EXPORT

Export involves physical transhipment of goods from the home country to the host country, in lieu of payment thereof.
Export goods and services are provided to foreign consumers by domestic producers

REASONS FOR EXPORTING

Mode of entering international market and requires less investment than the other modes of entry. Economies of scale Increase Top Line and Bottom line Market extension Extend product life cycle Offset lack of demand for seasonal products

EXPORT PRICING

Export pricing is the most important factor in promoting export and facing international trade competition. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. There is no fixed formula for successful export pricing and it differs from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.

EXPORT PRICING STRATEGY

(1) High pricing strategy Unique or new products Brand name products: Gucci bags High profit margin Limits market to well-to-do customers Attracts competition Higher price at the beginning and lower price later

Contd.....

(2) Low pricing strategy To penetrate foreign markets To increase market share To dispose of excess or obsolete inventory To discourage new competition Cannot be a long-term strategy

Contd.....

(3) Moderate pricing strategy Adequate profit margin Can meet competition and maintain market shares Should be long-term strategy

Non Price Factors

1. 2. 3. 4. 5. 6. 7. 8. 9. Presumed Relationship between Quality & Price. After Sale Service. Before Sale Service in consumer Goods. Prompt deliveries. Settlement of claims. Ability to Supply complete Range of product. Sales Promotion. Fancy Prices for Handicraft Goods. Fro Industrial Goods, demonstrating the product, spare parts, Trg. After Sales Service Financial Credit gets Related to price.

TRADITIONAL PRODUCTS

India is able to get Reasonable Prices. To Reduce cut throat unfair Prices UNCATAD help is being sought. Indian Exporter 55 cents for shims. Sold at $ 2.1 a pound.

NON TRADITIONAL PRODUCTS

Intermediate Product: Consumer Products. All developing countries are put to Serve dis-advantage.

DETERMINANTS OF EXPORT PRICING Range of products offered. After-sales service in products like machine tools, consumer durables. Product differentiation and brand image. Frequency of purchase. Specialty value goods and gift items. Aggressive marketing and sales promotion. Unique value goods and gift items.

VARIABLE COST+OTHER COST DIRECTLY RELATED TO EXPORT

Special Packing. Commission to Oversea Agent. Export Credit Insurance. Bank Charges. Inland Freight. Port Charges. Forwarding Charging. Export duty. Documentation & Incidental.

Contd.....

Cost of after sales.

Promotional.
Pre-shipment Inspection Port Charges.

- Less duty Drawback = Export Price

METHODS ( PRODUCT PRICING) Cost Plus. Marginal cost pricing. Competitive pricing. Market pricing
Contd.....

Value based or competition based pricing. ROI. Markup. Seal bid. Product bundling.

METHODS FOB or FOR (Free on board) CIF (Cost, Insurance & Freight )

EXW
FAS FCA FOB

Ex Works
Free Alongside Ship Free Carrier Free On Board

CIF CIP CPT DAF

Cost, Insurance and Freight Carriage and Insurance Paid To Carriage Paid To Delivered At Frontier

DDP DDU DEQ DES

Delivered Duty Paid Delivered Duty Unpaid Delivered Ex Quay Delivered Ex Ship

WHY GOVERNMENT GIVE INCENTIVES ON EXPORT

To balance export import deficit. To empower the Indian currency. To bring the dollar price demand and supply at equilibrium. To create a good impact on GNP.

EXPORT INCENTIVES

Export Incentives impart cost competitiveness to exports, thereby facilitating greater market penetration. Raw material and other components can be imported without payment of customs duty for use in goods to be exported. Refund of local taxes and duties levied on raw materials and components used in the manufacture of exports. Increase employment opportunities. Increase merchandise export

Indians as a gem & jwellery hub. Indian as a automotive hub. Indian as refueling stock. Benefit of un-rebated servies tax. Trade facilitation measures

DUTY DRAWBACK (DBK)

The duty drawback refers to the refund of central Excise (CST) & Custom duties paid by manufacturer and/or exporter in relation to the inputs used for manufacturing of the products. Duty drawback is not applicable in the respect of a product if (a)- No excise/custom duties were paid for its manufacturer and/or exporter (b)- Amount of the drawback is less then 1 % of FOB value.(except where the amount of drawback is more than Rs. 500. per shipment) (c) - manufacturer and/or exporter is by 100% EOU/EPZ/SEZ Units. (d)- If manufacturer and/or exporter apply for duty entitlement pass book scheme.

DUTY ENTITLEMENT PASS BOOK (DEPB)

Where exporter is eligible to claim credit (in some percentage of FOB (Free on Board) value) if exports made in freely convertible currency (means currency acceptable by all countries like USD). The rate of Duty Entitlement Pass Book (DEPB) is announced by DGFT. The rates of Duty Entitlement Pass Book (DEPB) are decided by DGFT after every 5 years but they have right to change the rates at any time.

FOCUS MARKET SCHEME (FMS)

Government of India gives the duty credit equivalent to 2.5 % of FOB value of exports to some countries to increase the export in these countries.

FOCUS PRODUCT SCHEME (FPS). Government of India gives the duty credit equivalent to 1.25 % of FOB value of exports to some products to increase the export of these products.

VISHESH KRISHI AND GRAM UDYOG YOJNA (VKGUY)

The objective of this scheme is to prompt the export of fruits, vegetables, flower, minor forest product and their value added product. Export of agricultural product shall be entitled for duty credit equivalent to 5 % of FOB value of exports for each licensing year.

EXPORT PROMOTION CAPITAL GOODS SCHEME

A domestic manufacturer can import machinery and plant without paying customs duty or settling at a concessional rate of customs duty
Customs Duty Rate
10%

Export Obligation
4 times exports (on FOB basis) of CIF value of machinery. 6 times exports (on FOB basis) of CIF value of machinery or 5 times exports on (NFE) basis of CIF value of machinery. 6 times exports (on FOB basis) of CIF value of machinery or 5 times exports on (NFE) basis of CIF value of machinery.

Time
5 years 8 years

Nil in case CIF value is Rs200mn or more.

Nil in case CIF value is Rs50mn or more for agriculture, aquaculture, animal husbandry, floriculture, horticulture, poultry and sericulture.

8 years

EXCHANGE EARNER FOREIGN CURRENCY ACCOUNT (EEFC A/C)

Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorized Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.

FREE TRADE ZONES (FTZ)

Several FTZs have been established at various places in India like Kandla, Noida, Cochin, etc. No excise duties are payable on goods manufactured in these zones provided they are made for export purpose. Goods being brought in these zones from different parts of the country are brought without the payment of any excise duty. Moreover, no customs duties are payable on imported raw material and components used in the manufacture of such goods being exported. If entire production is not sold outside the country, the unit has the provision of selling 25% of their production in India. On such sale, the excise duty is payable at 50% of basic plus additional customs or normal excise duty payable if the goods were produced elsewhere in India, whichever is higher.

Advance Licence / Duty Exemption Entitlement Scheme (DEEC)

In this scheme advance licence, either quantity based (Qbal) or value based (Vabal), is given to an exporter against which the raw materials and other components may be imported without payment of customs duty provided the manufactured goods are exported. These licences are transferable in the open market at a price.

MANUFACTURE UNDER BOND

This scheme furnishes a bond with the manufacturer of adequate amount to undertake the export of his production. Against this the manufacturer is allowed to import goods without paying any customs duty, even if he obtain it from the domestic market without excise duty. The production is made under the supervision of customs or excise authority.