Preliminaries for Exports and Imports

Topics to be covered

• Meaning & Definition of Export

• Classification

• Selection of Product

• Identification of Market

• Strategy & Preparation for Export Marketing

• Export Marketing Organizations

• Registration formalities

Topics to be covered

• IEC

• RCMC

• Export Licensing

• Methods of Exporting

• Pricing Quotations

• Payment Terms

• Letter of Credit

Topics to be covered

• Liberalisation of Imports

• Negative list of Imports

• Categories of Importers

• Specials schemes for Importers

Meaning of EXPORT & IMPORT

MeaningEx – Port : Products & Services leaving country’s shore / port ( main international trade is through sea only) to another country.Im – Port : Products & Services entering country’s port from another country

Definition of EXPORT & IMPORT

Definition

Export : An act of taking out any goods out

of country by sea / air / land and

with proper transaction of money.

NoteExports and Imports shall be free, except

where regulated by Foreign Trade Policy

(FTP) or any other law in force.

The item wise export and import policy

shall be, as specified in Indian Trade

Classification (ITC) (Harmonized System –

HS) notified by DGFT, as amended from time to time.

GLOSSARY (ACRONYMS)

• ACU - Asian Clearing Union

• AEZ - Agricultural Export Zone

• ANF - Aayaat Niryaat Form

• ARO - Advance Release Order

• ASIDE - Assistance to States for Infrastructure Development of Exports

• BG - Bank Guarantee

• BIFR - Board of Industrial and Financial Reconstruction

GLOSSARY (ACRONYMS)• BoA - Board of Approval

• BoT - Board of Trade

• BRC - Bank Realisation Certificate

• BTP - Bio Technology Park

• CBEC - Central Board of Excise and Customs

• CCP - Customs Clearance Permit

• CEA - Central Excise Authority

• CEC - Chartered Engineer Certificate

GLOSSARY (ACRONYMS)• CIF - Cost, Insurance & Freight

• CIS Commonwealth of Independent States

• CoD - Cash on Delivery

• CoO - Certificate of Origin

• CVD - Countervailing Duty

• DA - Document against Acceptance

• DoBT - Department of Bio Technology

• DC - Development Commissioner

• DEPB -Duty Entitlement Pass Book

GLOSSARY (ACRONYMS)• DFIA - Duty Free Import Authorisation

• DFRC - Duty Free Replenishment Certificate

• DGCI&S - Director General, Commercial Intelligence & Statistics

• DGFT - Director General of Foreign Trade

• DIPP - Department of Industrial Policy & Promotion

• DoC - Department of Commerce

GLOSSARY (ACRONYMS)• DoE - Department of Electronics

• DoIT - Department of Information Technology

• DoR - Department of Revenue

• DoT - Department of Tourism

• DTA - Domestic Tariff Area

• EDI - Electronic Data Interchange

• EEFC - Exchange Earners’ Foreign Currency

GLOSSARY (ACRONYMS)• EFC - Exim Facilitation Committee

• EFT - Electronic Fund Transfer

• EH - Export House

• EHTP - Electronic Hardware Technology Park

• EIC - Export Inspection Council

• EO -Export Obligation

• EODC - Export Obligation Discharge Certificate

GLOSSARY (ACRONYMS)

• EOP - Export Obligation Period

• EOU - Export Oriented Unit

• EPC - Export Promotion Council

• EPCG - Export Promotion Capital Goods

• EPO - Engineering Process Outsourcing

• FDI - Foreign Direct Investment

• FIEO - Federation of Indian Export Organisation

GLOSSARY (ACRONYMS)• FIRC - Foreign Exchange Inward

Remittance Certificate

• FMS - Focus Market Scheme

• FOB - Free On Board

• FPS - Focus Product Scheme

• FT(D&R)Act Foreign Trade ( Development & Regulation) Act, 1992 (No. 22 of 1992)

GLOSSARY (ACRONYMS)• FTDO -Foreign Trade Development Officer

• FTP - Foreign Trade Policy

• GATS - General Agreement on Trade in Services

• GRC -Grievance Redressal Committee

• HACCP -Hazard Analysis And Critical Control Process

• HBP v1- Hand Book of Procedures (Vol. 1)

• HBP v2 - Hand Book of Procedures (Vol. 2)

GLOSSARY (ACRONYMS)• ICD - Inland Container Depot

• ICM - Indian Commercial Mission

• IEC - Importer Exporter Code

• ISO - International Standards Organisation

• ITC (HS) -Indian Trade Classification (Harmonised System) Classification for

Export & Import Items

• ITPO -India Trade Promotion Organisation

GLOSSARY (ACRONYMS)

• LC – Letter of Credit

• LoC - Line of Credit

• LoI - Letter of Intent

• LoP - Letter of Permit

• LUT - Legal Under Taking

• MAI - Market Access Initiative

GLOSSARY (ACRONYMS)• MDA - Market Development Assistance

• MEA - Ministry of External Affairs

• MoD - Ministry of Defence

• MoF - Ministry of Finance

• NC - Norms Committee

• NFE - Net Foreign Exchange

GLOSSARY (ACRONYMS)• NOC - No Objection Certificate

• PRC - Policy Relaxation Committee

• PTH - Premier Trading House

• PSU - Public Sector Undertaking

• R&D - Research and Development

• RA - Regional Authority

• RBI - Reserve Bank of India

GLOSSARY (ACRONYMS)

• REP - Replenishment

• RCMC - Registration-cum-Membership Certificate

• RSCQC - Regional Sub-Committee on Quality Complaints

• S/B - Shipping Bill

• SEH - Star Export House

GLOSSARY (ACRONYMS)

• SEI CMM - Software Engineers Institute’s Capability Maturity Model

• SEZ - Special Economic Zone

• SFIS - Served from India Scheme

• SIA - Secretariat for Industrial Assistance

GLOSSARY (ACRONYMS)

• SION - Standard Input Output Norms

• SSI - Small Scale Industry

• STE - State Trading Enterprise

• STH - Star Trading House

• STP - Software Technology Park

• TEE - Towns of Export Excellence

GLOSSARY (ACRONYMS)

• TH - Trading House

• TRQ -Tariff Rate Quota

• VA - Value Addition

• VKGUY- Vishesh Krishi and Gram Udyog Yojana

• WHOGMP - World Health Organisation Good Manufacturing Practices

Why Export ?EXPORT MEANS• Growth • Change in Organization’s Attitude• QUALITY • Re looking in costing • Competitive in world market• Brand Building (building trust, confidence)• Diversification• Finance at lower rate• Bench Marking

Classification• ITC – HS Codes or better known as

Indian Trade Clarification based on Harmonized System of Coding was adopted in India for import-export operations. Indian custom uses an eight digit ITC-HS Codes to suit the national trade requirements.

Classification• ITC-HS Codes Schedules ITC-HS codes are divided into two schedules. ITC(HS) Import Schedule I describe the rules

and guidelines related to import policies where as Schedule II describe the rules and

regulation related to export policies. Schedule I of the ITC-HS code is divided into

21 sections and each section is further divided into chapters.

Classification• ITC-HS Codes Schedules The total number of chapters in the schedule I

is 98. The chapters are further divided into sub-

heading under which different HS codes are mentioned.

Export Policy Schedule II of the ITC-HS code contain 97 chapters giving all the details about the guidelines related to the export policies.

• Governing Body of ITC (HS) Code:

• Any changes or formulation or addition of new codes in ITC-HS Codes are carried out by DGFT (Directorate General of Foreign Trade). Commodity description, weeding out of defunct codes, addition of new codes, change of product description etc., are taken up periodically as a part of the ongoing process towards perfection.

• ITC Hs Code Major 21 Sections • Animals & Animal Products • Vegetable Products • Animal Or Vegetable Fats • Prepared Foodstuffs • Mineral Products • Chemical Products • Plastics & Rubber • Hides & Skins • Wood & Wood Products • Wood Pulp Products • Textiles & Textile Articles

ITC Hs Code Major 21 Sections • Footwear, Headgear • Articles Of Stone, Plaster, Cement, Asbestos • Pearls, Precious Or Semi-Precious Stones,

Metals • Base Metals & Articles Thereof • Machinery & Mechanical Appliances • Transportation Equipment • Instruments - Measuring, Musical • Arms & Ammunition • Miscellaneous • Works Of Art

ClassificationITC (HS)-Codes: Harmonized System Codes (HS-Code) is a system of progressivelymore specific identifiers for a commodity.Example: Chapter 9 : Tea , Coffee , Mate and Spices 0901 : harmonised code for Coffee (in general) 0902 : harmonised code for Tea (in general) 090111 Not decaffeinated:  090111 Arabica plantation:  09011111 A grade

09011112 B grade

Strategy and Preparation of Export Marketing

Starting Export

1. Identify Product

2. Market Selection

3. SWOT Analysis

4. Registration as Exporter

5. Export license

6. Export sales leads

7. Exporting product sample

8. Export Pricing & Costing

Starting Export

9. Understanding Foreign Exchange Rates

10. Sales Agents Role

11. Export Risk management

12. Packaging

13. Inspection Certificates & Quality Control

14. Export Documents

15. Custom procedure

16. Deemed Exports

Starting Export

17. Exports to SAARC

18. Exports to CIS

19. Organizations supporting Exports

Export Marketing

Relevance of 5 Ps for Export Market too

• Product

• Price

• Place

• Promotion

• Presentation

1. Identifying the Product

• Demand - Export what is needed

• Clear understanding and detail knowledge of product

• We should have capability to manufacture / procure the product

• Thorough market study

• Government policies about the product (our’s as well other country)

1.Identifying the Product• Quality of product matters a lot.

Consistency in quality is a must

• Quality Certificate is supportive (ISO etc helps)

• Timely supply is key. Ensure capacity available to cater

• Study government incentive for own costing

• Study Import regulations of other country

2. Market Selection

• Study market - Desk work, Market survey, visit trade fairs / international exhibitions

• Know the buyers/ users of the product

• Application of product in other countries

• Other suppliers / competitors & their strategies

3. SWOT Analysis

• Know your Strength, Weakness, Opportunities & Threats – co. as a whole

• En-cash strength in brand building

• Work on weakness

• Details of Opportunities

• Minimise Threats by keeping alternatives

4. Registration

• Registration of the organization – as it is

- A joint stock co. or

- partnership firm

• Opening Bank Account – a current account with commercial bank who has authorization from RBI to deal with foreign exchange

4. Registration

• Obtaining Importer Exporter Code No. – from DGFT

• Obtaining a PAN – from Income Tax dept, in the name of the organization for claiming exemptions and deduction

• Sales Tax no. – for availing sales tax exemption for export, registration with sales tax dept is must

4. Registration

• Export Promotion Councils – for obtaining Registration Cum Membership Certificate (RCMC) which is mandatory for exporter. Benefits available to registered exporter only

• Export Credit & Guarantee Corpn. India- for securing overseas payments against political and commercial risks. This helps exporter in financial assistance from banks & other financial institution

IEC

• Import Export Code (IEC) number is unique 10 digit code awarded by Directorate General of Foreign Trade (DGFT) for all traders/ manufacturers for the purpose of and Exports from India and Imports in India.

• Obtaining this code is mandatory.

IEC• Only one IEC would be issued against a

single PAN number.

• Any proprietor can have only one IEC number and in case there are more than one IEC allotted to a proprietor, the same may be surrendered to the Regional Office for cancellation.

IEC• The application  can  be download  Form

in PDF or Word. This is called "Aayaat Niryaat Form - ANF2A".

• Along with IEC Code Number Application Form it is necessary to submitAppendix-18B Attested by Applicant's Banker in his letter head with two passport size photo).

IEC• Profile of Importer/ Exporter Each Importer/Exporter shall be required to file

importer/ exporter profile once with the Regional Authority in Part 1 of ‘Aayaat Niryaat Form - ANF2A’.

Regional Authority shall enter the information furnished in Part 1 of ‘Aayaat Niryaat Form ANF-2A’ in their database so as to dispense with the need for asking the repetitive information. In case of any change in the information given in Part 1 of ‘Aayaat Niryaat Form ANF-2A’, importer/exporter shall intimate the same to the Regional Authority.

RCMC• Registration Cum Membership Certificate

(RCMC) -

An Exporter is required to register themselves with their industry’s Export Promotion Council / Federation of Indian Exporters Organization (FIEO) / Chamber of Commerce & Industries / Commodity Boards - which ever is applicable

RCMC• Procedure For Issue Of RCMC

An application for registration may be made to the concerned registering authority in the form given in Appendix-3A along with the documents prescribed therein.If the application for registration is accepted, the concerned registering authority shall issue the RCMC indicating the status of the applicant as merchant exporter or manufacturer exporter in the form given in Appendix-3B. In case an exporter desires to get registration as a manufacturer exporter, he shall furnish evidence to that effect.

RCMC

• RCM Certificate helps the exporters by

issuing them Certificate of Origin which is suppose to be submitted to importer’s bank

Export Licensing

This is a document issued by appropriate Licensing Agency after which exporter is allowed to transport his product to foreign market.

Export License depends on the nature of product to be transported as well as the destination port.

Export Licensing

Export license are only issued for the goods mentioned in the Schedule 2 of ITC (HS) classification of Export & Import items.

A proper application is to be made to DGFT & Export Licensing Committee to consider such application

Methods of Exporting

• Direct Exports to Actual Users

• Indirect Export

- to Traders who supply to actual users

- to merchant exporters

Price Quoting• Ex- Works ( Ex- Factory / Ex-Godown) –

beyond this entire responsibility is buyer/importers. Only plantation industry follow this pricing

• F.O.R / F.O.T – Free on Rail / Free on Truck – exporters quotes up to loading of material on rail or truck.

Price Quoting

• F.O.B – Free on Board – most popular pricing. This includes Ex Work price+ Packing+ Transportation up to Shipment place+ Custom Charges+ Export Duties+ Inspection charges+ Loading on Ship+ any other charges exporter incurs till material is loaded on ship.

Price Quoting• F.A.S – Free Alongside Ship – This

includes all charges mentioned in FOB minus Loading on Ship charges. Loading on Ship, marine insurance etc are importer’s responsibility

• C & F – Cost & Freight- This is FOB Price + freight charges up to destination is included. Here risk of exporters ends at point of shipment & passed to importer.

Price Quoting• C.I.F – FoB Cost +Insurance+ Freight – as

name suggest it these 3 elements are exporters responsibility while quoting. Here risk is buyer’s but exporter has paid the cost till its destination

• D.A.F – Delivered at Frontier – when exports is by Rail or Road, exporters responsibility lies till the frontier /border of other country but before their custom border

Price Quoting

• DDP – Delivery, Duty Paid – bringing goods up to the buyer’s gate, responsibility & cost is exporter’s.

Export Pricing

• Cost based Pricing

• Market oriented Pricing

• Following the competitor

• Negotiated pricing

• Customer Determined Pricing

• Break even Pricing

Export Pricing• Cost based pricing consist of

- Purchase price

- Pre Shipment Inspection

- Local Transport

- Terminal Handling Charges (THC)

- Custom Handling Agent (CHA)

- Bill of Loading

- Bank Charges (local)

- Banking Charges (oversea)

- Warehousing charges

Export Pricing

- Bank Interest

- Administrative Expenses

-------------------------

= Free on Board (FoB) Cost=

+ Margin ( 3 to 5%)

---------------------------------

Payment Terms• 1) T.T. : Telegraphic Transfer or cash Advance. It is

the safest mode of payment as we receive the payment in advance from our consignee.You have to sent the full set of original documents to the buyer as per agreed term only.* This mode of payment is mostly useful for starting relationship with a new client/consignee to avoid risk. In this mode of payment 100% risk is buyers only.

Payment Terms

• 2) L/C at Sight: L/C means letter of credit. It is a guarantee, given by the buyer's

bank, that they will pay for the goods exported, provided that the exporter can provide a given set of documents in accordance with clauses specified in the L/C and in a timely manner. It is also a safest mode as if the buyer does not pay the amount, their bank have to pay the amount being the guarantor.

* If there would be any discrepancy in the documents, buyer's bank can highlight that and they have authority to deduct the some amount that should be mention in the discrepancy clause in the L/c.

L/c can be according to the days term which means the payment will be received after 45/60/90 days of bill of lading date. But the payment is secure as the bank is the guarantor.

Letter of Credit

Letter of Credit (L.C) is an assurance of payment by the bank.

It is an arrangement under which the banker at the request of the buyer undertakes to make payment to the seller, provided specified documents are submitted.

L C is an arrangement between buyer’s bank and seller’s bank

Letter of Credit

This arrangement between banks is independent of Contract between Exporter & Importer.

L C is issued to cover the performance (here order executed)

Whereas Bank Guarantee is issued to cover non performance.

Type of LC

• Confirmed LC – irrevocable LC are confirmed by issuing bank as well as advising bank, gives confirmation constitute a definite undertaking of the confirming bank to pay against presentation of proper documents.

Type of LC

• Revocable LC – This LC can be amended or cancelled by the issuing bank without prior notice to the beneficiary. This is not very helpful for exporter.

• Irrevocable LC – this type of LC can not be modified or cancelled without the prior approval of the beneficiary, hence more acceptable in trade

Payment Terms• 3) CAD : Cash Against Documents/Bill of

Exchange/DP,: You have to send the documents (including the

bill of lading necessary to claim the goods at the foreign port) to the buyer through your bank and they will forward those documents to a bank in the buyer's country, along with instructions on how to collect the money from the buyer.

# When the foreign bank receives the documents, they will contact the buyer and provide documents to the buyer only when the buyer pays.

IMPORTSWHY IMPORTS?

• For development of competitive market

• Access to quality as well as low price product ( more for export production)

• Enhancement of local manufacturing standards (in long run)

• Revenue for government

• Employment opportunity

What is being Imported

• Crude oil & related

• Food items

• Chemicals & allied products

• Plant & machinery (new technology)

• Computer parts

• Pharmaceuticals & cosmetics

• Soft toys, novelty items, wood furniture etc

• Services

Liberalization of Imports

Why Liberalization?(a) Import liberalization will provide to industrial firms

greater and cheaper access to imported capital goods and intermediate goods (embodying advanced technology), which will enable the firms improve their productivity performance;

(b) Greater availability of imported intermediate goods will enable the firms to exploit better the productivity enhancing potential of imported technology;

(c) The increased competitive pressure on industrial units in a liberalized import regime will force them to be more efficient in the use of resources (which can be achieved through better organization of production, improved managerial efficiency, more effective utilization of labour, better capacity utilization, etc.);

Why Liberalization?(d) The increased competitive pressure coupled with

expanded opportunities for importing technology and capital goods will bring greater technological dynamism in industrial firms;

(e) As the competitive business environment forces inefficient firms to close down, the average level of efficiency of various industries should improve;

(f) Greater access to imported inputs and a more realistic exchange rate associated with a liberalized trade regime would enable industrial firms compete more effectively in export markets.

This would allow them to increase their sales and reap economies of scale with concomitant gains in productivity.

Negative List of Imports• This list consist of

1.Freely importable items- except where they are regulated by law

2.Prohibited list – e.g – Rough diamonds from Venezuela

- Arms & related material to/from Iraq

- Any material/tech related to nuclear

dev. To Korea

- Heavy Water related items to / from Iran

Negative List of Imports

3. Restricted List – to protect animals, plants etc can be imported with permission of DGFT

4. Cannelised List - These items are to be imported by agencies appointed by Govt. They are the selling agent for domestic market. E.g Wheat, Rice, Minerals & Metals etc

Categories of Importers• There can be 2 categories of Importers

A. Actual Users

1.Actual Users (Manufacturers)- direct user of imported goods in manufacturing

2.Actual users ( Non – industrial)

- any commercial establishment, trading

- non commercial orgns. Like R & D labs, Hospitals, University etc

- any service industry

Categories of Importers

B. Non Actual Users

- importers for Stocks & Sale

- personal imports

- imports of Gifts etc.

Special Schemes for Imports

• Imports of Second Hand Capital Goods-

• Ammunition by Licensed Arms Dealers-

• Under Govt. to Govt. agreement-

• Imports of Cheque books /Ticket Forms-

• Imports of Reconditioned / Second Hand Aircraft Spares for Airlines

• Relocation of plant & machineries (above Rs.25 cr depreciated value)