Introduction : Assessing Export Readiness/ Basic Steps for Exporting Dr. Vijaya Katti

1. For Niryat Bandhu Scheme (Session on 20.6.2016) Introduction : Assessing Export Readiness/ Basic Steps for Exporting Dr. Vijaya Katti Chairperson (MDPs) Indian Institute of Foreign Trade New Delhi

2. Coverage • What is meant by exports? • Legal definition • Why to export? Who can export? • International trade scenario and India’s position in global trade • Product specific specialties • Demand of pattern of specific export market specific products • Global market and possibilities of exports • How to assess your export readiness?

3. What is meant by export? - Legal definition

4. Concept of Export • The term export derives from the conceptual meaning as to ship the goods and services out of the port of a country. • The seller of such goods and services is referred to as an “exporter” who is based in the country of export whereas the overseas based buyer is referred to as an “importer”. • In International Trade, “export” refers to selling goods and services produced in the home country to other markets. • In very simple terms, export may be defined as the selling of goods to a foreign country. However, As per Secion2(e) of the India Foreign Trade (Development & Regulations) Act (1992), the term export may be defined as ‘an act of taking out of India any goods by land, sea or air and with proper transaction of money”.

5. Why Export- Reasons for Export • There are many good reasons for exporting. Some of the motives of export are given below: • The first and the primary reason for export is to earn foreign exchange. The foreign exchange not only brings profit for the exporter but also improves the economic condition of the country. • Secondly, companies that export their goods are believed to be more reliable than their counterpart domestic companies assuming that exporting company has survived the test in meeting international standards. • Thirdly, free exchange of ideas and cultural knowledge opens up immense business and trade opportunities for a company. • Fourthly, as one starts visiting customers to sell one’s goods, he has an opportunity to start exploring for newer customers, state-of-the-art machines and vendors in foreign lands. • Fifthly, by exporting goods, an exporter also becomes safe from offset lack of demand for seasonal products. • Lastly, international trade keeps an exporter more competitive and less vulnerable to the market as the exporter may have a business boom in one area while simultaneously witnessing a bust in a different area.

6. Who can export? • Any one who wants to do something different • Anyone who wants to enter in a profit zone • Anyone who has assessed his readiness to enter in new field & try his luck • Anyone who is willing to take risk • Anyone who is constantly updating himself on global business environment

7. Planning for Export • The organization should plan well before exporting as to what product to be exported, where to be exported etc. The organization should also evaluate the export potential of a company. The main objective of a typical export plan should be to identify: • The objectives of exporting • Lists of activities to undertake to achieve those objectives • Mechanism for review and • Activities to help focus on goals

8. Contd.. • Successful exporters agree that your ability to become an accomplished international traders depends largely on how you Adopt appropriate export development strategy Make every penny count Target new business areas Identify and focus on markets, which consume products having the same competitive profile as the products you can supply Have some idea of impact of the FTAs, WTO standards, SPS Measures, Intellectual Property Rights, domestic regulations on the products of interest Dig out every penny due to you from the system, by making best use of available opportunities, policies and schemes

9. Contd.. • Information on the above subject is spread across numerous websites and documents produced by the Trade Ministries of various countries (For FTA, GSP, Customs duty), DGFT, Customs, RBI, Central Excise, Banks, WTO, Other international bodies. • You do not need to understand everything available, but how do you know what to miss. Information Overload makes impossible demand on your resources and time.

10. Contd.. • The course you have enrolled provides straight answers to innumerable questions asked by the exporters as they launched, developed and grew their business. It is a one stop access to information scattered across 100s of websites, manuals, and schemes : and covers basic essentials for starting your business endeavor.

11. Exporter’s Questionnaire

12. For a proper export planning following questions need to answered : • Which products are selected for export development? • What modifications, if any, must be made to adapt them for overseas markets? • Which countries are targeted sales development? • In each country, what is the basic customer profile ? • What marketing and distribution channels should be used to reach customers? • What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them? • How will the product’s export sale price be determined? • What specific operational steps must be taken and when? • What will be the time frame for implementing each element of the plan? • What personnel and company resources will be dedicated to exporting? • What will be the cost in time and money for each element? • How will results be evaluated and used to modify the plan?

13. Export Readiness Assessment (ERA) Questionnaire For filling up this questionnaire, please register and Login at http://indiabr.com/

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17. The course on “Export & Import Business” has 7 segments Basic steps for Exporting Marketing related issues (Identification of Product and Market) WTO Related Issues FTP related issues Finance/Risk Management issues Customs and Excise interface/Sales contract Preparation & Execution of Export Business Plan

18. Export Preliminaries • Export-Import is totally free with very limited restriction (96% items are free items) • To find Buyers-Seller is your decision • To decide Product and its Price-Qty are your decision • You must prepare Export Business Plan

19. Export • Take Order • Find CHA (Custom House Agent) • Find mode of export (Sea/Air) • Find Carrier • Fill Shipping Bill • Take payment • Request for Bank Realisation Certificate • Register for Export Scheme

20. Basic Steps for Exporting Step 1 • Those interested in EXIM business need to apply to the regional office of the Director General of Foreign Trade (DGFT) for getting Importer-Exporter Code (IEC) Number. This is true for any individual or company willing to undertake export or import in India. IEC number is not mandatory in the case of imports for personal use. The DGFT has regional offices in many states. Step 1 is applicable in the case of first-time exporters. Step 2 • The exporter has to register with the concerned export promotion council. For example, in case of garments, it is essential to obtain registration-cum-membership certificate (RCMC) from the Apparel Export Promotion Council (AEPC). Registration is essential in order to obtain various permissible benefits given by the government.

21. Step 3 • The exporter can now go in for procuring orders, by first sending a sample, if required. Both exporter and importer will have to agree upon the terms and conditions of the contract such as pricing, documents, freight charges, currency and so on. After this, the importer send a purchase order. Step 4 • With export orders in hand, the exporters starts manufacturing goods or buying them from other manufacturers.

22. Step 5 • The exporter makes arrangements for quality control and obtains from the inspector of quality control, a certificate confirming the quality of goods, depending upon the requirement. Step 6 • Exportables are then dispatched to ports/airports for transit.

23. Step 7 • The exporter asks the importer to take marine/air insurance under cost and freight, free on board etc., terms of contract. Step 8 • After the completion of these formalities, the exporter contacts the clearing and forwarding agent (C&F agent) for storing the goods in warehouses. (The exporter can also store the goods personally). The forwarding agent presents a document called the Shipping Bill, which is required for allowing shipment by the Customs Authority.

24. Step 9 • After loading the goods in to the ship, the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the ship superintendent of the port. The superintendent calculates the port charges and gives it to the exporter/C&F agent). Step 10 • When the port payments are made, the C&F agent or exporter gets the Bills of Lading or Airway Bill from the official agent of the shipping company or the airline.

25. Step 11 • The exporter applies to the relevant Chamber of Commerce for obtaining Certificates of Origin, stating that the goods originated from India. (This is not a mandatory document in all cases.) Step 12 • The exporter also sends a set of documents to the importer, stating the date of shipment, name of vessel, etc. Moreover, it is desirable to send certain documents like the Bills of Lading, Custom Invoice, and Packing List to their foreign counterparts.

26. Step 13 • The exporter now presents all the important documents at his bank. (This has to be done within 21 days after the shipment. Step 14 • The exporter’s bank sends these documents to the importer’s bank. The importer’s bank should make the payment on or before the due date. Although these steps give a clear picture about how to export, some steps are not essential.

27. EXPORT–IMPORT DOCUMENTATION Proforma Invoice • The Proforma Invoice, as the name suggests, is a proforma of the invoice. It is prepared by an exporter and sent to the importer for necessary acceptance. Packing List • It is a consolidated statement in a prescribed format, detailing how the goods have been packed. It is informative and itemizes the material in each individual package, such as drum, box, or carton. It is a very useful document for customs at the time of examination and for the warehouse keeper of the buyer to maintain a record of inventory and to effect delivery.

28. Commercial Invoice • An invoice is a fundamental document of prime importance. • It contains the name of the exporter, importer, and the consignee, and the description of goods. • It is a requisite for the invoice to be signed by an exporter or his agent. • Normally, the invoice is prepared first, and several other documents are then prepared by deriving information from the invoice.

29. Certificate of Origin • The Certificate of Origin is a very useful document in export-import trade. This certificate indicates that the goods, which are being exported, are actually manufactured in a specific country mentioned therein. This certificate is sent by the exporter to the importer. • It is useful for the clearance of the goods from the customs authority of the importing country. However, it is worth noting that the certificate of origin is required by some countries only.

30. Generalized System of Preference Certificate of Origin • As its name indicates, the generalised system of Preferences (GSP) certificate of origin certifies that the goods being exported have originated/been manufactured in a particular country. It is mainly useful for taking advantage of a preferential duty concession, if available.

31. Shipping Bill/Bill of Entry • The Shipping Bill is a reuisite for seeking the permission of customs to export goods by sea/air. It contains a description of export goods, the number and kind of packages, shipping marks and numbers, value of goods, the name of the vessel, the country of destination, etc.

32. ARE-I Form • The ARE-I Form is an application for the removal of excisable goods from the factory premises, for export purposes. For example, if you are exporting a ball point pen or a magazine, on which there is no excise applicable, you do not need to fill in this form.

33. Mate’s Receipt • After the cargo is cleared from the customs examination and other formalities are over, it is handed over to the shipping company for loading. The Mate’s Receipt is issued by the captain of the ship. It contains the name of the vessel, shipping line, port of loading, port of discharge, shipping marks and numbers, packing details, description of goods, gross weight, container number, and seal number. The mate’s receipt is exchanged for the Bill of Lading.

34. Exchange Declaration Form (GR/SDF Form) • One of the main functions of the Central Bank is to control and monitor the foreign exchange reserves of the country. Since exports directly relate to the country’s foreign exchange earnings, it becomes essential for nations to regulate an export transaction. • The Reserve Bank of India (RBI) has prescribed a GR form (SDF), a PP form, and SOFTEX forms to declare the export transactions.

35. Distribution/Disposal of Copies of GR Form • GR forms, covering the export of goods, should be completed by the exporter in duplicate, and both copies should be submitted to customs at the time of shipment. • Customs will verify all particulars of all goods and the value will be declared in the GR form. • After the shipment has been sent, the original of the GR form will be retained by the customs for onward submission to the RBI.

36. Statutory Declaration Form • Some offices in the customs department are now computerized. To meet the requirements of electronic data interchange system, the GR form has been replaced online by a new form known as Statutory Declaration Form (SDF). Post Parcel Form • When goods are exported by post, then instead of the GR form, the exporter has to fill up a Post Parcel (PP) form in triplicate.

37. SOFTEX Forms • The declaration in SOFTEX form, in respect of export of computer software and audio/video/television software, shall be submitted in triplicate to the designated official at the Department of Electronics of Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) on Export Processing Zones (EPZs) in India.

38. Bills of Exchange • The Bill of Exchange is commonly known as draft. It is ‘an instrument in writing, containing an order, signed by the maker, directing a certain person to pay a certain sum of money only to the order of a person to the bearer of the instrument’. Sight Draft • When the drawer, that is, exporter expects the drawee, that is, importer to make the payment immediately upon the draft being presented to him, the draft involved is called a Sight Draft.

39. Usance Draft • When the exporter has agreed to give credit to the foreign buyer, he draws the Usance Bills of Exchange. Inspection Certificate • The Inspection Certificate is required by some importers and countries in order to attest the specifications of the goods shipped. The attestation is usually performed by a government agency or by independent testing organizations.

40. Bill of Lading • The Bill of Lading (B/L) is a document issued by the shipping company or its agent. It acknowledges the receipt of the goods mentioned in the bill for shipment on board of the vessel. • The B/L is the legal document to be referred in case of any dispute over the shipment. Contd….

41. It contains the following information: • The shipping company’s name and address • The consignee’s name and address • The port of loading and the port of discharge • Shipping marks and particulars • Number of packages shipped with date-rubber stamp • Description of packages and the goods • Gross weight and net weight • Freight details and name of the vessel • Signature of the shipping company’s agent

42. Airway Bill • Airway Bill is a contract between the owner of the goods and the career or its agent. The receipt issued by the airlines company or its agent for carriage of goods is called an airway bill. • Insurance Certificate • The Insurance Certificate is used to assure the consignee that insurance will cover the loss or damage to the cargo during transit (marine/air insurance).

43. Consular Invoice • The Consular Invoice is a document required by certain countries. This invoice is an important document that needs to be submitted for certification to the embassy of the country concerned.

44. Marketing related issues

45. Marketing – The Concept • Marketing, in the simplest of terms, can be defined as the process which profitably meets the need for products. • The more formal definition of marketing" is that it is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

46. Marketing activities have been traditionally depicted in terms of a marketing mix, which can be defined as the set of marketing tools needed to pursue marketing objectives. The marketing mix consists of four broad groups, popularly referred to as the four Ps of marketing. These are: • Product • Price • Place • Promotion

47. INTERNATIONAL MARKETING • Marketing as a concept is universal, but the markets and behaviour of consumers vary across countries and can be quite different. This makes it essential for any student of international marketing to gain knowledge in three critical areas: • Cross-cultural knowledge • Country/regional knowledge • Cross-border transactions knowledge

48. EXPORT MARKETING-GOING GLOBAL This section addresses the all-important question: Why should a firm enter the international market? Some of the more obvious reasons for firms to enter overseas markets are: • Profitability • Growth • Achieving economies of scale • Risk spread • Access to imported inputs • Uniqueness of products and services • Marketing opportunities due to life cycle • Spreading R&D costs

49. Find Buyer • Experience • Business Promotion: Website • Distributor, Dealers, Commission Agents • Reference • Visits, Exhibition, Event Participation • Advertise and Marketing • Surfing

50. Deciding on Pricing • Price and Pricing Strategies • Profit-Oriented Pricing Objectives • Sales-Oriented Pricing Objectives