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India's Trade Overview

EXPORT PROCEDURES AND DOCUMENTATION

BASIC STEPS TO EXPORT

A vital success factor in initiating any export company is clear understanding and detail information & knowledge of products to be exported. In order to be a successful in exporting one must fully understand its foreign market and do proper research rather than try to tackle every market in a single basket. Overseas design and product must be studies properly and considered carefully. Because there are specific laws dealing with International trade and foreign business, it is crucial that you familiarize yourself with state, federal, and international laws before starting your export business.

1. Establish Organisation
2. Opening a bank account
3. Obtaining PAN
4. Obtaining Import Export Code (IEC)
5. Obtaining RCMC and getting registered with Income Tax Authorities

Price is also an important factor. So, before starting an export business an exporter must considered the price offered to the buyers. As the selling price depends on sourcing price, try to avoid unnecessary middlemen who only add cost but no value. It helps a lot on cutting the transaction cost and improving the quality of the final products.

• The primary reason for export is to earn foreign exchange. The foreign exchange not only brings profit for the exporter but also improves the economic condition of the country.
• Companies that export their goods are believed to be more reliable than their counterpart domestic companies assuming that exporting company has survive the test in meeting international standards.
• Free exchange of ideas and cultural knowledge opens up immense business and trade opportunities for a company.
• As one starts visiting customers to sell one’s goods, he has an opportunity to start exploring for newer customers, state-of-the-art machines and vendors in foreign lands.
• By exporting goods, an exporter also becomes safe from offset lack of demand for seasonal products.
• International trade keeps an exporter more competitive and less vulnerable to the market as the exporter may have a business boom in one sector while simultaneously witnessing a bust in a different sector.
Following factors must be considered while exporting:

Geographical Factors

Country, state, region, Time zones,

Urban/rural location logistical considerations e.g. freight and distribution channels

Economic, Political, and Legal Environmental Factors

Regulations including quarantine,

Labelling standards,

Standards and consumer protection rules,

Duties and taxes

Demographic Factors

Age and gender,

Income and family structure,

Occupation,

Cultural beliefs,

Major competitors,

Similar products,

Key brands.

Market characteristics

Market size,

Availability of domestic manufacturers,

Agents, distributors and suppliers. 

Once all the research and analysis is done its time to get registered with the various government authorities.Registration with Reserve Bank of India (RBI)

Prior to 1997, it was necessary for every first-time exporter to obtain IEC number from Reserve Bank of India (RBI) before engaging in any kind of export operations. But now this job is being done by DGFT.

Registration with Director General of Foreign Trade (DGFT)

For every first-time exporter, it is necessary to get registered with the DGFT (Director General of Foreign Trade), Ministry of Commerce, Government of India. DGFT provide exporter a unique IEC Number. IEC Number is a ten digits code required for the purpose of export as well as import. No exporter is allowed to export his good abroad without IEC number. However, if the goods are exported to Nepal, or to Myanmar through Indo-Myanmar boarder or to China through Gunji, Namgaya, Shipkila or Nathula ports then it is not necessary to obtain IEC number provided the CIF value of a single consignment does not exceed Indian amount of Rs 25,000/-.

Application for IEC number can be submitted to the nearest regional authority of DGFT. Application form which is known as “Aayaat-Niryaat Form – ANF2A” can also be submitted online at the DGFT web-site: http://dgft.gov.in/. While submitting an application form for IEC number, an applicant is required to submit his PAN account number. Only one IEC is issued against a single PAN number. Apart from PAN number, an applicant is also required to submit his Current Bank Account number and Bankers Certificate. An amount of Rs 1,000/- is required to be submitted with the application fee.

Registration with export promotion councils

Registered under the Indian Company Act, Export Promotion Councils or EPCs such as Trade Promotion Council of India are non-profit organisations for the promotion of various goods exported from India in international market. EPC works in close association with the Ministry of Commerce and Industry, Government of India and act as a platform for interaction between the exporting community and the government. So, it becomes important for an exporter to obtain a registration cum membership certificate (RCMC) from the EPC. An application for registration should be accompanied by a self-certified copy of the IEC number. Membership fee should be paid in the form of cheque or draft after ascertaining the amount from the concerned EPC. The RCMC certificate is valid from 1st April of the licensing year in which it was issued and shall be valid for five years ending 31st March of the licensing year, unless otherwise specified.

Registration with Commodity Boards

Commodity Board is registered agency designated by the Ministry of Commerce, Government of India for purposes of export-promotion and has offices in India and abroad. Currently, there are five statutory Commodity Boards under the Department of Commerce. These Boards are responsible for production, development and export of tea, coffee, rubber, spices and tobacco.

Registration with Income Tax Authorities

Merchandise goods exported are eligible for exemption from both Value Added Tax and Central Sales Tax. So, to get the benefit of tax exemption it is important for an exporter to get registered with the Tax Authorities.

Export Licence

A document issued by the competent/appropriate licensing agency after which an exporter is allowed to transport his product in a foreign market. The license is only issued after a careful review of the facts surrounding the given export transaction. Export license depends on the nature of goods to be transported as well as the destination port. So, being an exporter, it is necessary to determine whether the product or good to be exported requires an export license or not.

IntroductionExport pricing is the most important factor in for 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. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency. Like any business transaction, risk is also associated with good to be exported in an overseas market. Export is risk in international trade is quite different from risks involve in domestic trade. So, it becomes important to all the risks related to export in international trade with an extra measure and with a proper risk management.

Credit Risk

Sometimes because of large distance, it becomes difficult for an exporter to verify the creditworthiness and reputation of an importer or buyer. Any false buyer can increase the risk of non-payment, late payment or even straightforward fraud. So, it is necessary for an exporter to determine the creditworthiness of the foreign buyer. An exporter can seek the help of commercial firms that can provide assistance in credit-checking of foreign companies.

Poor Quality

Exported goods gets rejected by an importer on the basis of poor and substandard quality It is always recommended to properly check the goods to be exported. Sometimes buyer or importer raises the quality issue just to put pressure on an exporter in order to try and negotiate a lower price. So, it is better to allow an inspection procedure by an independent inspection company before shipment. Such an inspection protects both the importer and the exporter. Inspection is normally done at the request of importer and the costs for the inspection are borne by the importer or it may be negotiated that they be included in the contract price. Alternatively, it may be a good idea to ship one or two samples of the goods being produced to the importer by an international courier company. The final product produced to the same standards is always difficult to reduce.

Transportation

With the movement of goods from one continent to another, or even within the same continent, goods face many hazards. There is the risk of theft, damage and possibly the goods not even arriving at all.

Logistic

The exporter must understand all aspects of international logistics, in particular the contract of carriage. This contract is drawn up between a shipper and a carrier (transport operator). For this an exporter may refer to Incoterms 2000, ICC publication.

Legal

International laws and regulations change frequently. Therefore, it is important for an exporter to drafts a contract in conjunction with a legal firm, thereby ensuring that the exporter’s interests are taken care of.

Packaging

The basic role of packaging is to contain, protect and preserve a product as well as aid in its handling and final presentation. Packaging also has a role in the process of design, evaluation, and production of packages. The packaging can be done within the export company or the job can be assigned to an outside packaging company. Packaging provides following benefits to the goods to be exported:

• Physical Protection – Packaging provides protection against shock, vibration, temperature, moisture and dust.
• Containment or agglomeration – Packaging provides agglomeration of small objects into one package for reason of efficiency and cost factor.
• Marketing: Proper and attractive packaging play an important role in encouraging a potential buyer.
• Convenience – Packages can have features which add convenience in distribution, handling, display, sale, opening, use, and reuse.
• Security – Packaging can play an important role in reducing the security risks of shipment. It also provides authentication seals to indicate that the package and contents are not counterfeit. Packages also can include anti-theft devices, such as dye-packs, RFID tags, or electronic article surveillance tags, that can be activated or detected by devices at exit points and require specialized tools to deactivate. Using packaging in this way is a means of loss prevention.

Labelling

Like packaging, labelling should also be done with extra care. It is also important for an exporter to be familiar with all kinds of sign and symbols and should also maintain all the nationally and internationally standers while using these symbols. Labelling should be in English, and words indicating country of origin should be as large and as prominent as any other English wording on the package or label.

Labelling on product provides the following important information:

• Shipper’s mark
• Country of origin
• Weight marking (in pounds and in kilograms)
• Number of packages and size of cases (in inches and centimeters)
• Handling marks (international pictorial symbols)
• Cautionary markings, such as “This Side Up.”
• Port of entry
• Labels for hazardous materials

Labelling of a product also provides information like how to use, transport, recycle, or dispose of the package or product. With pharmaceuticals, food, medical, and chemical products, some types of information are required by governments. It is better to choose a fast-dyes for labelling purpose. Only fast dyes should be used for labelling. Essential data should be in black and subsidiary data in a less conspicuous colour; red and orange and so on. For food packed in sacks, only harmless dyes should be employed, and the dye should not come through the packing in such a way as to affect the goods.

Export from India required special document depending upon the type of product and destination to be exported. Export Documents not only gives detail about the product and its destination port but are also used for the purpose of taxation and quality control inspection certification.

Shipping Bill/ Bill of Export is the main document required by the Customs Authority for allowing shipment. A shipping bill is issued by the shipping agent and represents some kind of certificate for all parties, included ship’s owner, seller, buyer and some other parties. For each one represents a kind of certificate document.

In case of Post Parcel, no Shipping Bill is required. The relevant documents are mentioned:

• Customs Declaration Form – It is prescribed by the Universal Postal Union (UPU) and international apex body coordinating activities of national postal administration. It is known by the code number CP2/ CP3 and to be prepared in quadruplicate, signed by the sender.
• Dispatch Note – It is filled by the exporter to specify the action to be taken by the postal department at the destination in case the address is non-traceable or the parcel is refused to be accepted.
• Commercial Invoice – Issued by the exporter for the full realizable amount of goods as per trade term.
• Consular Invoice – Mainly needed for the countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Burma, Iraq, Ausatralia, Fiji, Cyprus, Nigeria, Ghana, Zanzibar etc. It is prepared in the prescribed format and is signed/ certified by the counsel of the importing country located in the country of export.
• Customs Invoice – Mainly needed for the countries like USA, Canada, etc. It is prepared on a special form being presented by the Customs authorities of the importing country. It facilitates entry of goods in the importing country at preferential tariff rate.
• Legalised /Visaed Invoice – This shows the seller’s genuineness before the appropriate consulate or chamber or commerce/ embassy.
• Certified Invoice – It is required when the exporter needs to certify on the invoice that the goods are of a particular origin or manufactured/ packed at a particular place and in accordance with specific contract. Sight Draft and Usance Draft are available for this. Sight Draft is required when the exporter expects immediate payment and Usance Draft is required for credit delivery.
• Packing List – It shows the details of goods contained in each parcel / shipment.
• Export Packing List – An export packing list is much more detailed and informative than a standard domestic packing list. It includes:
– Itemization of the contents of each individual package
– The type of package, such as a box, crate, drum or carton
– The individual net, legal, tare and gross weights and measurements for each package
• Shipper’s and buyer’s references: The list is used by the shipper or forwarding agent to determine the total shipment weight and volume, and whether the correct cargo is being shipped.
• Certificate of Inspection – It is a type of document describing the condition of goods and confirming that they have been inspected.
• Black List Certificate – It is required for countries which have strained political relation. It certifies that the ship or the aircraft carrying the goods has not touched those country(s).
• Manufacturer’s Certificate – It is required in addition to the Certificate of Origin for few countries to show that the goods shipped have actually been manufactured and is available.
• Certificate of Chemical Analysis – It is required to ensure the quality and grade of certain items such as metallic ores, pigments, etc.
• Certificate of Shipment – It signifies that a certain lot of goods have been shipped.
• Health/ Veterinary/ Sanitary Certification – Required for export of foodstuffs, marine products, hides, livestock etc.
• Certificate of Conditioning – It is issued by the competent office to certify compliance of humidity factor, dry weight, etc.
• Antiquity Measurement – It is issued by Archaeological Survey of India in case of antiques.
• Shipping Order – Issued by the Shipping (Conference) Line which intimates the exporter about the reservation of space of shipment of cargo through the specific vessel from a specified port and on a specified date.
• Cart/ Lorry Ticket – It is prepared for admittance of the cargo through the port gate and includes the shipper’s name, cart/ lorry No., marks on packages, quantity, etc.
• Shut Out Advice – It is a statement of packages which are shut out by a ship and is prepared by the concerned shed and is sent to the exporter.
• Insurance Certificate: An insurance certificate is used to assure the consignee that insurance will cover the loss of, or damage to, the cargo during transit. Typically, marine insurance coverage equal to 110% of the commercial invoice amount must be obtained for export shipments. If you plan to export infrequently, you may be able to buy insurance through your freight forwarder.
• Inspection Certificate: Inspection certificates often are required by foreign customs or businesses for certain regulated products. These are typically related to agriculture, health or the environment. Inspection certificates also may be required to ensure that vessels or crates are free of contaminants before entering certain ports, or that the products met the specifications outlined in a contract or purchase order.
• Short Shipment Form – It is an application to the customs authorities at port which advises short shipment of goods and required for claiming the return.

A proper knowledge of the custom rules and regulation becomes important for the exporter. For clearance of export goods, the exporter or export agent has to undertake the following formalities:

Registration

Any exporter who wants to export his good need to obtain PAN based Business Identification Number (BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for clearance of export goods. The exporters must also register themselves to the authorised foreign exchange dealer code and open a current account in the designated bank for credit of any drawback incentive.

Registration in the case of export under export promotion schemes:

All the exporters intending to export under the export promotion scheme need to get their licences

Processing of Shipping Bill – Non-EDI

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.

Processing of Shipping Bill – EDI

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. For export items which are subject to export cess, the TR-6 challans for cess is printed and given by the Service Center to the exporter/CHA immediately after submission of shipping bill. The cess can be paid on the strength of the challan at the designated bank. No copy of shipping bill is made available to exporter/CHA at this stage.

Quota Allocation

The quota allocation label is required to be pasted on the export invoice. The allocation number of AEPC (Apparel Export Promotion Council) is to be entered in the system at the time of shipping bill entry. The quota certification of export invoice needs to be submitted to Customs along-with other original documents at the time of examination of the export cargo. For determining the validity date of the quota, the relevant date needs to be the date on which the full consignment is presented to the Customs for examination and duly recorded in the Computer System.

Arrival of Goods at Docks

On the basis of examination and inspection goods are allowed enter into the Dock. At this stage the port authorities check the quantity of the goods with the documents.

System Appraisal of Shipping Bills

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. Sometimes the Shipping Bill is also processed on screen by the Customs Officer.

Customs Examination of Export Cargo

Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter or his agent.

The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The Customs Officer enters the examination report in the system. He then marks the Electronic Bill along with all original documents and check list to the Dock Appraiser. If the Dock Appraiser is satisfied that the particulars entered in the system conform to the description given in the original documents and as seen in the physical examination, he may proceed to allow “let export” for the shipment and inform the exporter or his agent.

Loading of goods in containers

The exporter or export agent hand over the exporter’s copy of the shipping bill signed by the Appraiser “Let Export” to the steamer agent. The agent then approaches the proper officer for allowing the shipment. The Customs Preventive Officer supervising the loading of container and general cargo in to the vessel may give “Shipped on Board” approval on the exporter’s copy of the shipping bill.

Sample check

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. There is no separate register for recording dates of samples drawn. Three copies of the test memo are prepared by the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent.

Export of Goods under Claim for Drawback

After actual export of the goods, the Drawback claim is processed through EDI system by the officers of Drawback Branch on first come first served basis without feeling any separate form.

Generation of Shipping Bills

The Shipping Bill is generated by the system in two copies- one as Custom copy and one as exporter copy. Both the copies are then signed by the Custom officer and the Custom House Agent.

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