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

Meaning Ex Port : Products & Services leaving countrys shore / port ( main international trade is through sea only) to another country. Im Port : Products & Services entering countrys 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.

Note
Exports 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 Institutes 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 Organizations 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 subheading 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

ITC (HS)-Codes: Harmonized System Codes (HS-Code) is a system of progressively more 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

Classification

Strategy and Preparation of Export Marketing

Starting Export
1. 2. 3. 4. 5. 6. 7. 8. Identify Product Market Selection SWOT Analysis Registration as Exporter Export license Export sales leads Exporting product sample 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 (ours 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. Indiafor 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 submit Appendix-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 ANF2A 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 industrys Export Promotion Council / Federation of Indian Exporters Organization (FIEO) / Chamber of Commerce & Industries / Commodity Boards - which ever is applicable

 Procedure For Issue Of RCMC

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 importers 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 importers 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 buyers 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 buyers gate, responsibility & cost is exporters.

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 buyers bank and sellers 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

 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.

Payment Terms

IMPORTS
WHY 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 GoodsAmmunition by Licensed Arms DealersUnder Govt. to Govt. agreementImports of Cheque books /Ticket FormsImports of Reconditioned / Second Hand Aircraft Spares for Airlines Relocation of plant & machineries (above Rs.25 cr depreciated value)