How to Start Export Business – Introduction
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- How to star Start Export Business
- Introduction
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.
There are many aspirant entrepreneurs like startups, small and medium sized enterprises and even manufacturers who wish to start exports business and they do not know how to start and where to start their process. This book is to make the participants to understand the practical process of starting Exports. Everybody is mainly afraid of the intricate processes involved in total export deal right from starting an export firm to till they get the realization of their proceeds to their account. Yes it is true. But once has to know the step by step approach and the knowledge on exploring potential markets, finding the buyers, making proper communication and offering the products with right pricing is very important make the deals success.
Many are not able to work out on the right pricing due to lack of knowledge on International Commercial Terms (INCOTERMS) and also in negotiating with right logistics service provider. As a first timer, freight forwarding / customs clearing agents will give a high quote and as a results, final pricing of the landing cost to buyers are out of their target prices for buyers. Also exporters are not aware offer this facility to know at what price the similar products have been exported from Indian ports just 2 days before. If they are able to know this kind of information, they can tune their pricing according the present market prices.
One more issue faced by the new entrants in exports how they get their payments and what mode they have to mention in the offers. The main apprehension for the new entrants is Rejections and failure of making payment by buyers. One should know what type of payments are prevailing in international business and what precautions are to be take to mitigate the risk of rejection and non-payments. Especially for the new entrants they should not offer at the credit payments or payment against the deliv-ery. Before finalising the deal and entering into contract level, one should make a due diligence about the buyer. For a new start ups, they can’t judge the buyers or this kind of information is not readily available on any websites. There is one organisation called Export Credit Guarantee Corporation of India (ECGC) which covers the export non-payment risks subject their rules and regulations. So, one has to approach to ECGC (www.ecgc.in) before entering into contract as first step of safely in the deal. If they advise to go ahead in this deal, you are safe on payment part, provided if there is no quality / non-compliance of buyer’s conditions.
If the exporter is able to offer the right price and convince the buyer to get the orders, half battle is won. Before coming to this stage, lot of communication will happen in terms of price, packing, specifications, shipping time and many issues. One should be careful on reading the contract before signing. Sometimes, one the price is finalised, buyers change the packing to the different mode or ask for customized packing, which will eat away the anticipated profits on exports. While giving the quote itself, mention your standard packing mode and make a remark that if there is any change in packing or customized packing, it would be extra.
Once deal is finalised, now the countdown starts to meet the deadlines of execution of order to make the shipment in the stipulated agreed time. So, one has to make an Order Execution Plan to make the shipment within stipulated within stipulated time frame. For this, one has to make the right estimation to consolidate the products, make a sorting and quality check as per the contract stipulations and get it packed as per the buyer’s requirements. Sometimes, buyer also put a clause to inspect the goods by third party agency or his own inspectors before shipment. If there is any such condition, they should be informed well in advance to undertake the pre-shipment inspection before the goods are being shipped. Local Clearing and Forwarding (C&F) agencies will undertake the activities of transporting your goods to the nearest ports for the custom clearance. They take the complete responsibility till the goods / container is placed on the outbound ship as per your requirements in your contractual norms. Wherever there is no sea port, Govt of formalities from major export centres. Once the goods are cleared from ICD custom authorities, it will have a direct entry to the desired port and will reach to the scheduled ship.
To organise for the dispatch and custom clearance process, exporter has to make lot of paper work to prepare the necessary documentation. One has to take utmost care to prepare the documents without any errors as the money realization from the banks are on the basis of submission of right documents. Ofcourse, most of the documents are common and some extra documents are also required depending upon the products especially in case of agro and pharma products. There are many service providers who can render their services to prepare the documents and to organise the other necessary certificates from the respective organizations. But it is necessary to understand and do it yourself for one or two shipments to know the intricacies and to have a person experience. Instead of spending time on procuring certificates from various organizations, those services can be outsourced and it is recommended to focus more time on market development.
