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A Basic Guide On Starting Your Export Business

Export-Import business is one of the lucrative business where it not only gives you higher profit margins but also expands your business horizon to the international market and also gives you access to the goods and services which otherwise are not available in the domestic market.

With regards to Manipur,  having shared a boundary with Myanmar, there's an ample scope for exports business. Integrated Check Post (ICP) at Moreh is under construction in full swing and it is just a matter of time when this will be functional. Once the ICP starts functioning, it will help in the smooth functioning of exports to Myanmar. And also with Act East Policy taking shapes, one can expand the export business towards the ASEAN countries. Once the Asian Highway is functional, it will help in boosting the exports business to ASEAN countries.

Earlier exports imports business with Myanmar was done in the form of barter system. However, the Govt has now made it into normal trade system, which means for every export, one has to undergo the proper channel with proper documents. I personally feel that not many of our people have an in-depth knowledge of the export procedures.  It will be lucky for those people who can start the business at such times as they will be able to get hold of many people who would want to export and import from Myanmar.

This post is a personal blog post and not in-depth articles on starting exports-imports business. This blog post will only give you the basic guidance on the things you need to know to start your exports business.
 

1. Import-Export License

First of all, you need an import-export license called Import Export Code (IEC) in order to export or import anything from India. Without this license, no individual or entity can export or import.  IEC forms the primary document for Government of India as an Exporter/Importer. On the basis of  IEC, companies can their exports/imports from DGFT, Customs, Export Promotion Council etc.  The license is issued by Director General of Foreign Trade (DGFT) which is under Ministry of Commerce and Industries, Govt. of India. They are the body responsible for framing laws, rules & regulations regarding foreign trade and foreign investments in India.

In Northeast (NE), DGFT has an office in Guwahati and Shillong.  To obtain the IEC license, one has to apply online at DGFT portal http://dgft.gov.in. For information on how to apply online visit the link http://dgft.gov.in/exim/2000/ieconlinehelp.pdf


2. Obtaining Registration Cum Membership Certificate (RCMC)

After obtaining the IEC, you need to obtain an RCMC, granted by the concerned Export Promotion Councils to get authorization to import and export, or for any other benefit. There are around 26 export promotion councils from where you can get an RCMC issued. Based on the products you are dealing with, you can apply for RCMC. For example, if you are dealing with spices, there is Spice board. You can also get RCMC from Federation of Indian Exports Organization (FIEO)  which is an organization set up by the Govt of India and under the administrative control of Ministry of Commerce. In case an export product is not covered by any Export Promotion Council/Commodity Board, etc. RCMC in respect thereof is to be obtained from FIEO. There are other benefits of being a member of FIEO.

FIEO has an office in Guwahati and you can reach Mr. Kaushik Dutta who is the Chapter Head, Northeast Region. You can visit FIEO website at https://www.fieo.org/. You may also want to visit http://www.indiantradeportal.in/, a website which is maintained by FIEO.


3. Exploring Buyers & Markets

One important and difficult part of exports business is finding the right market and buyer. Contacting new buyer, getting new buyer is a difficult task. Websites like http://www.indiantradeportal.in/ and https://eximmitra.in/ of EXIM bank will come handy. Exports promotion councils, Commodity boards etc will also help you to connect with foreign buyers. FIEO also can help you with the list of potential buyers.

 

4. Terms of Payment in Exports

In exports business, there are four main broad means of payments, namely Advance payment, Letter of Credit (LC), Documents against Payment/ Cash Against Documents(CAD), Documents against Acceptance (DA). You will need to establish clear terms of payment with your buyer before you make shipments. In exports business, every document has to be routed through your banks. I will be talking about the terms of payment in exports in my later blog post. But if you want to know about it now, you can directly reach me through email.

 

5.  Getting Bank Finance

When it comes to Exports, there are two ways of bank finance, Pre-Shipment/Packing Credit, and Post-Shipment finance.

Pre-Shipment/ Packing Credit - A finance given by the banks to help execute the orders and make the exports. When you get an order from a foreign buyer, and you do not have enough finance to execute the orders, you can approach your bank with the orders and avail the packing credit finance. After you execute the orders and made the shipment and the payments are received from the foreign buyers, the bank will adjust the said packing credit and close the loan under the said export order.

Post-Shipment Finance - After making the exports, instead of waiting for payment from the foreign buyer, you can either let the bank purchase, discount or negotiate the bills. In exports business, often the business is on credit, say 30 days credit, 60 days credit etc.  If you don't want to wait for that long period to get your payments from your buyer, you can approach your bank and get post-shipment finance in the form of bill purchasing, nill discounting or bill negotiation (these are banking terms and its best you can in touch with your bankers for further details).

In NE, United Bank of India and State Bank of India seems to be doing very well in financing exports business. That being said, you can always get in touch with your bankers. You may also want contact EXIM bank, they have an office in Guwahati. Among private banks, HDFC bank is doing very well in exports financing.

 

6. Insurance

Another important aspect is to avail insurance for your goods as well as for your payments.  For goods insurance also known as marine insurance, you can approach general insurance companies like Oriental Insurance, All India Insurance etc.

Another important insurance is credit insurance, an insurance against the risk of payment. As mentioned earlier, many exports business takes place in the form of credits, where the buyer promised to pay you in later dates, say after 30, 60 or 90 days. As per RBI guidelines, an exporter has to receive their exports receivables within 180 days (exceptions as per RBI guidelines) and hence you will not be able to give credit for more than 180 days. However during this credit periods, there's a risk of non-payment from the buyer due to commercial as well as political risk, say the buyer has willingly defaulted you, or the buyer has gone insolvent. And therefore it is very important to get credit insurance to cover the risk of non-payment from the buyer. ECGC formerly known as Export Credit Guarantee Corporation of India, a Govt company under Ministry of Commerce & Industry provides various credit risk insurance policies (Visit www.ecgc.in for more details) You can approach me to know more about this. I will also be writing more about it in my later blog post.

Well, that's it for now! Like I mentioned, in the beginning, this post is just to highlight you the basic things that one must know in order to start an export business. The post is written out of my own personal experience and knowledge and is in no way a comprehensive write-ups and does not cover the whole aspects of doing exports business.

If you have any queries or want to know more, you can reach me at r.r.shimray@gmail.com

Added by: shimray
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