India’s Foreign Trade i.e. Exports and Imports are regulated by Foreign Trade Policy notified by Central government in exercise of powers conferred by section 5 of foreign trade (Development and Regulation) Act 1992. Presently Foreign Trade Policy 2015-20 is effective from 1st April, 2015. As per FTD & R act, export is defined as an act of taking out of India any goods by land, sea or air and with proper transaction of money.
Export in itself is a very wide concept and lot of preparations is required by an exporter before starting an export business. To start export business, the following steps may be followed:
1) Establishing an Organisation
To start the export business, first a sole Proprietary concern/ Partnership firm/Company has to be set up as per procedure with an attractive name and logo.
2) Opening a Bank Account
A current account with a Bank authorized to deal in Foreign Exchange should be opened.
3) Obtaining Permanent Account Number (PAN)
It is necessary for every exporter and importer to obtain a PAN from the Income Tax Department. (To apply PAN Card Click here)
4) Obtaining Importer-Exporter Code (IEC) Number
- As per the Foreign Trade Policy, it is mandatory to obtain IEC for export/import from India. Para 2.05 of the FTP, 2015-20 lays down the procedure to be followed for obtaining an IEC, which is PAN based.
- An application for IEC is filed online at www.dgft.gov.in as per ANF 2A, online payment of application fee of Rs. 500/- through net Banking or credit/debit card is made along with requisite documents as mentioned in the application form. (For more information Click here)
5) Registration cum membership certificate (RCMC)
For availing authorization to import/ export or any other benefit or concession under FTP 2015-20, as also to avail the services/ guidance, exporters are required to obtain RCMC granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.
6) Selection of product
All items are freely exportable except few items appearing in prohibited/ restricted list.
After studying the trends of export of different products from India proper selection of the product(s) to be exported may be made.
7) Selection of Markets
An overseas market should be selected after research covering market size, competition, quality requirements, payment terms etc. Exporters can also evaluate the markets based on the export benefits available for few countries under the FTP. Export promotion agencies, Indian Missions abroad, colleagues, friends, and relatives might be helpful in gathering information.
8) Finding Buyers
Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web browsing are an effective tool to find buyers. EPC’s, Indian Missions abroad, overseas chambers of commerce can also be helpful. Creating multilingual Website with product catalogue, price, payment terms and other related information would also help.
Providing customized samples as per the demands of Foreign buyers help in getting export orders. As per FTP 2015-2020, exports of bonafide trade and technical samples of freely exportable items shall be allowed without any limit.
Product pricing is crucial in getting buyers’ attention and promoting sales in view of international competition. The price should be worked out taking into consideration all expenses from sampling to realization of export proceeds on the basis of terms of sale i.e. Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of establishing export costing should be to sell maximum quantity at competitive price with maximum profit margin. Preparing an export costing sheet for every export product is advisable.
11) Negotiation with Buyers
After determining the buyer’s interest in the product, future prospects and continuity in business, demand for giving reasonable allowance/discount in price may be considered.
12) Covering Risks through ECGC
International trade involves payment risks due to buyer/ Country insolvency. These risks can be covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd (ECGC). Where the buyer is placing order without making advance payment or opening letter of Credit, it is advisable to procure credit limit on the foreign buyer from ECGC to protect against risk of non-payment.(To know more about ECGC Click here)