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.
STARTING EXPORTS
Export in itself is a very wide concept and lot of preparations is required by an
exporter before starting an export business. To start export business, the
following steps may be followed:
1) Establishing an Organisation
To start the export business, first a sole Proprietary concern/ Partnership
firm/Company has to be set up as per procedure with an attractive name and
logo.
2) Opening a Bank Account
A current account with a Bank authorized to deal in Foreign Exchange should be
opened.
3) Obtaining Permanent Account Number (PAN)
It is necessary for every exporter and importer to obtain a PAN from the Income
Tax Department. (To apply PAN Card Click here)
•As per the Foreign Trade Policy, it is mandatory to obtain IEC for
export/import from India. Para 2.05 of the FTP, 2015-20 lays down
the procedure to be followed for obtaining an IEC, which is PAN
based.
•An application for IEC is filed online at www.dgft.gov.in as per ANF
2A, online payment of application fee of Rs. 500/- through net
Banking or credit/debit card is made along with requisite
documents as
• mentioned in the application form. (For more information
Click here)
5) Registration cum membership certificate (RCMC)
For availing authorization to import/ export or any other benefit or
concession under FTP 2015-20, as also to avail the services/
guidance, exporters are required to obtain RCMC granted by the
concerned
Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.
6) Selection of product
All items are freely exportable except few items appearing in
prohibited/ restricted list.
 7) Selection of Markets
An overseas market should be selected after research covering market size,
competition, quality requirements, payment terms etc. Exporters can also
evaluate the markets based on the export benefits available for few countries
under the FTP. Export promotion agencies, Indian Missions abroad,
colleagues, friends, and relatives might be helpful in gathering information.
8) Finding Buyers
Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web
browsing are an effective tool to find buyers. EPC’s, Indian Missions abroad,
overseas chambers of commerce can also be helpful. Creating multilingual
Website with product catalogue, price, payment terms and other related
information would also help.
9) Sampling
Providing customized samples as per the demands of Foreign buyers help in
getting export orders. As per FTP 2015-2020, exports of bonafide trade and
technical samples of freely exportable items shall be allowed without any limit.
10) Pricing/Costing
Product pricing is crucial in getting buyers’ attention and promoting sales in
view of international competition. The price should be worked out
taking into consideration all expenses from sampling to realization of export
proceeds on the basis of terms of sale i.e. Free on Board (FOB), Cost, Insurance
& Freight (CIF), Cost & Freight(C&F), etc. Goal of establishing export costing
should be to sell maximum quantity at competitive price with maximum profit
margin. Preparing an export costing sheet for every export product is
advisable.

11) Negotiation with Buyers

After determining the buyer’s interest in the product, future prospects and
continuity in business, demand for giving reasonable allowance/discount in
price may be considered.

12) Covering Risks through ECGC

International trade involves payment risks due to buyer/ Country insolvency.
These risks can be covered by an appropriate Policy from Export Credit
Guarantee Corporation Ltd (ECGC). Where the buyer is placing order without
making advance payment or opening letter of Credit, it is advisable to procure
credit limit on the foreign buyer from ECGC to protect against risk of non-
payment.(To know more about ECGC Click here)
 Processing an Export Order
i. Confirmation of order
On receiving an export order, it should be examined carefully in respect of items,
specification, payment conditions, packaging,
delivery schedule, etc. and then the order should be confirmed. Accordingly, the
exporter may enter into a formal contract with the overseas buyer.
ii. Procurement of Goods
After confirmation of the export order, immediate steps may be taken for
procurement/manufacture of the goods meant for export.
It should be remembered that the order has been obtained with much efforts and
competition so the procurement should also be strictly as per buyer’s
requirement.
iii. Quality Control
In today’s competitive era, it is important to be strict quality conscious about the
export goods. Some products like food and agriculture, fishery, certain chemicals,
etc. are subject to compulsory pre-shipment inspection. Foreign buyers may also
lay down their own standards/specifications and insist upon inspection by their
own nominated agencies. Maintaining high quality is necessary to sustain in
export business.
Exporters are eligible to obtain pre-shipment and post-shipment finance from
Commercial Banks at concessional interest rates to complete the export
transaction. Packing Credit advance in pre-shipment stage is granted to new
exporters against lodgment of L/C or confirmed order for 180 days to meet
working capital requirements for purchase of raw material/finished goods, labour
expenses, packing, transporting, etc. Normally Banks give 75% to 90% advances
of the value of the order keeping the balance as margin. Banks adjust the
packing credit advance from the proceeds of export bills negotiated, purchased or
discounted.
Post Shipment finance is given to exporters normally upto 90% of the Invoice
value for normal transit period and in cases of usance export bills upto notional
due date. The maximum period for post-shipment advances is 180 days from the
date of shipment. Advances granted by Banks are adjusted by realization of the
sale proceeds of the export bills. In case export bill becomes overdue Banks will
charge commercial lending rate of interest.
v. Labeling, Packaging, Packing and Marking
The export goods should be labeled, packaged and packed strictly as per the
buyer’s specific instructions. Good packaging delivers and presents the goods in
top condition and in attractive way. Similarly, good packing helps easy handling,
maximum loading, reducing shipping costs and to ensuring safety and standard of
the cargo.
Marking such as address, package number, port and place of destination, weight,
 vi. Insurance
Marine insurance policy covers risks of loss or damage to the
goods during the while the goods are in transit.
Generally in CIF contract the exporters arrange the insurance
whereas for C&F and FOB contract the buyers obtain insurance
policy.
vii. Delivery
It is important feature of export and the exporter must adhere the
delivery schedule. Planning should be there to let nothing stand in
the way of fast and efficient delivery.
viii. Customs Procedures
It is necessary to obtain PAN based Business Identification Number
(BIN) from the Customs prior to filing of shipping bill for clearance
of export good and open a current account in the designated bank
for crediting of any drawback amount and the same has to be
registered on the system.
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.

• 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.
• 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.
• 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 there of along with details of the testing agency in the
ICES/E [Indian Customs EDI System’] system.
In both the cases, after the permission for amendments has been
granted, the Assistant Commissioner / Deputy Commissioner
(Export) may approve the amendments on the system on behalf of
the Additional /Joint Commissioner.
Where the print out of the Shipping Bill has already been generated,
the exporter may first surrender all copies of the shipping bill to the
Dock Appraiser for cancellation before amendment is approved on
the system.
ix. Customs House Agents
Exporters may avail services of Customs House Agents licensed by
the Commissioner of Customs. They are professionals and facilitate
work connected with clearance of cargo from Customs.
x. Documentation
FTP 2015-2020 describe the following mandatory documents for
import and export.
· Bill of Lading/ Airway bill
· Commercial invoice cum packing list
· shipping bill/ bill of export/ bill of entry (for imports)
(Other documents like certificate of origin, inspection certificate etc may be required as per the case.)
 xi. Submission of documents to Bank
After shipment, it is obligatory to present the documents to the Bank within 21
days for onward dispatch to the
foreign Bank for arranging payment. Documents should be drawn under
Collection/Purchase/Negotiation under L/C as the case may be, along with the
following documents
- Bill of Exchange
- Letter of Credit (if shipment is under L/C)
- Invoice
- Packing List
- Airway Bill/Bill of Lading
- Declaration under Foreign Exchange
- Certificate of Origin/GSP
- Inspection Certificate, wherever necessary
- Any other document as required in the L/C or by the buyer or statutorily.
xii. Realization of Export Proceeds
As per FTP 2015-2020, all export contracts and invoices shall be denominated
either in freely convertible currency of
Indian rupees, but export proceeds should be realized in freely convertible
currency except for export to Iran.
Export proceeds should be realized in 9 months.
 Custom Clearance Formalities

• Customs clearance work involves preparation and submission of documentations

required to facilitate export or imports into the country, representing client
during customs examination, assessment, payment of duty and co taking delivery
of cargo from customs after clearance along with documents.
InvestorWords.com defines customs clearance as:
• the act of passing goods through customs so that they can enter or leave the
country.
• a document given by customs to a shipper to show that customs duty has
been paid and the goods can be shipped.
As per Management Study Guide :

• Customs clearance work involves preparation and submission of

documentations required to facilitate export or imports into the country,
representing client during customs examination, assessment, payment of duty
and co taking delivery of cargo from customs after clearance along with
documents.
• Some of the documents involved in customs clearance are :
• 1. Exports Documentation: Purchase order from Buyer, Sales Invoice, Packing
List, Shipping bill, Bill of Lading or air way bill, Certificate of Origin and any other
specific documentation as specified by the buyer, or as required by financial
institutions or LC terms or as per importing country regulations.
• 2. Imports Documentation: Purchase Order from Buyer, Sales Invoice of supplier,
Bill of Entry, Bill of Lading or Air way bill, Packing List, Certificate of Origin, and
any other specific documentation required by the buyer, or financial institution or
the importing country regulation.
Customs Clearance Procedure in India
• Import and export of goods into and outside a country should undergo a customs
clearance process.
• The importer and exporter of the goods should submit valid documents to clear
this process. In this article, we look at some of the major steps and processes in
clearing customs in India.
Calling of Vessels
• Once the vessels carrying the goods reaches the country, the person who carried
the vessels should make sure that the calling of vessels is done at the customs
port.
• For instance, if goods are imported via aircraft, the pilot is responsible for call of
the vessels at the customs airport.
• There is no requirement for the importer to get involved in this process and will
be done by the airline or shipping line.