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 Management
A multi-disciplinary functional area, extension of general management,
dealing with non-routine activities, uncertainty of environment and
meeting commitments.
Essence:
Managing and coordinating of all activities of business with proper
coordination and integration among various agencies involve in execution of
export order.
Efficient networking, joint ventures and business partnerships leading to a
strategic alliances.
Exporters Classifications
Merchant Exporter: buying the goods from the market/manufacturer and selling to
foreign 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 becoming
eligible for export/import is to get registered as an authorized
holder of IEC Number.
Registering with an appropriate Export Promotion Council:
obtaining Registration-cum-Membership Certificate to claim
benefits under FTP; Product not covered by any EPC - obtain
RCMC 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 Product
Specifications, Delivery, After Sales-Service Conditions, etc.
Getting IEC Number
An application in the prescribed format to be made to the Regional
Licensing Authority with payment of the prescribed fee and following
documents:
1. Bank Receipt (in duplicate)/Demand Draft of application fee in terms of Appendix
21B.
2. Certificate from the Banker.
3. Self-certified copy of Permanent Account Number (PAN) issued by Income Tax
Authorities.
4. Two copies of passport size photographs of the applicant duly attested by the
banker of the applicant.
5. Self-certified copy of RBI approval in cases where non-resident interest/holding in
the 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 registered
under the Indian Companies Act or the Societies Registration Act.
They are supported by financial assistance from the Government of
India.
The role of the EPCs is to project India's image abroad as a council of
reliable suppliers of high quality goods and services.
The EPCs encourage and monitor the observance of international
standards and specifications by exporters.
The EPCs keep abreast of the trends and opportunities in
international markets for goods and services and assist their members
in taking advantage of such opportunities in order to expand and
diversify 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 Exports
Export Marketing:
Market research, collecting adequate information, analysing market
environments (opportunities & threats), identifying/selecting target
markets, undertaking trips to foreign markets and establishing personal
rapport, 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, no
ambiguity regarding specifications of the goods and terms of sale
including 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 to
project credibility and earn initial respect for your product.
The people have infinite choices for providers of products or service presented
online and make a snap decisionwithin secondswhether or not they want to
explore a relationship with you.
Your Website should guarantee to display the product strength, value and
opportunities 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 the
international businesses product promotions in the coming decade, which can be
achieved 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 of
Lading/Airway Bill.
Sending Shipment Intimation to Buyer, Preparing Set of Shipping
Documents, Sending advance Set to Buyer and submitting Negotiable Set
of Documents to local Bank.
Exporters Bank to forward the documents to Buyers Bank for
negotiation and collecting payment, availing export financing/incentives
and preparing for next order/shipment.
Process of a Foreign Trade Transaction
Importers Bank Exporters Bank
Importer Exporter
Purchase order
Shipment of goods
Letter of Credit
Shipping Documents and time draft accepted
Payment-discounted value of B/E
Export Financing
RBI Policy:
No export order should suffer for want of funds.
Banks should finance up to 90% of FOB value at concessional rate of
interest from 90 to 270 days, improving the competitiveness of Indian
exports.
GOI provides facilities of Pre and Post-shipment Credits through commercial
banks under the various schemes of ECGC and EXIM Bank for which
maximum 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 above
the normal permissible bank finance. A separate loan account for each
export order can be opened.
Post-shipment Finance: Facility for short term credit against exports
receivable at concessional rate of interest to cover the time gap between
shipment of goods and collection of payment. Bank offers post-shipment
advance against: Negotiation of Export Documents or Bills Discounting or
Advance against Bills sent on Collection.
Period of Finance: Normal Transit Period (25) + Usance Period as per the
draft + Grace Period (3)
ECGC provides guarantees to the bank to cover risks of post-shipment
credits 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 Control
Export Inspection Council (EIC) controls EIAs at five metro cities with a network
of 38 sub-offices and laboratories to back up pre-shipment inspection, quality
control 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 to
produce a consistent quality product to meet buyers specifications and gain
confidence of buyer.
Exporters are required to apply to Export Inspection Agency (EIA) for deputing
an inspector to conduct an inspection of the consignment at the factory or
warehouse of exporter and issue of inspection certificate.
Export Incentives
Pre-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 Garg
B. Tech. M. Tech. MBA
Industry Consultant & Management Professor (IB, SCM & Strategy)
Advisory Board Member - ISCEA, USA www.iscea.com
Country Head (India) - BRASI, Canada - www.brasi.org
Director IKN, Canada - www.iknownetwork.org
Ph: +91 98688 77774 / 98716 58884, USA: +1 815 349 6142
http://in.linkedin.com/in/skgarg