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How to start an export import business

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How to start an export import business

  1. 1. For MBA / PGDM Students How to start an Export-Import Business Sunil Garg B. Tech. M. Tech. MBA Industry Consultant & Management Professor (IB, SCM & Strategy) E-mail: sunil.garg.edu@gmail.com
  2. 2. Export Management A multi-disciplinary functional area, extension of general management, dealing with non-routine activities, uncertainty of environment and meeting commitments. Essence:  Managing and coordinating of all activities of business with proper coordination and integration among various agencies involve in execution of export order.  Efficient networking, joint ventures and business partnerships leading to a strategic alliances. Exporters Classifications • Merchant Exporter: buying the goods from the market/manufacturer and selling to foreign buyers • Manufacturer Exporter: manufacturing the goods for export • Services Exporter: Hotels, Tourism, IT, Software, Health Care, Consultancy, etc. • Project Exports: Contracts for Designing, manufacturing, supply, erection, commissioning, etc • Deemed Exports: Global Tenders, Duty-free Licenses • Buying Agent/Sales Agent/Commission Agent/Indenting Agent
  3. 3. Agencies Involved Manufacturer, Exporter, Foreign Buyer, Buying Agents, Inspection Agency, Insurance Company, ECGC, Local & Foreign Banks, Packer, Transporter or Inland Carriers, Consolidators, CHA, Stevedores, Shipping Company Agent or Shipping Company, Protective Agents, Excise, VAT, Shipping Company /Airlines, EPC, DGFT, Chamber of Commerce, Custom and Port Authorities, RBI, etc.
  4. 4. Planning for Exports  Getting IEC Code No from DGFD: The first step for becoming eligible for export/import is to get registered as an authorized holder of IEC Number.  Registering with an appropriate Export Promotion Council: obtaining Registration-cum-Membership Certificate to claim benefits under FTP; Product not covered by any EPC - obtain RCMC from the concerned Regional Licensing Authority.  Procuring of Export Orders: Effective Business Communication, Internet Marketing, Personal Meeting, Engaging Agent, Negotiation, Entering in to Export Contract - Meeting Product Specifications, Delivery, After Sales-Service Conditions, etc.
  5. 5. Getting IEC Number An application in the prescribed format to be made to the Regional Licensing Authority with payment of the prescribed fee and following documents: 1. Bank Receipt (in duplicate)/Demand Draft of application fee in terms of Appendix 21B. 2. Certificate from the Banker. 3. Self-certified copy of Permanent Account Number (PAN) issued by Income Tax Authorities. 4. Two copies of passport size photographs of the applicant duly attested by the banker of the applicant. 5. Self-certified copy of RBI approval in cases where non-resident interest/holding in the firm/company exists with repatriation benefits.
  6. 6. Export Promotion Councils (EPCs) http://exim.indiamart.com/reference-directories/directory-of-epcs.html The Export Promotion Councils are non-profit organisations registered under the Indian Companies Act or the Societies Registration Act. They are supported by financial assistance from the Government of India. The role of the EPCs is to project India's image abroad as a council of reliable suppliers of high quality goods and services. The EPCs encourage and monitor the observance of international standards and specifications by exporters. The EPCs keep abreast of the trends and opportunities in international markets for goods and services and assist their members in taking advantage of such opportunities in order to expand and diversify exports.
  7. 7. Export Promotion Councils (Contd.) http://exim.indiamart.com/reference-directories/directory-of-epcs.html • ENGINEERING EXPORT PROMOTION COUNCIL Contact Person: Chairman Address : World Trade Centre. 14/IB, Ezra Street, Calcutta-700 001. Tel. : (91)33-263080/81/82/83/84/85, Fax : (91)33-2258968 E-Mail : eepc-ho@eepc.ho.cmc.net.in Website: http://www.eepc.gov.in • OVERSEAS CONSTRUCTION COUNCIL OF INDIA Contact Person: Chairman Address : H-118, Himalaya House, 11th Floor, 23,Kasturba Gandhi Marg, New Delhi-110 001 Tel. : (91)11-3312936/3327550, Fax : (91)11-3312936 Website : http://www.occi.org • BASIC CHEMICALS, PHARMACEUTICALS AND COSMETICS EXPORT PROMOTION COUNCIL • CHEMICALS AND ALLIED PRODUCTS EXPORT PROMOTION COUNCIL • PLASTICS & LINOLEUMS EXPORT PROMOTION COUNCIL • COUNCIL FOR LEATHER EXPORTS • SPORTS GOODS EXPORT PROMOTION COUNCIL • GEM AND JEWELLERY EXPOR PROMOTION COUNCIL • SHELLAC EXPORT PROMOTION COUNCIL • CASHEW EXPORT PROMOTION COUNCIL
  8. 8. Export Promotion Councils (Contd.) http://exim.indiamart.com/reference-directories/directory-of-epcs.html • ELECTRONICS AND COMPUTER SOFTWARE EXPORT PROMOTION COUNCIL Contact Person: Chairman Address : PHD-House,Phase-II, 3rd floor,Opp.,Asian Games Village, New Delhi-110 0 16. Tel. : (91)11-696103/696206/654463, Fax : (91)11-6853412 E-Mail : esc@giasdl01.vsnl.net.in Website: http://www.indiansources.com Textiles Sector: • APPAREL EXPORT PROMOTION COUNCIL Contact Person: Chairman Address : NBCC Towers,15 Bhikaji Cama Place, New Delhi - 110 066. Tel. : (91) 11-883351/ 6888505/ 6888656/ 6888300, Fax : (91) 11-6168584 Website : http://www.aepc.com • CARPET EXPORT PROMOTION COUNCIL • COTTON TEXTILE EXPORT PROMOTION COUNCIL • EXPORT PROMOTION COUNCIL FOR HANDICRAFTS • HANDLOOM EXPORT PROMOTION COUNCIL • THE INDIAN SILK EXPORT PROMOTION COUNCIL SYNTHETIC & RAYON TEXTILE EXPORT PROMOTION COUNCIL • WOOL & WOOLENS EXPORT PROMOTION COUNCIL
  9. 9. Entering into Exports Export Marketing: Market research, collecting adequate information, analysing market environments (opportunities & threats), identifying/selecting target markets, undertaking trips to foreign markets and establishing personal rapport, participating in international trade fairs, selecting products & specifications, catalogue & sampling, selecting prospective buyers, negotiating pricing and delivery terms and entering into written contract. Export Contract: It is necessary to enter into an export contract with the overseas buyer. EC should be carefully drafted, comprehensive but in precise terms, incorporating all relevant and important conditions of the trade deal, no ambiguity regarding specifications of the goods and terms of sale including export price, mode of payment, type of packaging, storage, port of shipment, delivery schedule, etc.
  10. 10. Export Contract (Essential Contents)  Product Description, Standards and Specifications  Quantity Parameters  Inspection Clause  Total Value of Contract  Terms of Delivery  Taxes, Duties and Charges  Period of Delivery/Shipment  Packing, Labeling and Marking  Terms of Payment-- Amount/Mode & Currency/ Credit  Discounts and Commissions  Licenses and Permits  Insurance  Documentary Requirements  Guarantee, After Sale-service  Arbitration  Force Majeure
  11. 11. Targeting Customers by Internet Marketing The quality of presence on the web is the first and only economical chance to project credibility and earn initial respect for your product. The people have infinite choices for providers of products or service presented online and make a snap decision–within seconds–whether or not they want to explore a relationship with you. Your Website should guarantee to display the product strength, value and opportunities to all your stack holders all over the world. Extending reach to targeted customers requires Search Engine Optimization (SEO), Social Media Marketing and portfolios creation. Social Media Marketing would be the ground-breaking reality for the international businesses product promotions in the coming decade, which can be achieved by profiles created on SM Networking sites link: Facebook, Twitter, Linkedin, Plaxo, Stumble upon, MySpace, YouTube, Flicker, Silicon India, e- magazines and blogs, etc.
  12. 12. Execution of Exports  Procuring Order, Finalizing Written Contract.  Start Manufacturing or Procuring Goods, Quality Inspection, Sea-worthy - export packing, Stuffing in Container /FCL/LCL as per requirements, Insurance, Dispatch to ICD, Ports/Airport, Obtaining Certificate of Origin.  Appointing CHA, Processing Shipping Bill with Customs, Collecting Bill of Lading/Airway Bill.  Sending Shipment Intimation to Buyer, Preparing Set of Shipping Documents, Sending advance Set to Buyer and submitting Negotiable Set of Documents to local Bank.  Exporter’s Bank to forward the documents to Buyer’s Bank for negotiation and collecting payment, availing export financing/incentives and preparing for next order/shipment.
  13. 13. Process of a Foreign Trade Transaction Purchase order Importer Shipment of goods Exporter Letter of Credit Shipping Documents and time draft accepted Importer’s Bank Exporter’s Bank Payment-discounted value of B/E
  14. 14. Export Financing RBI Policy: No export order should suffer for want of funds. Banks should finance up to 90% of FOB value at concessional rate of interest from 90 to 270 days, improving the competitiveness of Indian exports. GOI provides facilities of Pre and Post-shipment Credits through commercial banks under the various schemes of ECGC and EXIM Bank for which maximum rate of interests are limited to: • Up to 180 days: Not exceeding PLR minus 2.5% • Beyond 180 days and up to 270 days: Not exceeding PLR plus 0.5% • Beyond 270 days and up to 360 days: May be fixed by bank
  15. 15. Export Financing • Pre-shipment Finance: Known as Packing Credit to purchase raw-materials and making goods ready for export before shipment. This is over and above the normal permissible bank finance. A separate loan account for each export order can be opened. • Post-shipment Finance: Facility for short term credit against exports receivable at concessional rate of interest to cover the time gap between shipment of goods and collection of payment. Bank offers post-shipment advance against: Negotiation of Export Documents or Bills Discounting or Advance against Bills sent on Collection. • Period of Finance: Normal Transit Period (25) + Usance Period as per the draft + Grace Period (3) • ECGC provides guarantees to the bank to cover risks of post-shipment credits to the exporters on individual order as well as whole turnover basis.
  16. 16. Process of Exports Financing Obtaining Export Contract acceptable to bank >> Pre- export incentives (if applicable) >> Pre-shipment credit (finance) >> Purchase/Import of raw-material & processing >> Central Excise Clearance >> Custom Clearance >> Shipment >> Negotiation of shipping documents >> Post- shipment credit (finance) >> Export proceeds realisation >> Post-export incentives >> End of transaction.
  17. 17. Pre-shipment Inspection & Quality Control Export Inspection Council (EIC) controls EIAs at five metro cities with a network of 38 sub-offices and laboratories to back up pre-shipment inspection, quality control and certification activity. Type of Inspections: EIA provides follows three systems of inspection: • Consignment-wise Inspection • In-process Quality Control (IPQC) • Self-Certification Scheme All manufacturer exporters should implement a Quality Management System to produce a consistent quality product to meet buyers’ specifications and gain confidence of buyer. Exporters are required to apply to Export Inspection Agency (EIA) for deputing an inspector to conduct an inspection of the consignment at the factory or warehouse of exporter and issue of inspection certificate.
  18. 18. Export Incentives Pre-export incentives - Duty Free Imports of raw-materials and related inputs – two schemes: (a) Advance Authorization Scheme (AAS): Non-transferable, can be availed after export obligation: products manufactured can be disposed of locally. Imports allowed based on standard input-output norms (SION) • (b) Duty Free Import Authorization (DFIA): Transferable, can be availed after export obligation – inputs imported can be transferred. Minimum 20 % value addition as per FTP. ----------- Post-export Incentives - Duty Pay-back on Inputs for replenishment of duties - two schemes: (a) Duty Drawback and (b) Duty Exemption Pass Book (DEPB)
  19. 19. Risks Covers By Various Agencies Category of Risk Insurance Agency 1 Credit Risk, Political Risk ECGC 2 Physical Risk, Cargo, Transit Risks, Loss, Damage, GIC (General Insurance Product Liability Risk Company) 3 Foreign Exchange Risk Commercial Banks (Forward Cover) The role of the Global Manager is to identify and address all types of risk in international business deals, establish support and control mechanisms, and set the course for the risk management in terms of organization policies and objectives.
  20. 20. Export Promotion Drive The Government has introduced several schemes to promote units dedicated to exports. These include: • Export Oriented Units (EOU): Hundred per cent export of manufactured goods. • Technology Parks (TPs): For export of software and services • Export Processing Zones (EPZ) or Special Economic Zones (ESZ) – For duty free Imports and Exports from a specified area. The Government of India had in April 2000 announced the introduction of ‘Special Economic Zones’ policy in the country deemed to be foreign territory for the purposes of trade operations, duties and tariffs. India passed special economic zone act in 2005. Currently, India has more than 1022 units in operations in over 9 functional SEZs, each an average size of 200 acres. 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All these SEZs are in various parts of the country in the private/joint sectors or by the State Government.
  21. 21. What Does Not Work ? • Outdated Product Knowledge and Skills ? • Lack of networking ? • Lack of Communication ? • Lack of Self Development ? • Lack of Motivation ? • Lack of Leadership
  22. 22. What Works ! • Continuous Learning ! • Focused Networking ! • Strong Communication ! • Gap Analysis and Self Development ! • The Right Attitude ! • Taking Control - Leadership
  23. 23. Skills That Work!!! Supply Chain Management Production Management Inventory Management Logistics and Distribution Communication & Leadership IT-ERP/SAP Business Processes Improvement
  24. 24. Important Websites http://www.ipfonline.com/ http://www.made-from-india.com/ http://www.tradeindia.com/ http://www.yellowpages.co.in/ http://www.alibaba.com/
  25. 25. Enterprise Systems Technologies for Managers Learning Management Systems (LMS) Collaboration Cloud Computing
  26. 26. Thank You, Sunil Garg B. Tech. M. Tech. MBA Industry Consultant & Management Professor (IB, SCM & Strategy) Advisory Board Member - ISCEA, USA – www.iscea.com Country Head (India) - BRASI, Canada - www.brasi.org Director – IKN, Canada - www.iknownetwork.org Ph: +91 98688 77774 / 98716 58884, USA: +1 815 349 6142 http://in.linkedin.com/in/skgarg

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