(290). Start a Export Business
How to Start Export is a fair question that every first time exporter wants to ask. Export in itself is a very wide concept and lot of preparations is required by an exporter before starting an export business. A key success factor in starting any export company is clear understanding and detail knowledge of products to be exported. In order to be a successful in exporting one must fully research its foreign market rather than try to tackle every market at once. The exporter should approach a market on a priority basis. 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 imperative that you familiarize yourself with state, federal, and international laws before starting your export business.
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.
However, before we go deep into "How to export ?” let us discuss what an export is and how the Government of Indian has defined it.
In very simple terms, export may be defined as the selling of goods to a foreign country. However, As per Section 2 (e) of the India Foreign Trade Act (1992), the term export may be defined as 'an act of taking out of India any goods by land, sea or air and with proper transaction of money”.
Exporting a product is a profitable method that helps to expand the business and reduces the dependence in the local market. It also provides new ideas, management practices, marketing techniques, and ways of competing, which is not possible in the domestic market. Even as an owner of a domestic market, an individual businessman should think about exporting. Research shows that, on average, exporting companies are more profitable than their non-exporting counterparts.
Why Need to Export
There are many good reasons for exporting:
- The first and 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.
- Secondly, 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.
- Thirdly, free exchange of ideas and cultural knowledge opens up immense business and trade opportunities for a company.
- Fourthly, 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.
- Fifthly, by exporting goods, an exporter also becomes safe from offset lack of demand for seasonal products.
- Lastly, 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.
- No doubt that in the age of globalization and liberalizations, Export has became of the most lucrative business in India. Government of India is also supporting exporters through various incentives and schemes to promote Indian export for meeting the much needed requirements for importing modern technology and adopting new technology from MNCs through Joint ventures and collaboration.
One should also evaluate the unique features of a product. If those features are hard to duplicate abroad, then it is likely that you will be successful overseas. A unique product may have little competition and demand for it might be quite high.
- Identifies what you want to achieve from exporting.
- Lists what activities you need to undertake to achieve those objectives.
- Includes mechanisms for reviewing and measuring progress.
- Helps you remain focused on your goals.
For a proper export planning following questions need to answered:
- Which products are selected for export development?
- What modifications, if any, must be made to adapt them for overseas markets?
- Which countries are targeted for sales development?
- In each country, what is the basic customer profile?
- What marketing and distribution channels should be used to reach customers?
- What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them?
- How will the product's export sale price be determined?
- What specific operational steps must be taken and when?
- What will be the time frame for implementing each element of the plan?
- What personnel and company resources will be dedicated to exporting?
- What will be the cost in time and money for each element?
- How will results be evaluated and used to modify the plan?
DO seek good advice – and test your Export Plan with advisers.
DON’T create a bulky document that remains static.
DO review the Export Plan regularly with your staff and advisers.
DO assign responsibility to staff for individual tasks.
DON’T use unrealistic timelines. Review them regularly – they often slip.
DO create scenarios for changed circumstances – look at the “what ifs” for changes in the market environment from minor to major shifts in settings. e.g. changes of government, new import taxes.
DO develop an integrated timeline that draws together the activities that make up the Export Plan.
DO make sure that you have the human and financial resources necessary to execute the Export Plan. Ensure existing customers are not neglected.
Identifying Export Product.
A key factor in any export business is clear understanding and detail knowledge of products to be exported. The selected product must be in demand in the countries where it is to be exported. Before making any selection, one should also consider the various government policies associated with the export of a particular product.
Whether companies are exporting first time or have been in export trade for a long time - it is better for both the groups to be methodical and systematic in identifying a right product. It’s not sufficient to have all necessary data 'in your mind' - but equally important to put everything on paper and in a structured manner. Once this job is done, it becomes easier to find the gaps in the collected information and take necessary corrective actions.
There are products that sell more often than other product in international market. It is not very difficult to find them from various market research tools. However, such products will invariably have more sellers and consequently more competition and fewer margins. On the other hand - a niche product may have less competition and higher margin - but there will be far less buyers.
Fact of the matter is - all products sell, though in varying degrees and there are positive as well as flip sides in whatever decision you take - popular or niche product.
• The product should be manufactured or sourced with consistent standard quality, comparable to your competitors. ISO or equivalent certification helps in selling the product in the international market.
• The price of the exported product should not fluctuate very often - threatening profitability to the export business.
- 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,
- Cultural beliefs,
- Major competitors,
- Similar products,
- Key brands.
- Market Characteristics
- Market size,
- Availability of domestic manufacturers,
- Agents, distributors and suppliers.
Primary research, such as population figures, product compliance standards, statistics and other facts can be obtained without any cost from international organizations like United Nations (UN) and World Trade Organizations (WTO). Analysis of export statistics over a period of several years helps an individual to determine whether the market for a particular product is growing or shrinking.
Secondary research, such as periodicals, studies, market reports and surveys, can be found through government websites, international organisations, and commercial market intelligence firms.
Market selection process requires a broad range of informations depending upon the products or services to be exported, which includes:
- The demand for product/service.
- The size of the potential audience.
- Whether the target audience can affords product.
- What the regulatory issues are that impact on exports of product.
- Ease of access to this market – proximity/freight.
- Are there appropriate distribution channels for product/service.
- The environment for doing business – language, culture, politics etc.
- Is it financially viable to export to selected market.
- Talking to colleagues and other exporters.
- Trade and Enterprise – web site, publications, call centre.
- The library.
- The Internet.
- What similar products are in the marketplace (including products that may not be similar but are used to achieve the same goal, e.g. the product in our sample matrix at the end of this document is a hair removal cream. As well as undertaking competitor research on other hair removal creams, we would also need to consider other products that are used for hair removal, i.e. razors, electrolysis, wax).
- What is your point of difference? What makes your product unique? What are the key selling points for your product?
- How do people obtain/use these products?
- Who provides them?
- Are they imported? If so from which countries?
- Is there a local manufacturer or provider?
- Who would your major competitors be? What are the key brands or trade names?
- What is the market’s structure and shape?
- What is the market’s size?
- Are there any niche markets, and if so how big are they?
- Who are the major importers/ stockists / distributors / agencies or suppliers?
- What are the other ways to obtain sales/representation?
- What are the prices or fees in different parts of the market?
- What are the mark-ups at different distribution levels?
- What are the import regulations, duties or taxes, including compliance and professional registrations if these apply?
- How will you promote your product or service if there is a lot of competition?
- Are there any significant trade fairs, professional gathers or other events where you can promote your product or service?
- Packaging – do you need to change metric measures to imperial, do you need to list ingredients?
- Will you need to translate promotional material and packaging?
- Is your branding – colours, imagery etc., culturally acceptable?
There are a number of options for entering your chosen market. Most exporters initially choose to work through agents or distributors. In the longer term, however, you may consider other options, such as taking more direct control of your market, more direct selling or promotion, or seeking alliances or agreements.
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.
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.
A amount of Rs 1000/- is required to submit with the application fee. This amount can be submitted in the form of a Demand Draft or payment through EFT (Electronic Fund Transfer by Nominated Bank by DGFT.
Registration with Export Promotion Council
Registered under the Indian Company Act, Export Promotion Councils or EPC is a non-profit organisation 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.
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. At present, 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.
Goods exported out of the country 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.
Exporting Product Samples.
Extra care should be taken in order to avoid the risk associated in sending a costly product sample for export. Secrecy is also an important factor while sending a sample, especially if there is a risk of copying the original product during export.
Before exporting a product sample an exporter should also know the Government policy and procedures for export of samples.
While sending a product sample to an importer, it is always advised to send samples by air mail to avoid undue delay. However, if the time is not an issue then the product sample can also be exported through proper postal channel, which is cheaper as compared to the air mail.
Samples having permanent marking as “sample not for sale” are allowed freely for export without any limit. However, in such cases where indelible marking is not available, the samples may be allowed for a value not exceeding US $ 10,000, per consignment.
For export of sample products which are restricted for export as mentioned in the ITC (HS) Code, an application may be made to the office of Director General of Foreign Trade (DGFT).
Export of samples to be sent by post parcel or air freight is further divided into following 3 categories, and under each category an exporter is required to fulfill certain formalities which are mentioned below :
- Samples of value up to Rs.10, 000- It is necessary for the exporter to file a simple declaration that the sample does not involve foreign exchange and its value is less than Rs. 10,000.
- Samples of value less than Rs. 25,000- It is necessary for the exporter to obtain a value certificate from the authorised dealer in foreign exchange (i.e. your bank). For this purpose, an exporter should submit a commercial invoice certifying thereon that the parcel does not involve foreign exchange and the aggregate value of the samples exported by you does not exceed Rs. 25,000 in the current calendar year.
- Samples of value more than Rs. 25,000- It becomes necessary for the exporter to obtain GR/PP waiver from the Reserve Bank of India
A sample against which an overseas buyer agrees to make payment is exported in the same manner as the normal goods are exported. Sample can also be carried personally by you while travelling abroad provided these are otherwise permissible or cleared for export as explained earlier. However, in case of precious jewellery or stone the necessary information should be declared to the custom authorities while leaving the country and obtain necessary endorsement on export certificate issued by the Jewelry Appraiser of the Customs.
As per the special provision made for the export of garment samples, only those exporters are allowed to send samples that are registered with the Apparel export Promotion Council (AEPC). Similarly, for export of wool it is necessary for the exporter to have registration with the Woolen Export Promotion Council.
All kinds electronic and computer software product samples can only be exported abroad, if the exporter dealing with these products is registered with the Electronics and Computer Software Export Promotion Council (ESC)
Similarly samples of other export products can be exported abroad under the membership of various Export Promotion Councils (EPC) of India.
Shipping Bill / Bill of Export
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 below:
- 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.
- Despatch 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 realisable 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.
- 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.
- 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.
Export Promotion Councils are registered as non -profit organisations under the Indian Companies Act. At present there are eleven Export Promotion Councils under the administrative control of the Department of Commerce and nine export promotion councils related to textile sector under the administrative control of Ministry of Textiles. The Export Promotion Councils perform both advisory and executive functions. These Councils are also the registering authorities under the Export Import Policy, 2002-2007.
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. There are five statutory Commodity Boards, which are responsible for production, development and export of tea, coffee, rubber, spices and tobacco.
FIEO was set up jointly by the Ministry of Commerce, Government of India and private trade and industry in the year 1965. FIEO is thus a partner of the Government of India in promoting India’s exports.
Address: Niryaat Bhawan, Rao Tula Ram Marg, Opp. Army Hospital. Research & Referral, New Delhi 110057
The Indian Institute of Foreign Trade (IIFT) was set up in 1963 by the Government of India as an autonomous organisation to help Indian exporters in foreign trade management and increase exports by developing human resources, generating, analysing and disseminating data and conducting research.
Address: B-21 Kutub Institutional Area, Mehrauli Road, New Delhi-110016
The Indian Institute of Packaging or IIP in short was established in 1966 under the Societies Registration Act (1860). Headquartered in Mumbai, IIP also has testing and development laboratories at Calcutta, New Delhi and Chennai. The Institute is closely linked with international organisations and is recognized by the UNIDO (United Nations Industrial Development Organisation) and the ITC (International Trading Centre) for consultancy and training. The IIP is a member of the Asian Packaging Federation (APF), the Institute of Packaging Professionals (IOPP) USA, the Insitute of Packaging (IOP) UK, Technical Association of PULP AND Paper Industry (TAPPI), USA and the World Packaging Organisation (WPO).
Address: B-2, MIDC Area, P.B. 9432, Andheri (E), Mumbai 400096.
The Export Inspection Council or EIC in short, was set up by the Government of India under Section 3 of the Export (Quality Control and Inspection) Act, 1963 in order to ensure sound development of export trade of India through Quality Control and Inspection.
Address: 3rd Floor, ND YMCA, Cultural Centre Bldg., 1, Jai Singh Road, New Delhi-110001.
The Indian Council for Arbitration (ICA) was established on April 15, 1965. ICA provides arbitration facilities for all types of Indian and international commercial disputes through its international panel of arbitrators with eminent and experienced persons from different lines of trade and professions.
Address: Federation House, Tansen Marg, New Delhi-110001
India Trade Promotion Organisation (ITPO)
ITPO is a government organisation for promoting the country’s external trade. Its promotional tools include organizing of fairs and exhibitions in India and abroad, Buyer-Seller Meets, Contact Promotion Programmes, Product Promotion Programmes, Promotion through Overseas Department Stores, Market Surveys and Information Dissemination.
Address: Pragati Bhawan Pragati Maidan, New Delhi-10001
Chamber of Commerce & Industry (CII)
CII play an active role in issuing certificate of origin and taking up specific cases of exporters to the Govt.
Federation of Indian Chamber of Commerce & Industry (FICCI)
Federation of Indian Chambers of Commerce and Industry or FICCI is an association of business organisations in India. FICCI acts as the proactive business solution provider through research, interactions at the highest political level and global networking.
Address: Federation House, Tansen Marg, New Delhi-110001
Bureau of Indian Standards (BIS)
The Bureau of Indian Standards (BIS), the National Standards Body of India, is a statutory body set up under the Bureau of Indian Standards Act, 1986. BIS is engaged in standard formulation, certification marking and laboratory testing.
Address: 9, Manak Bhavan, Bahadur Shah Zafar Marg, New Delhi-110002
Textile Committee carries pre-shipment inspection of textiles and market research for textile yarns, textile machines etc.
Address: Textile Centre, second Floor, 34 PD, Mello Road, Wadi Bandar, Bombay-400009
The Marine Products Export Development Authority (MPEDA) was constituted in 1972 under the Marine Products Export Development Authority Act 1972 and plays an active role in the development of marine products meant for export with special reference to processing, packaging, storage and marketing etc.
Address: P.B No.4272 MPEDA House, pannampilly Avenue, Parampily Nagar, Cochin-682036
Indian Investment Center (IIC) was set up in 1960 as an independent organization, which is under the Ministry of Finance, Government of India. The main objective behind the setting up of IIC was to encourage foreign private investment in the country. IIC also assist Indian Businessmen for setting up of Industrial or other Joint ventures abroad.
Address: Jeevan Vihar, 4th Floor, Parliament Street, New Delhi-110001
DGFT or Directorate General of Foreign Trade is a government organisation in India responsible for the formulation of guidelines and principles for importers and exporters of country.
Address: Udyog Bhawan, H-Wing, Gate No.2, Maulana Azad Road, New Delhi -110011
DGCIS is the Primary agency for the collection, compilation and the publication of the foreign inland and ancillary trade statistics and dissemination of various types of commercial informations.
Address: I, Council House Street Calcutta-700001,