(5) dated 2nd January, 2015 has issued notification allowing dual-use of infrastructure in NPA in SEZs by both SEZ and DTA entities, by amending Rule 11(10) of SEZ Rules, 2006. Recent initiatives of the Govt. of India for speedy disposal of work of SEZs :- Department of Commerce, Govt. of India

47. International Trade Issues and Commitments Adopt your business to benefit from the impact of WTO, Free Trade Agreement, New trade issues. Following aspects will be covered : IV How you can use available Trade Policy Instruments for Handling Imports Surge through the use of Anti Dumping, Safeguard and Countervailing Measures? III How new Issues like Non Tariff Measures of Various Countries, Sanitary and Phyto-sanitary Standards, Intellectual Property Rights and Geographical Indications may impact your profitability? II How your product can enter US and European market at less than normal duty using the schemes like GSP, or how your imports can benefit from Duty Free Tariff Preference Scheme? I How to benefit from the Indian Free Trade Agreements and WTO Rules?

48. Incoterm InternationalCommerceTerm • A formalized international Term of Trade regulated by the International Chamber of Commerce • Specifies the responsibilities of the exporter and the responsibilities of the importer in an international transaction • Which tasks will be performed by the exporter • Which tasks will be performed by the importer • Which activities will be paid by the exporter • Which activities will be paid by the importer • When the transfer of responsibility for the goods will take place • First codified by the International Chamber of Commerce in 1953. The latest revision is dated 2000

49. Finance/ Risk Management

50. Nuts & Bolts of Finance • I. Management of international payments, Understanding change in value of Foreign Currencies • II. Risk management in exports – Commercial and Political Risk , How to do more export business with less money III. Export Finance including Pre-Shipment & Post-Shipment Finance, Line of Credit, RBI Guidelines, Foreign Exchange for Individuals/Firms IV. Export Insurance including Export Credit cum Guarantee Corporation (ECGC) Schemes For Product Insurance, Marine Insurance International Trade is an endurance game of a hyper competitive nature where every penny counts and rewards could be high for smart entrepreneurs