How to Start Export Business from India?

1. Introduction

Table of Contents

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Exporting is the process of selling goods or services to another country. It can be a great way to grow your business and reach new markets. Exporting can be a lot of work, but it can also be very rewarding. If you’re looking to grow your business and expand your reach, exporting is a great option to consider. If you’re thinking about exporting, there are a few things you need to do first, such as:

Step 1 Starting Exports for Beginners: A Step-by-Step Guide

1. Obtaining a Permanent Account Number (PAN)

  1. PAN is a unique identification number issued by the Income Tax Department of India.
  2. IEC is a 10-digit code issued by the Directorate General of Foreign Trade (DGFT).
  3. Both PAN and IEC are required for importing and exporting goods from India.
  4. Therefore, if you need to obtain an IEC, you will need to have a PAN.

In short, PAN is a prerequisite for obtaining an IEC. Without a PAN, you will not be able to apply for an IEC.

2. Establishing an Organization

To start an export business, you must first establish a sole proprietorship, partnership, Private Limited, One Person Company, LLP, or Farmer Producer Company with an attractive name and logo.

3. Opening a Current Account In Bank

A current account should be opened with a bank authorized to deal in foreign exchange.

4. Apply for Importer Exporter Code (IEC) Number

According to the Foreign Trade Policy (FTP), 2015-20, it is mandatory to obtain an IEC for export and import from India. The procedure for obtaining an IEC, which is PAN-based, is laid down in Para 2.05 of the FTP. An application for an IEC can be filed online at using ANF 2A. The application fee of Rs. 500/- can be paid online through net banking, credit/debit card, or UPI, along with the required documents as mentioned in the application form. (Click here for more)

5. Product Selection for export

Most items are eligible for unrestricted export, with only a limited number listed as prohibited or restricted. It is advised to carefully analyze the export trends of various products from India before making a thoughtful selection of the items to be exported. (Click here for more)

6. Apply for Registration cum Membership Certificate (RCMC)

To access authorization for import/export or any other advantages or concessions outlined in FTP 2015-20, as well as to benefit from services and guidance for exporters, obtaining the relevant Registration Cum Membership Certificate (RCMC) from the respective Export Promotion Councils/FIEO/Commodity Boards/Authorities is essential.

7. Markets for export

After conducting research on market size, competition, quality requirements, payment terms, and other factors, exporters should select an overseas market. They can also evaluate markets based on the export benefits available for certain countries under the Foreign Trade Policy (FTP). Export promotion agencies, Indian Missions abroad, colleagues, friends, and relatives can all be valuable sources of information for exporters.

8. Finding Buyers for Export

Participating in trade fairs, buyer-seller meets, exhibitions, B2B portals, and web browsing are all effective ways to find buyers. “Export Promotion Councils”, Indian Missions abroad, and overseas chambers of commerce can also be helpful. Creating a multilingual website with a product catalog, price, payment terms, and other relevant information would also be helpful.

9. Sampling in Export

Providing customized samples according to the requirements of foreign buyers can help in getting export orders. As per the Foreign Trade Policy (FTP) 2015-2020, there is no limit on the export of bona fide trade and technical samples of freely exportable items.

10. Pricing/Costing in Export

Setting the right product pricing plays a vital role in capturing buyers’ attention and driving sales, especially in the face of global competition. The pricing strategy should encompass all costs, from sample production to the actual receipt of export revenues, based on various terms of sale such as Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight (C&F), and more.

The objective of devising an export costing strategy is to achieve a balance: maximizing sales volume by offering a competitive price while ensuring a healthy profit margin. It’s recommended to create a comprehensive export costing sheet for each product intended for export.

11. Negotiation with Buyers

After determining the buyer’s interest in the product, their future prospects, and the continuity of the business relationship, the request for a reasonable price allowance or discount may be considered.

12. Covering Risks through ECGC

International trade involves payment risks due to buyer or country insolvency. These risks can be covered by an appropriate policy from the Export Credit Guarantee Corporation of India (ECGC). If a buyer places an order without making an advance payment or opening a letter of credit, it is advisable to obtain a credit limit from ECGC on the foreign buyer to protect against the risk of non-payment.

Step 2 Processing an Export Order

Confirmation of Export Order

Confirmation of an export order is an essential step in the processing of an export order. It is a document that confirms the terms and conditions of the agreement between the exporter and the importer. The confirmation of an export order ensures that both parties are on the same page and that there are no discrepancies between the terms of the export order and the ones offered by the exporter in their proforma invoice/contract. Here are some steps involved in the confirmation of an export order:

Examination of the Export Order

The exporter needs to review the export order, in relation, to the terms and conditions outlined in the contract. This is a step because all subsequent actions and responses hinge upon the terms and conditions of the export order. By examining the export order the exporter can ensure they understand what the importer expects. Can meet those expectations.

Confirm the Product Specification

Before proceeding with the export, the exporter should double-check if the product specifications match what they typically deal with. It’s also important to inquire whether the importer needs any extra documentation, specific packaging, labeling, or marking requirements, as well as any other compliance obligations of the destination country. Ensuring these details are in order is crucial. Additionally, it’s essential for the exporter to make sure that the terms outlined in the export order align accurately with those stated in their proforma invoice or contract. This helps prevent any discrepancies down the line.

Check the Payment Terms

The exporter should read through the payment terms and ensure they are as per their suitability. They should get an idea of how big the order is and whether they can deliver it within the required time.

Find out about Insurance Responsibility

The exporter should find out who is responsible for the insurance of the consignment

Confirm Acceptance to the Importer

After a full rundown of the order, the exporter should confirm their acceptance to the importer. In case any discrepancies are found, the exporter should clarify them with the importer before confirming the order. In conclusion, confirmation of an export order is a crucial step in the processing of an export order. It ensures that both parties are on the same page and that there are no discrepancies between the terms of the export order and the ones offered by the exporter in their proforma invoice/contract. By following the above steps, an exporter can confirm the export order and ensure successful delivery.

Step 3 Procurement of Goods for Export: A Step-by-Step Guide

Procurement of goods for export is a crucial aspect of the export business. It involves the acquisition of goods that are meant for export, either through manufacturing or sourcing from suppliers. Here are some steps and resources involved in the procurement of goods for export:

Steps for Procurement of Goods for Export

  1. Confirm Export Contract: Once the export contract is confirmed, the exporter has to arrange for the manufacture of goods meant for export if they are not readily available.
  2. Identify the Market: The exporter should first identify the market and find a buyer for their product. They should also consider the health, safety, and technical requirements of their product.
  3. Determine the Export Classification: The exporter should determine the export classification of their product and whether a license is required to export it.
  4. Determine the Payment Method: The exporter should determine the payment method that best suits their needs and minimizes payment risk while accommodating the needs of the buyer.
  5. Determine the Shipping Method: The exporter should determine the shipping method that best suits their needs and ensures that the goods reach the buyer in good condition.
  6. Obtain the Required Documents: The exporter should obtain the required documents for exporting their goods, such as a pro forma invoice, export license, and other export-related documents.

Step 4 Quality Control for Export: A Guide to Ensure Compliance

Quality control is a crucial aspect of the export business. It ensures that the products being imported or exported meet the required standards and comply with foreign certification bodies in the target markets. Here are some steps and resources involved in quality control for export:

Steps for Quality Control for Export

  1. Integrate Quality Infrastructure: Integrate quality infrastructure into your operations as a method to align with the quality standards specific to your industry, which are acknowledged in the export market.
  2. Conform to International Quality-Control Standards: Conform to international quality-control standards to give your products an edge over competing businesses. Typically, technical requirements are mandatory and should be met before your products are exported.
  3. Gather Information on Each Country’s Standards: Gather information regarding each country’s standards and technical requirements so that you adapt your production processes accordingly.
  4. Control Quality During Production: Control of quality is best exercised during the course of production of an article, actually starting from with the raw materials, Progressing through various stages, and culminating in the end product, with careful consideration given to packaging, storage, and transportation.
  5. Pre-Shipment Inspection: Pre-shipment inspection is the process of inspection of a batch of goods, just prior to shipment to determine whether it satisfies the conditions for shipment, This could involve aspects like quality, weight, packaging, and any potential contraband elements.

Step 5 Finance for Export: A Guide to Obtain Funds for Export Business

Export financing is an essential aspect of the export business. It involves obtaining funds to facilitate the export of goods or services by providing the liquidity needed to accept new business, grow international sales, and compete more effectively. Here are some steps and resources involved in financing for export:

Steps for Financing for Export

  1. Determine the Financing Needs: Determine the financing needs for your export business, including the amount of capital required, the duration of the loan, and the interest rate.
  2. Approach the Local Commercial Bank: A logical first step if you’re seeking to finance short-term export sales is to approach the local commercial bank your company already uses. If your company has received credit from the bank before, the bank will already be acquainted with your financial position, credit requirements, repayment history, and capacity to fulfill obligations.
  3. Explore Export Financing Programs: Certainly, the Indian government has implemented several export financing programs and schemes to support exporters in their international trade endeavors. These programs are designed to provide financial assistance, promote competitiveness, and facilitate the growth of Indian exports. Here are some notable export financing programs offered by the Indian government:
  4. Export Credit Guarantee Corporation (ECGC) Schemes: ECGC offers various insurance and guarantee schemes to protect exporters against payment defaults by buyers and political risks in the export market. These schemes provide exporters with the confidence to explore new markets and expand their export operations.
  5. Export Promotion Capital Goods (EPCG) Scheme: The EPCG scheme aims to promote the import of capital goods for production purposes, by allowing duty-free import of such goods, subject to fulfillment of export obligations.
  6. Interest Equalization Scheme (IES): The IES provides interest rate subsidy on pre and post-shipment rupee export credit, encouraging exporters to access credit at affordable rates and compete effectively in the global market.
  7. Merchandise Exports from India Scheme (MEIS): MEIS provides incentives in the form of duty credits to exporters on specific products, based on their export performance. This scheme aims to boost exports and make Indian products competitive in international markets.
  8. Services Exports from India Scheme (SEIS): SEIS provides rewards to service exporters based on their net foreign exchange earnings. This scheme covers various service sectors and encourages service providers to explore global opportunities.
  9. Foreign Trade Policy (FTP) Benefits: The Indian government regularly announces Foreign Trade Policies that offer various benefits, exemptions, and incentives to exporters. These policies focus on enhancing export competitiveness and market diversification.
  10. Export Development Fund (EDF): EDF provides financial assistance to exporters and export promotion organizations for activities such as market research, product development, participation in trade fairs, and promotional campaigns.
  11. Export Finance and Insurance Schemes: Various financial institutions, including banks, offer export finance solutions such as pre-shipment and post-shipment credit, export bills discounting, and export packing credit insurance.
  12. Technology Upgradation Fund Scheme (TUFS): TUFS supports textile and garment exporters by providing financial assistance for the upgradation of technology, modernization, and capacity expansion.
  13. Market Access Initiative (MAI): MAI provides financial support for export promotion activities such as market research, brand building, and participation in international trade exhibitions and fairs.

These export financing programs and schemes offered by the Indian government are designed to empower exporters, enhance their competitiveness, and facilitate their growth in global markets. Each program targets specific aspects of the export process, from financing to market access, ultimately contributing to the overall development of India’s export sector.

Step 6 Labeling, Packing, Packing and Marking for Export: Ensuring Compliance and Protection

Labeling, packing, and marking are crucial aspects of the export process. They ensure that the goods are properly identified, protected, and handled during transportation. Here is some information on labeling, packing, and marking for export:

  1. Proper Packing: Once the goods are ready for shipment, they should be properly packed to ensure their safety and integrity during transit. The packing should be done in accordance with the specific instructions provided by the importer or following the packing rules prescribed by the Bureau of Indian Standards for certain items. If needed, assistance can be taken from organizations like the Indian Institute of Packing (IIP) for guidance on packing.
  2. Marking: Marking refers to the process of labeling the packages with necessary information. The markings should include details such as the consignee, port of shipment, port of destination, measurements, country of origin, gross and net weight, and any other specific instructions provided by the importer. These markings help in identifying and handling the goods correctly.
  3. Labeling: Labeling is an important aspect of export business as it provides essential information about the product. The labels should include details such as product name, quantity, weight, ingredients (if applicable), manufacturing date, expiry date (if applicable), and any other relevant information required by the importing country’s regulations. Proper labeling ensures compliance with labeling requirements and facilitates smooth customs clearance.
  4. Compliance with Regulations: Different countries have specific regulations regarding labeling, packing, and marking for imported goods. It is important to comply with these regulations to avoid any issues during customs clearance. For example, the United States has agencies like the Federal Trade Commission (FTC), Environmental Protection Agency (EPA), and Consumer Product Safety Commission (CPSC) that have specific labeling and marking rules. It is crucial to check with the appropriate agency for specific information about your product and the labeling and marking requirements.

By following proper labeling, packing, and marking practices, exporters can ensure that their goods are well-protected, comply with regulations, and reach their destination in good condition.

Step 7 Insurance for Export (Export Credit Insurance: Protecting Exporters from Non-Payment Risks)

Export credit insurance is a form of insurance that safeguards exporters against the possibility of not receiving payment from international buyers. It provides conditional assurance to exporters that payment will be made if the foreign buyer is unable to pay. Here are some key points about export credit insurance:

  1. Risk Mitigation: Export credit insurance helps mitigate the risk of non-payment by foreign buyers, allowing exporters to offer open account terms safely in the global market. It protects exporters from commercial risks such as buyer insolvency.
  2. Competitive Advantage: By offering open terms instead of requiring letters of credit or prepayment, exporters can remain competitive and potentially increase sales by an average of 40%. Export credit insurance helps companies extend credit to their buyers and level the playing field in the global market.
  3. Protection from Political Risks: Export credit insurance also provides protection against political risks, including import/export changes and foreign government intervention. This coverage helps safeguard exporters from unforeseen events that may impact payment from foreign buyers.
  4. Improved Customer Relationships: Export credit insurance enables exporters to get a better grasp of the creditworthiness of their buyers. This knowledge helps build trust and long-term relationships with customers, enabling better negotiation of deal terms and adjustment of credit terms based on the current situation.
  5. Flexibility and Customization: Export credit insurance offers flexibility for exporters to select specific foreign customers to insure rather than insuring all eligible foreign buyers. This allows exporters to tailor their insurance coverage to their specific needs.
  6. Financing Opportunities: Export credit insurance can also be used as collateral for arranging financing through lenders. Insured foreign receivables can serve as additional collateral, providing exporters with additional financing options.

By obtaining export credit insurance, exporters can protect their sales, minimize the risk of non-payment, and gain a competitive advantage in the global market.

Step 8 Delivery for Export

Delivery for export involves the process of shipping goods to international customers efficiently, securely, and legally. Here are some key considerations and steps involved in the delivery process for export:

  1. Prepare the Product for Shipment: Ensure that the product is properly prepared for shipment, including packaging, labeling, and marking requirements. Confirm if there are any specific packing, labeling, and marking requirements or compliance requirements of the destination country.
  2. Choose Shipping Options: Research and compare costs and available services offered by different international shipping companies. Consider factors such as transit time, reliability, and cost-effectiveness when selecting the shipping option that best suits your needs.
  3. Complete Required Documentation: Completing the necessary export documentation is crucial for a successful export transaction. This may include commercial invoices, packing lists, export licenses (if required), and any other relevant documents specific to the destination country.
  4. Consider Export Controls: If you are shipping controlled information, technology, or items outside of India, you may need to comply with export control regulations and obtain the necessary licenses or authorizations. Consult the Export Control Office to determine the export classification, license requirements, and other considerations related to export controls.
  5. Obtain Delivery Order (D.O.): A delivery order is a document issued by the carrier of goods to pick up the empty container for stuffing export. Ensure that you have the necessary delivery order from the carrier to facilitate the shipment.
  6. Confirm Insurance Coverage: Determine who is responsible for ensuring the consignment and ensure that the insurance coverage is in place. This helps protect against any potential loss or damage during transit.
  7. Review Payment Terms: Review the payment terms and ensure they are as per your suitability. Clarify any payment-related details with the importer to avoid any payment disputes.
  8. Confirm Acceptance of the Order: After reviewing all the details of the export order, confirm your acceptance to the importer. This confirms your commitment to fulfilling the order and establishes clear communication between both parties.

By following these steps and considering the necessary factors, exporters can ensure a smooth and successful delivery of their goods for export.

Step 9 Customs Procedures for Export

Customs procedures for export are an essential aspect of the export business. Here are some key considerations and steps involved in the customs procedures for export:

  1. Export Declaration: The exporter/declaring presents the goods, export declaration, and export license (if required) at the customs office responsible for the place where he is established or where the goods are packed or loaded for export. You can submit the export declaration to any customs office that is authorized for the specific operation.
  2. Presentation of Goods for Export: Items declared for export will be monitored by customs until they leave the EU’s customs territory. The customs office where the goods leave will notify the customs office where they entered about the details of the export declaration.
  3. Export Customs Clearance: The export customs clearance procedure is the process of goods leaving one country to be shipped to another. The process involves submitting the necessary documents, such as the commercial invoice, packing list, and bill of lading, to the customs authorities for clearance.
  4. Compliance with Export Controls: Export controls may apply to certain goods, technologies, or information that are subject to export regulations. It is important to comply with these regulations to avoid any legal issues during customs clearance.
  5. Product Preparation and Shipping Considerations: Proper product preparation and shipping considerations are critical to a successful export transaction. This includes choosing the appropriate shipping option, completing the necessary documentation, and complying with any regulations specific to the destination country.

By following these steps and considering the necessary factors, exporters can ensure a smooth and successful customs clearance process for their goods.

Step 10 Custom House Agents for Export

Custom House Agents (CHA) play a crucial role in the import-export business. They act as intermediaries between the exporter and the customs officials to undergo necessary export and import clearance procedures and formalities. Here are some key points about Custom House Agents for export:

  1. Definition: A Custom House Agent is a licensed expert who acts as a representative for handling any tasks associated with the arrival or departure of vehicles or the procedure of bringing in or sending out goods at a customs station. They maintain precise, detailed, and current records.
  2. Role: A Custom House Agent’s responsibility is to manage all business dealings connected to imports and exports at the customs office. They work as legal advisors, suggest the correct classifications of goods, and resolve any queries raised by customs officers. They are responsible for the A to Z customs clearance process.
  3. Licensing: To work as a Custom House Agent, one must obtain a valid license issued by the commissioner of Customs under section 146 of the Customs Act, 1962, as per Customs House Agents Licensing Regulations, 1984. The license may be temporary or permanent.
  4. Benefits: Hiring a Custom House Agent can be beneficial for exporters as they can help establish and maintain a good relationship with customs officials, ensure compliance with regulations, and facilitate the customs clearance process in a speedy and efficient manner.
  5. Training: To become a Custom House Agent, one must have proper on-the-job training and obtain the necessary certification. The training includes documentation work, responsibilities of the clearing agent, CusDec framing, and preparing clearing documents.

By hiring a Custom House Agent, exporters can ensure compliance with regulations, facilitate the customs clearance process, and establish a good relationship with customs officials.

Step 11 Documentation for Export

Export documentation plays a crucial role in the process of exporting goods. It involves preparing and submitting the necessary documents to ensure that the goods are shipped legally and efficiently. Here are some key points about documentation for export:

  1. Types of Export Documents: The number and types of documents required for export vary according to the destination and type of shipment. Some common export documents include
    • Commercial invoice cum Packing lists,
    • Bill of Lading / Airway Bill
    • Shipping Bill / Bill of Export / Bill of Entry (for Imports purposes)
    • Certificate of Origin / Inspection Certificate
    • Export license.
  2. Importance of Accurate Documentation: Accurate documentation is crucial for a successful export transaction. It helps ensure compliance with regulations, facilitates customs clearance, and reduces the risk of delays or penalties.
  3. Responsibility for Documentation: While freight forwarders and customs brokers may prepare most of the documentation, the exporter is ultimately responsible for the accuracy of the documents. Knowing which documents are needed for a shipment and why they’re needed is really important.
  4. Export License: An export license is like a permission slip from the government. It allows you to send certain goods in certain amounts to a specific place for a specific purpose. You might need this paper for many or just a few exports, depending on the country and situation.
  5. Export Declaration: The exporter/declaring presents the goods, export declaration, and export license (if required) at the customs office responsible for the place where he is established or where the goods are packed or loaded for export. You can give the export declaration to any customs office that’s right for the job.

By understanding the types of export documents required, ensuring the accuracy of the documentation, and complying with regulations, exporters can ensure a smooth and successful export transaction.

Step 12 Submission of documents to the Bank for Export

Once your goods are sent, you need to show the documents to the Bank within 21 days. They will then send these documents to the foreign Bank to set up the payment. The documents should be prepared for Collection, Purchase, or Negotiation under a Letter of Credit (L/C), along with the following papers. Here are a few important things to think about::

  1. Gather Required Export Documents: Collect all the necessary export documents, such as
    • Commercial Invoice cum Packing List
    • Bill of Exchange
    • Letter of Credit (if Shipment is under LC)
    • Bill of Lading / Airway Bill
    • Declaration Under Foreign Exchange
    • Certificate of Origin / Inspection Certificate (if it is Necessary)
    • Any additional documentation as required in the L/C or specific to the destination country. The exact documents required may vary depending on the destination and type of shipment.
  2. Scrutinize the Documents: Before submitting the documents to the bank, carefully review them to ensure that all formalities have been complied with and that they are accurate and complete. This step helps avoid any potential issues or delays in the export process.
  3. Contact the Bank: Reach out to your bank and inquire about their specific requirements for document submission. They will provide guidance on the process and any additional forms or information that may be needed.
  4. Submit the Documents: Once you have gathered and reviewed the necessary export documents, submit them to your bank for processing. The bank will verify the documents and handle the necessary procedures for informing the buyer and facilitating the export transaction.
  5. Follow Up: Stay in communication with your bank to ensure that the documents are processed in a timely manner and that any further actions or requirements are addressed. This helps maintain transparency and facilitates a smooth flow of the export process.

It is important to note that the specific procedures and requirements may vary depending on the country and bank involved. Therefore, it is advisable to consult with your bank and seek their guidance for a seamless document submission process.

Step 13 Realization of Export Proceeds

Realization of export proceeds is an important aspect of the export business. It involves the process of receiving payment for exported goods. Here are some key points about the procedure for the realization of export proceeds:

  1. Export Documentation: Exporters must ensure that all necessary export documentation is in order before shipment, including commercial invoice, packing list, bill of lading, and any other relevant documents specific to the destination country. This documentation is required for customs clearance and payment processing.
  2. Payment Terms: Payment terms should be agreed upon between the exporter and importer before shipment. The payment terms may include advance payment, a letter of credit, or an open account.
  3. Submission of Documents: Once the shipment is made, the exporter must submit the necessary documents to the bank for processing. The bank will verify the documents and handle the necessary procedures for informing the buyer and facilitating the export transaction.
  4. Realization of Export Proceeds: The exporter will receive payment for the exported goods once the payment is processed and the export proceeds are realized. The time taken for the realization of export proceeds may vary depending on the payment terms and the country involved.
  5. Delayed Realization: In case of delayed realization of export proceeds, the exporter may approach the bank or relevant authorities for assistance. The bank may provide guidance on the necessary steps to be taken to resolve the issue.

By following the necessary procedures and ensuring compliance with regulations, exporters can ensure a smooth and successful realization of export proceeds.

According to the Foreign Trade Policy (FTP) 2015-2020, all export agreements and invoices must use a currency that can be easily converted or Indian rupees. However, the money you get from exports should be in a currency that can be easily converted, except if you’re exporting to Iran. You should receive this money within 9 months.