export import

1. © 2005 Prentice Hall 8-1
Introduction
Exporting, Importing

2.  Identify some sources of export financing
 Describe the activities of a foreign freight forwarder
 Understand the kinds of export documents required
 Identify import sources
 Explain why firms export and problem areas of exporting
 Identify the sources of export counseling and support
 Discuss the meaning of the various terms of sale
Objectives:

3. Why Export?
Reasons to export
– To serve markets where the firm has no or limited
production facilities
– To satisfy a host government’s requirement that the
local subsidiary have exports
– To remain price-competitive in the home market
– To test foreign markets and foreign competition
inexpensively

4. Reasons to export?
– To offset domestic market’s cyclical sales
– To achieve additional sales
– To extend a product’s life cycle
– To respond strategically to foreign competitors
– To achieve the success the firm’s management
has seen others achieve
– To improve the efficiency of manufacturing
equipment

5. Reasons not to Export
Two major reasons
– Preoccupation with the vast Domestic market
– Reluctance to become involved in a new, unknown and
therefore risky operation
Not active in international markets due to
– Lack of knowledge
• Locating foreign markets
• Payment and financing procedures
• Export procedures

6. Why do we need export
Export means trade across the political
boundaries of different nation. No Nation is
self sufficient and had all the goods that it
needs. This happens because of climatic
variation & unequal distribution of natural
resources. As a result, countries all over the
world have become interdependent, which
necessitated foreign trade. A developing
country like India with its fast growing
agricultural production to keep pace with the
population to keep pace with the population
growth and growing Industrial infrastructure

7. needs high-import and this can be sustained only
with fast export growth. To meet the oil import
bill, export is unavoidable. Thus, it is evident that
export promotion continues to be a major thrust
area for the government. Several measures have
been under taken in the past for improving export
performance of the country. In India, Govt. has
come out from time to time with various policies
on foreign trade to promote export thereby
increasing the “Foreign Exchange Reserve”.
These policies are termed as “Exim Policy”

8. . Import export act was introduced by gov
during second world war and it lasted for
around 45 yrs and in June 1992 this act was
superceded by the Foreign Trade
(Development & Regulation Act), 1992. .
The basic objective of this new act was to
give effect to the new liberalized export and
import policy of the Govt. till 1985 annual
policies were made but from 1985-92, three
yr policy was made and then 5 yr policy was
made coinciding with 5 yr plans 1992-97,
1997-02, 2002-07.
Brief history

9. What is Exim Policy?
It contains policies in the sphere of Foreign
trade i.e. with respect to import & export
from the country and more especially export
promotion measures, policies and procedure
related there to.
Export means selling abroad and import as
bringing into India, any goods and services

10. Objective of Exim Policy
Accelerating the country’s transition to a globally
oriented vibrant economy with a view to derive
maximum benefits from expanding global market
opportunities;
Stimulating sustained economic growth
Enhancing the technological strength and
efficiency
Encouraging the attainment of internationally
accepted standards of quality
Providing consumers with good quality products
and services at reasonable prices.

11. General provisions regarding export impor
Exports and Imports free unless regulated
Compliance with Laws
Interpretation of Policy
Procedure:
Exemption from Policy/ Procedure
Principles of Restriction
Restricted Goods
Terms and Conditions of a Licence
Importer-Exporter Code Number
Exemption from Bank Guarantee
Clearance of Goods from Customs

12. Import control regime
1956-57, restrictions on imports started as lot of imports were
there as such gov even had to import foodgrains for self
fulfillment
Imports were classified into
Banned items ,Canalised items ,Restricted items, OGL
In 1966 ruppee was devalued by 36.5% By devaluation gov
expressed the hope that the devaluation would lead to expansion
in export earnings as indian goods will become cheaper in
international market on the other hands import would decline
as price of imported goods would increase.

13. Because of a rigid itemization of permissible imports, an
element of inflexibility in the pattern of utilization of
imports was introduced. The transferability of licenses
among same and different industries was not permissible
This gave rise to an expanding black market in import
licenses. Therefore, the import allocation system was so
designed as to eliminate the possibility of all competition
either domestic or foreign. The Govt of India has
liberalized the import regime from time to time. At
present, practically all controls on import have been lifte
Under the new EXIM policy 2002-07.

14. Comparison of Pre 90’s & Post
90’s Exim Policy
Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1948-51 650 647 -3 Excess of Import due to-
•Pent-up demand of war.
•Shortage of food & raw material due to
partition.
•Import of capital goods due to starting
of hydro-electric & other projects.
1951-56 730 622 -108 Trade deficit was largely due to
programmes of industrialization which
gathered momentum and pushed up the
imports of capital goods.
No improvement in exports.

15. Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1956-61 1080 613 -467 Excess of import due to setting of steel
plants,heavy expansion & renovation on
railways & modernization of many
industries.
Export lower than occur in second plan
which shows that export promotion drive
did not materialize.
1961-66 1224 747 -477 Excess of import due to-
•Rapid industrialization needs capital
goods as raw material.
•Defence needs had increased due to
aggression by China & Pakistan.
•Need of foodgrains due to failure of
crops in 1965-66.

16. Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1966-69
(Annual-
plans)
5775 3708 -2067 Devaluation was resorted to essentially-
•To reduce volume of import.
•To boost export.
•Create favourable balance of trade and
balance of payment.
1969-74 1972 1810 -162 As a consequence of import restriction
policies with vigorous export promotion
measures ,during 1972-73 the country
had favourable balance of trade for first
time since independence.
But several international factors pushed
up the price of petroleum
product,steel,fertilizers etc.results low
magnitude of trade balance.

17. Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1974-79 5540 4730 -810 Significant increase in export during
every year of this period.Export of
coffee,tea,cotton fabrics etc.recorded
substantial increase in this period.
But,Janta Government followed policy of
haphazard import liberalization results
decline trade balance from 1977-78.
1980-85 14,986 9051 -5935 Decline in POL imports was more than
by a big hike in non-POL imports as a
consequence of import liberalization.
Consequently, huge trade imbalance.

18. Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1985-90 28,874 18,033 -10,841 Huge trade imbalance compelled the
government to approach the World
Bank/IMF for loan.
The government was also forced to
apply brakes on the licensing policy of
imports.
1990-92 45,522 38,300 -7222 In 1990-91,push was given to
export,but as a consequence of Gulf
war government failed to curb imports.
In1991-92, government introduced
number of measures in trade policy
allowing exim scripts,abolishing cash
compensatory support(CCS) schemes
as also a two-step devaluation of the
rupee,but fail to boost up export.

19. Year Import
(Cr.)
Export
(Cr.)
Trade
Bal.(Cr.)
1992-01 140740 118252 -22,488 In 1992-01,slow down in exports due to-
•Depressed nature of world markets.
•Saturation of developed countries market
for electronic goods which are dynamic
export sectors.
•Increased protectionism by industrialised
countries in area of textile and clothing.
•Increasing competition from China &
Taiwan.
•India underestimated the impact South-
East Asian crisis
•Non-Tarrif barriers have been created by
developed counties to slow down Indian
exports.
•In 2000-01 export was largely due to
rupee depreciation along with further
trade liberalization,more openness to
foreign investment in EOU sectors ike IT.

20. Year Import
(US
$million)
Export
(US
$million)
Trade
Bal.(US
$million)
2002 –03
2003-04
65422
80177
52512
64723
-12910
-15454
Rise in imports in 2002-03 was broadly
based on oil imports,food &allied
products(edible oil),capital goods.
Exim policy 2003-04gave massive thrust
to exports by
•Duty free import facility for service
sector upto earning 10lakh foreign
exchange.
•Liberalization of Duty Exemption
scheme.
Besides,all these measures trade balance
in 2003-04 are high due to mainly on
imports of POL products
more.Currently, almost two-third of
country crude oil requirements are
imported.Besides import of POL, import
of non POL items shot up by 17%
in2002-03 to 26.2%in 2003-04.

21. Trade - On an All time High
 India’s total external trade in goods and services grew
by 41.5% in H12014-15 to US $ 153 billion. This is
expected to go up to US $ 310 billion by the end of this
year. This was just over US $ 74 billion in.
 The trade to GDP ratio, calculated at current prices, has
risen to 29.36%
Economy is
more Open
than ever
before
Strong Export
Growth
 Exports have grown to US $ 57.05 billion during April-
November 2014-2015. They are expected to grow at
26% during the current year to US$ 100 billion.
Strong Imports
growth
 Non-oil imports grew at over 28% during April -
September led by demand for capital goods.
Strong Service
Exports
 Service Exports grew by 71% in. India's IT-ITES exports
have shown robust growth and are expected to grow by
32% this year to US $ 23 billion.
Source: Reserve Bank of India

22. Show and Sell
Trade events to facilitate international trade
– Pavilions
– Trade missions
– Product literature center
– Reverse trade missions

23. © 2005 Prentice Hall 8-23
Introduction
Export Selling vs. Export Marketing
– Export selling involves selling the same
product, at the same price, with the same
promotional tools in a different place
– Export marketing tailors the marketing mix to
international customers

24. © 2005 Prentice Hall 8-24
Introduction
Requirements for Export Marketing
– An understanding of the target market
environment
– The use of market research and identification of
market potential
– Decisions concerning product design, pricing,
distribution and channels, advertising, and
communications

25. Export Marketing Plan
Essentially same as domestic marketing plan
Specific about
– Markets to be developed
– Marketing strategy for serving them
– Tactics to make the strategy operational

26. © 2005 Prentice Hall 8-26
Organizational Export Activities
The firm is unwilling to export; it will not even fill
an unsolicited export order
The firm fills unsolicited export orders but does
not pursue unsolicited orders. Such a firm is an
export seller.
The firm explores the feasibility of exporting (this
stage may bypass Stage 2).
The firm exports to one or more markets on a trial
basis.

27. © 2005 Prentice Hall 8-27
Organizational Export Activities
The firm is an experienced exporter to one or
more markets
After this success, the firm pursues country- or
region-focused marketing based on certain criteria
The firm evaluates global market potential before
screening for the “best” target markets to include
in its marketing strategy and plan

28. EXPORT PROCEDURE:-
Registration
Processing of Shipping Bill
Arrival of Goods at Docks
System Appraisal of Shipping Bills
Customs Examination of Export Cargo
Stuffing / Loading of Goods in Contaoners
Drawls of Samples
Amendments
Export of Goods under Claim for Drawback

29.  Generation of Shipping Bills :-
For clearance of export goods, the exporter or export
agent has to undertake the following formalities:
Registration :-
Any exporter who wants to export his good need to
obtain PAN based IEC code from the Directorate
General of Foreign Trade prior to filing of shipping bill
for clearance of export goods.
The exporters must also register themselves to the
authorised foreign exchange dealer code and open a
current account in the designated bank for credit of any
drawback incentive.

30.  Registration in the case of export under export promotion
schemes: -
 All the exporters intending to export under the export
promotion scheme need to get their licences / DEEC book
etc.
 Processing of Shipping Bill - Non-EDI: -
In case of Non-EDI, the shipping bills or bills of export are
required to be filled in the format as prescribed in the
Shipping Bill and Bill of Export (Form) regulations, 1991.
An exporter need to apply different forms of shipping bill/
bill of export for export of duty free goods, export of
dutiable goods and export under drawback etc.

31. Processing of Shipping Bill - EDI:-
Under EDI System, declarations in prescribed
format are to be filed through the Service Centers
of Customs. A checklist is generated for
verification of data by the exporter/CHA.
After verification, the data is submitted to the
System by the Service Center operator and the
System generates a Shipping Bill Number, which
is endorsed on the printed checklist and returned
to the exporter/CHA.

32.  Arrival of Goods at Docks:-
On the basis of examination and inspection goods are
allowed enter into the Dock. At this stage the port
authorities check the quantity of the goods with the
documents.
 System Appraisal of Shipping Bills:-
In most of the cases, a Shipping Bill is processed by the
system on the basis of declarations made by the exporters
without any human intervention. Sometimes the Shipping
Bill is also processed on screen by the Customs Officer.

33.  Customs Examination of Export Cargo:-
The Customs Officer may inspect/examine the
shipment along with the Dock Appraiser. The Customs
Officer enters the examination report in the system &
then marks the Electronic Bill along with all original
documents and check list to the Dock Appraiser.
If the Dock Appraiser is satisfied that the particulars
entered in the system conform to the description given
in the original documents and as seen in the physical
examination, he may proceed to allow "let export" for
the shipment and inform the exporter or his agent.

34.  Stuffing / Loading of Goods in Containers :-
The exporter or export agent hand over the
exporter’s copy of the shipping bill signed by
the Appraiser “Let Export" to the steamer
agent. The agent then approaches the proper
officer for allowing the shipment.
The Customs Preventive Officer supervising
the loading of container and general cargo in to
the vessel may give "Shipped on Board"
approval on the exporter’s copy of the
shipping bill.

35. Drawal of Samples:-
Where the Appraiser Dock (export) orders for
samples to be drawn and tested, the Customs
Officer may proceed to draw two samples
from the consignment and enter the particulars
thereof along with details of the testing agency
in the ICES/E system.

36.  The disposal of the three copies of the test
memo is as follows:-
Original – to be sent along with the sample to the
test agency.
Duplicate – Customs copy to be retained with the
2nd sample.
Triplicate – Exporter’s copy.
The Assistant Commissioner/Deputy Commissioner if he
considers necessary, may also order for sample to be drawn for
purpose other than testing such as visual inspection and
verification of description, market value inquiry, etc.

37. Amendments:-
Any correction/amendments in the check list
generated after filing of declaration can be made
at the service center, if the documents have not
yet been submitted in the system and the shipping
bill number has not been generated.
Generation of Shipping Bills:-
The Shipping Bill is generated by the system in
two copies- one as Custom copy and one as
exporter copy. Both the copies are then signed by
the Custom officer and the Custom House Agent.

38. © 2005 Prentice Hall 8-38
Government programs that support
Exports
Tax incentives
Subsidies
Governmental assistance

39. Cash subsidies
Marketing development assistance
Air freight subsidy
Spices export promotion scheme
Jute externel marketing assistance
Financial assistance scheme agriculture
&meat exports
Financial assistance to marine products
exports

40. Fiscal incentives
Exemption from payment of central excise duty &
simplified procedure for clearance.
Exemption from sales tax
Exemptions & deductions under income tax
act,1961.
Duty draw back Scheme (DDS)
Cash Compensatory Support ( CCS )
International Price Reimbursement Scheme
(IPRS)

41. © 2005 Prentice Hall 8-41
Governmental Actions to Discourage
Imports and Block Market Access
Tariffs
Import controls
Nontariff barriers
– Quotas
– Discriminatory procurement policies
– Restrictive customs procedures
– Arbitrary monetary policies
– Restrictive regulations

42. © 2005 Prentice Hall 8-42
Tariff Systems
Single-column tariff
– Simplest type of tariff
– Schedule of duties in which rate applies to
imports from all countries on the same basis
Two-column tariff
– General duties plus special duties apply

43. © 2005 Prentice Hall 8-43
Preferential Tariff
Reduced tariff rate applied to imports from
certain countries
GATT prohibits the use, with 3 exceptions:
– Historical preference arrangements already
existed
– Preference is part of formal economic
integration treaty
– Industrial countries are permitted to grant
preferential market access to LDCs

44. © 2005 Prentice Hall 8-44
Customs Duties
Ad valorem duty
– Expressed as percentage of value of goods
Specific duty
– Expressed as specific amount of currency per
unit of weight, volume, length, or other units of
measurement
Compound or mixed duties
– Apply both ad valorem and specific on the same items

45. © 2005 Prentice Hall 8-45
Other Duties and Import Charges
Anti-dumping Duties
– Dumping is the sale of merchandise in export
markets at unfair prices
– Special import charges equal to the dumping
margin
Countervailing duties
Variable Import Levies
Temporary Surcharges

46. © 2005 Prentice Hall 8-46
Key Export Participants
Foreign purchasing
agents
Export brokers
Export merchants
Export management
companies
Export distributor
Export commission
representative
Cooperative exporter
Freight forwarders
Manufacturer’s export
representatives

47. © 2005 Prentice Hall 8-47
Organizing for Exporting in the
Manufacturer’s Country
Exports can be handled
– As a part-time activity performed by domestic
employees
– Through an export partner
– Through an export department
– Through an export department within an
international division
– For multi-divisional companies, each
possibility exists for each division

48. © 2005 Prentice Hall 8-48
Organizing for Exporting in the
Market Country
Direct market representation
– Advantages: control and communications
Representation by independent
intermediaries
– Advantages: best for situations with small sales
volume

49. © 2005 Prentice Hall 8-49
Export Financing and Methods of
Payment
Documentary credits (letter of credit)
Documentary collections (bill of exchange)
Cash in advance
Sales on open account
Sales on consignment basis

50. © 2005 Prentice Hall 8-50
Flow Chart of Documentary Credit

51. © 2005 Prentice Hall 8-51

52. © 2005 Prentice Hall 8-52
Sourcing
Must emphasize benefits of sourcing from country
other than home country
Must assess vision and values of company
leadership
Advantage can be gained by
– Concentrating some of the marketing activities
in a single location
– Leveraging company’s know-how
– Tapping opportunities for product development
and R&D

53. © 2005 Prentice Hall 8-53
Factors that Affect Sourcing
Management Vision
Factor costs and conditions
Customer Needs
Logistics
Country infrastructure
Political risk
Exchange rate, availability, and convertibility of
local money

54. Payment Procedures…
Payment terms offered by exporters to foreign
buyers
– Cash in advance
• When credit standing of the buyer unknown or uncertain
– Open account
• When sale is made on open account
– Seller assumes payment risk
– Offered to reliable customers in economically stable countries

55. Payment Procedures…
– Consignment
• Goods shipped to buyer; payment made when sold
• Payment risk assumed by seller
– Letter of credit (L/C)
• Document issued by buyer’s bank
– Promise to pay seller specified amount when
bank has received documents stipulated in letter
of credit

56. Payment Procedures
Letter of credit
• Confirmed L/C
– Correspondent bank in seller’s country agrees to honor
issuing bank’s L/C
• Irrevocable L/C
– Once the seller has accepted L/C, buyer cannot alter or
cancel it without seller’s consent

57. Export Financing…
Private Source – Commercial Banks
– Banker’s acceptance
• Time draft with maturity of less than 270 days that has been
accepted by the bank on which the draft was drawn, thus
becoming the accepting bank’s obligation; may be bought and
sold at a discount in the financial markets like other
commercial paper
– Factoring
• Discounting an account receivable without recourse

58. Export Financing…
– Forfeiting
• Purchasing without recourse an account receivable whose
credit terms are longer than the 90 to 180 days usual in
factoring; unlike factoring, political and transfer risks are borne
by the forfeiter

59. Export Financing
Public Sources
– Export-Import Bank (Ex-Imbank)
• Principal government agency that aids Indian exporters by means of
loans, guarantees, and insurance programs
– ECGC

60. Other Public Incentives
Foreign Trade Zone
– Duty-free area designed to facilitate trade by reducing
the effect of customs restrictions
Free Trade Zone
– An area designated by the government as outside its
customs territory
Customs drawback
– Rebate on customs duties

61. Export Procedures
Foreign freight forwarders act as agents for
exporters
– Prepare documents
– Book space
– Offer advice about
• Markets
• Regulations
• Transportation
• Packing
– Supply cargo insurance

62. Shipping Documents…
Shipper’s Export Declaration
– Department of Commerce form to control export
shipments and record export statistics
Validated export license
– Document issued by the government authorizing export
of strategic commodity or shipment to unfriendly
country
General Export License
– Covers export commodities for which validated license
not required; no formal application required

63. Collection Documents
Commercial invoice
• Include origin of goods, export packing marks, and clause
stating goods will not be transshipped
– Consular invoice
• Purchased from the consul and prepared in local language
– Certificate of origin
• Issued by local Chamber of Commerce
– Inspection certificate
• Frequently required for grain, food, live animals

64. Export Shipments…
 Containers
 Reduce theft and handling costs
 LASH (lighter aboard ship)
 Barges for shallow inland waterways
 RO-RO (roll on-roll off)
 Can drive onto vessel
 Air Freight
 Can arrive in one day

65. Importing
Ways to identify import sources
– If similar imported products are already in the
market, visit a retailer and examine the product label
– If the product is not being imported, call the nearest
consul or embassy of that country
– Use the electronic bulletin boards of the World Trade
Centers

66. Customhouse Broker
Independent business that handles import
shipments
Acts as agent for importer
– Customhouse broker brings goods through customs
– May arrange transportation for goods after they leave
customs
– Need to know when imports are subject to import
quotas and how much of the quota has been filled

67. Importing
Bonded warehouse
– Area authorized by customs for storage of goods on which payment of
import duties is deferred until goods are removed
Automated Commercial System (ACS)
– Used to track, control, and process all commercial goods imported
into country
Import Duties
– Importer must know how India calculates import duties