Exports and Imports in India is governed by 'Foreign Trade Policy' notified by Government of India by foreign trade (Development & Regulation) Act 1992. Currently FTP or Foreign Trade Policy (2015-20) is effective from April 1, 2015. According to 'foreign trade policy and regulation act', export is an act of sending any goods out of India by any means of transportation like sea, land or air with proper transaction of money for the value of goods delivered.
Starting the export process
To export from India, apart from getting the contract from a buyer, an exporter is expected to undergo the below regulations to comply with the Foreign Trade Policy of India.
Forming an Organization
As a first step in starting the export business, decide whether your company is going to be a sole Proprietary concern or Partnership firm or an Private limited company. Also get a form 1 registration of a company from your regional MSME.
Opening a Bank Account
A current account must be opened in your local bank, which should be capable of handling FOREX. Form 1 registration certificate from MSME can be used as a proof of registration of your company.
Obtaining Permanent Account Number (PAN)
All the exporters and importers are expected to have a PAN number. Once you got your bank account, you can apply for the PAN card either offline or online
Applying IEC (Importer-Exporter Code)
An IE Code is a ten digit number, required for undertaking export/ import from India. We can either apply directly in the Regional office of DGFT or there is new scheme to get IE codes online. Another main thing to be noted is you can take only one IE code using one PAN card.
Registration cum membership certificate (RCMC)
RCMC or otherwise called as Registration Cum Membership Certificate will be issued by Export Promotion Councils (EPC)/ Commodity board of India or any Development authority as mentioned in foreign trade policy or HBP Vol1.
Under foreign trade policy, a company who wants to export or import, wants to claim export incentive or tax levy for capital imports needs to have RCMC. As of now RCMC procedures are manual and needs to submit the RCMC certificate as a hard copy to respective Regional authority.
Selection of product
From India, most of the products are free to export. There are few restrictions which an exporter needs to be aware of in order to comply with FTP regulations. Examples could be beef should be exported without reproductive organs such as testicles, some seeds, and commodities such as pulses, lentils, onion gets temporary pause to export when the price in the local market.
Selection of Potential Markets
For several countries, the European countries and North American countries the Export incentive is 5% of the entire forex earned. But for other countries , which don’t have an international currency, the export incentive is usually 3% of the entire forex earned. So it could be a strategical move to find buyers from Tier 1 countries mentioned by the EPC.
The best way to find your buyers is by online. Build them trust. Always remember, a customer buys a salesman, not the product at first. Send samples to your client, if they are happy, it would be better to meet them in person and build long lasting relationships. Traditional ways of getting buyers are participating Export promotion council's events, Chamber of Commerce events with respective countries, International trade events.
Trust building is the basic necessity in getting export orders, and sending samples play a main role in it. According to Foreign Trade Policy of 2015-2020, export of technical samples, bonafide trade of freely exportable items are allowed without any cap limit.
The competition in the International trade business has become more as the growth of export volume from China and rise of trade relations between African countries and West. The exporter should work on the pricing of the product covering his breakeven, freight costs, if the cost of sample is too high, insurance etc. Now to matchup with the International competition, some Indian exporters just quote the breakeven to the client and make their profit from the incentives provided by Export promotion council.
Risk protection with ECGC
ECGC or Export Credit Guarantee Corporation of India Limited is a fully owned organisation by Government of India, set up with the motive of promoting exports by providing assistance with Credit Risk Insurance and related services for exports. It aim is to provide competitive edge to Indian exporters by providing them with credit insurance covers against loss that may incur in export of goods & services and also provides Overseas Investment opportunities, insurance to Indian organisations investing in joint ventures in foreign countries in the form of loan or equity.
- 1. Starting the export process
- 2. Forming an Organization
- 3. Opening a Bank Account
- 4. Obtaining Permanent Account Number (PAN)
- 5. Applying IEC (Importer-Exporter Code)
- 6. Registration cum membership certificate (RCMC)
- 7. Selection of product
- 8. Selection of Potential Markets
- 9. Finding Buyers
- 10. Sampling
- 11. Pricing
- 12. Risk protection with ECGC