export preliminaries

7/31/2019 Export Preliminaries

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What is Export?

The word Export is very famous in the business world & even among the youngsters as a career

option. Export provides good amount of opportunities

The Foreign Trade (Development & Regulation) Act 1992 defines export as taking out of Indiaany goods by land, sea or air. Export is completed once the goods are cleared, loaded and have

left the territorial waters of India. Export means to send or to transport goods abroad for Trade orSale. In order to qualify a transaction of exports, there are 2 main criterias.

A. Goods / services must go out of India.

B. Foreign exchange must come into India.

Export is very essential for the country and therefore government always encourages export

activities.

STEP 1 - WHY EXPORTS?

10 Good Reasons

1. Unique product/service expect limited competition abroad

2. Product more suited to one/more foreign countries as against local market because ofprice/quality/suitability/demand reasons.

3. Too much competition in domestic market

4. Follow competition into new markets5. Local market saturation - looking for new markets to increase production turnover, sales &

profits

6. Stagnation in Technological/product development partnering with foreign players helps

to stimulate this

7. Sell over-production8. Use spare capacity

9. Achieve EOS & so reduce costs through increase in production10. Portfolio diversification

5 Bad Reasons .

1. Personal ambition

2. Corporate prestige

3. Travel4. National interest

5. Subsidies


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STEP 2 DO YOU HAVE THE RESOURCES?

1. Management/Organisation

Motives

Attitude

Qualification

Experience

Know-how

Structure

Time

Talent

2. Production

Capacity Flexibility Time/Costs

3. Finance

Capital

Loan Capacity

STEP 3 SET UP APPROPRIATE BUSINESS ORGANISATION

KINDS OF BUSINESS ORGANISATIONS :

- Sole Proprietary- Partnership

- Company ( Pvt or Public)

STEP 4 CHOOSING APPROPRIATE MODE OF OPERATION

You can choose any of the following modes of operations :

1) Manufacturer exporter, i.e. manufacturing the goods

yourself for exports


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2) Merchant Exporter, i.e. he is a trader who buys the

goods from the market or from a manufacturer and

then selling them to foreign buyers

3) Sales Agent / Commission Agent i.e. acting on

behalf of the seller and charging commission

4) Buying Agent i.e. acting on behalf of the buyer and

charging commission

5) Service Provider i.e. providing service from India to

another country.

STEP 5 NAMING THE BUSINESS

- SELECTION OF NAMETo start any business, the first thing we have to do is to select the

name of the new firm

The name and style should be soft, attractive, short and meaningful.The name may give the idea of the product of the firm.

Examples:

a) Quality Garments: This type of name is mostly selected by themanufacturer exporter. From his name, one can come to know the

products in which the exporter is dealing.

b) Quality Exports: This type of name is mostly selected by a

merchant exporter. The name only reflects export activities without

specifying any products name.

- LOCATION / ADDRESS

The next thing is to decide the address of the firm, i.e. the place fromwhere the business will be conducted. As it is said that People are

known by dress & address, so mostly the firm or the office address

must be in a good locality.

The office should be located preferably in a commercial complex, inclean and workable surroundings.

- DESIGNING TRADE NAME AND LOGO

- GETTING OFFICE STATIONERY PRINTED

After selecting the name and address, you have to get your letterhead,visiting cards, envelopes and other kinds of stationery printed. The

letterhead should be of A4 size and should be aligned to the

envelopes and business cards


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The letterhead should include the name and preferable the logo and

the full address of the companys registered office, head office,

corporate office, including the name of the country, all telephone

numbers, fax, email & website details.

STEP 6 OPENING A BANK A/C

Next a bank account is to be opened. There are three types of banks in India:

1. Local Co-operative Bank : These banks do not deal directly in

Foreign Exchange. These banks are suitable for local business andtherefore not recommended for exporters.

2. Foreign Banks : These banks are extremely suitable forinternational business. These banks have good global network.

3. Indian Nationalized Banks : These banks deal in foreign exchangedirectly. It is better to open an account with a bank that handles

foreign exchange directly.

STEP 7 APPLYING FOR PAN

Next, you are required to open a Permanent Account Number (PAN) with

the Income Tax Authorities who have jurisdiction in your area.

In short, after all the above things are over you are ready with a firm or a

company for doing business.

STEP 8 EXPORTER IMPORTER CODE NUMBER (IEC)

Every Importer & Exporter is required to obtain the IEC. The Custom

authorities will not allow anybody to import & export goods into or from

India unless he holds a valid IEC number. Every person/firm/companyengaged in export business in India is required to obtain the IEC number

from the regional office of the Directorate General of Foreign Trade (DGFT)

as required under the Foreign Trade Policy.

To apply for the IEC, an application in duplicate in the prescribed form (3)

has to be filled in. the following documents are also required along with the

application form:


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i. Photocopy of PAN card.ii. Application Fee Rs. 1000/-

iii. Three copies of Passport size photographs.

iv. A bank certificate in the prescribed format in duplicate onthe banks letterhead

v. Declaration on the letterhead giving full particulars ofwhether there is any NRI interest in the applicants firm andwhether it is with full repatriation of benefits.

vi. A declaration should be given on the applicants letterhead

about the non involvement of any company or partner thathas been caution listed by the RBI/DGFT.

The IEC number will be allotted by the Regional Licencing Authority within

10 days from the date of the application. This IEC number will have 10

digits. There is no expiry date for this IEC number. It is valid until revoked orsurrendered. Once this number is obtained you can export or import any

products.

STEP 9 - SELECTING THE PRODUCT

According to the marketing theory, a product is something that fulfils theneeds and desires of the buyer. That buyer, customer or consumer, is

prepared to pay money for that fulfillment if he (or she) expects that your

product will justify the expense. Having bought it, the customer will -hopefully - experience a certain satisfaction that will outweigh the sacrifice of

its price. That feeling is what it is all about. And that is why marketers are

constantly busy with achieving satisfaction. If realized, your customer willbe inclined to buy your product over and over again.

PRELIMINARY VERIFICATIONS

- Studying the trends of export of different items from India

- Check with the Indian Trade Classification (Harmonised System)Classification for Export & Import Items [ITC (HS)] Classification

Book whether the items selected by you are permitted for export or

not.

- Getting conversant with Government Policy and regulations inrespect of the product selected for export.

- Should also know import regulations in respect of such commodities

by the importing countries.

YOUR PRODUCT OR SERVICE SHOULD BE SPECIAL (USP)

When looking at your product to decide if it will be a good export product,

your second task will be to assess its competitiveness. In most foreignmarkets, your kind of product is already available; it is offered by your


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competitors, whom you have to fight in order to gain market share. This is

when looking through the eyes of the buyer truly pays off: can you make

your product look different, better than your competitors?

The product must ideally have a unique selling proposition (USP). Whatmakes your product special? What gives your product that special identity?

The answer is: almost anything, as long as the customer or consumerrecognizes it as such. Always comparing it with competitive products, thiscould be:

For consumer products:

a better flavour or taste, design, colour or

shape

a better performance (it works better)

a lower price a longer durability or easier maintenance

easier handling, more practical or faster a better or more attractive packaging a better availability (a Just-in-Time delivery,

sufficient stocks in the store)

a better service, etc. etc.

For industrial products:

a better performance longer durability, zero defects

easier handling, installing, maintenance minimal tolerance in specifications continuous innovations an extensive range of product options

flawless delivery, always on time free and fast repairs

24 hrs communication etc. etc.

In short: a better buy than the competitors product. Your chances in theexport market greatly increase when your product or your overall

proposition has a USP. You could make it special by adding a special

value. To find out how you could improve your product or make it more

special, you should check all possibilities along the lines of the product

benefits. Product benefits are, as you know by now, the productcharacteristics that respond best to the buying motives of the customer. They

are the reasons why the consumer buys your product in the first place.

PRODUCT ADAPTATION

The needs and wants of markets abroad differ from your home customers.

That means that you may have to change your product (or service) to adapt itto the foreign customers wishes. In marketing terms: you have to make your

product match with the market.

Possible reasons for product adaptation

To make your product just as good as the competitors. This is called

imitation, a loco, or me-too. It leaves only your price as an instrumentto beat the competition with (and the lawyers to fight over patent rights)


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To make your product better or more special than your competitors. This

way you create a unique selling proposition (USP). That makes comparing

your product with the competition more difficult for the buyer. He may think

that your product has so much more added value that he accepts to pay ahigher price for it. He will also stay loyal to it longer.

To conform to local rules and regulations. There are many of suchregulations: on consumer health and safety, on standardization of size and

weight. In Europe you know them by their acronyms: CE marking,

CEN/CENELEC, ETSI norms etc.

To make the product better and more easily transportable. Packing your

product efficiently may save money on the shipping bill, or keep your

product from being damaged

To fit into lowerimport rates

Last, but not least: because your customer explicitly wants you to change

the product, in order to suit his particular needs. This occurs for industrial and

consumer products alike, where buyers may have their own technicalspecifications. Increasingly, those suppliers may involve you in the designing

process, using your know-how to improve product and production. Such

opportunities for innovation are important, because they could mean adding

value that the buyer could not do or has not thought about.

STEP 10 REGISTRATION OF EXPORTERS

A buyer is willing to buy when, considering rational and emotional motives. He expects that thsatisfaction derived from the products use is greater than the sacrifice of paying its price.

Sacrifice

Satisfaction

BUYING

DECISIONS

Functional,

Rational Motives

Emotional

Motives


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I. REGISTRATION WITH RESERVE BANK OF INDIA NO MORE

REQUIRED

Prior to 1.1.1997 it was compulsory for every exporter to obtain anexporters code number from the RBI before engaging in export. This hassince been dispensed with and registration with the licensing authorities is

sufficient before commencing export or import.

II. REGISTRATION WITH REGIONAL AUTHORITIES OF DIRECTOR

GENERAL OF FOREIGN TRADE (OBTAINING IMPORTER-

EXPORTER CODE NUMBER)

The Customs Authorities will permit you to import or export goods into or

from India only if you are holding a valid Importer-Exporter Code Number(IEC Number).

However, if you are exporting goods to Nepal or to Myanmar through Indo-Myanmar Border areas or to China through Gunji port in Uttaranchal and

Namgaya, Shipkila in Himachal Pradesh and Nathula port in Himalayas, you

are not required to obtain IEC Number provided the CIF value of a single

consignment does not exceed Indian Rs. 25000/- (Rs. 1,00,000 in case ofNathula port)

III. REGISTRATION WITH EXPORT PROMOTION COUNCILS/

COMMODITY BOARDS/AUTHORITIES

In order to enable you to obtain benefits/concession under the Foreign Trade

Policy, you are required to register yourself with the concerned ExportPromotion Council or Commodity Board or Authority by obtaining the

registration-cum-membership certificate (RCMC).

The basic objective of Export Promotion Councils is to promote and developthe exports of the country. Each council is responsible for the promotion of a

particular group of products, projects and services.

An exporter desiring to obtain a Registration-cum-Membership Certificate

(RCMC) shall declare his main line of business in the application which shallbe made to the Export Promotion Council (EPC) relating to that line of

business. However, a status holder has the option to obtain RCMC from

Federation of Indian Exporters Organization (FIEO). The serviceexporters (except software service exporters) are required to obtain RCMC

from FIEO. In respect of exporters having their head office/registered office

in the State of Orissa, RCMC is issued from FIEO office in Bhubaneshwarirrespective of the product being exported by them.

IV. REGISTRATION WITH VALUE ADDED TAX AUTHORITIES


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Goods which are to be shipped out of the country for export are eligible for

exemption from both Value Added Tax and Central Sales Tax. For this

purpose, you should get yourself registered with the Value added Tax

Authority of your State after following the procedure prescribed under theValue Added Tax Act applicable to your State.

V. REGISTRATION WITH CENTRAL EXCISE AUTHORITIES

Goods meant for exports are exempt from Central Excise duty. For this

purpose the manufacturer and merchant exporters have two options. Eitherthey can deposit central excise duty at the time of clearance from factory and

later on take refund or avail the procedure for export of goods without

payment of duty.

STEP 11 SELECTING THE OVERSEAS MARKETS

Overseas markets are identified as traditional, potential and new. Target

markets should be selected after careful consideration of various factors like

political relations of India with the importing country, scope of exportersselected product, demand stability, preferential treatment to products from

developing countries, market penetration by competitive countries and

products, distance of potential market, transport problems, language

problems, tariff and non-tariff barriers, distribution infrastructure, size ofdemand in the market, expected life span of market and product

requirements, sales and distribution channels.

For this purpose you should collect adequate market information before

selecting one or more target markets. The information can be collected from

various sources like Export Promotion Councils (EPCs)/ Commodity Boards,Federation of Indian Export Organization (FIEO), Indian Institute of Foreign

Trade (IIFT), Indian Trade Promotion Organisation (ITPO), Indian

Embassies and High Commissions Abroad, Foreign Embassies and HighCommissions in India, Import Promotion Institutions Abroad, Overseas

Chambers of Commerce and Industries, Various Directories, Journals,

Market Survey Reports etc.

STEP 12 SELECTING PROSPECTIVE OVERSEAS BUYERS

Various Marketing Tools to Identify the Buyers:

Friends

&

Relatives:

The first thing that you should do is find out if you have any friends or rela

settled abroad, i.e. in the country that you wish to export to. As a matter of fact of the export transactions that take place from India to USA are conducted

relatives.

A letter should then be written to the friend or relative. It should be a cordial l

starting off personally then later describing your product and business


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proposal. You should explain your present activities and then ask for their

assistance and support. If your letter does not get a reply, write again, but ifthere is still no reply then you must telephone him. Talk to the person, askfor his opinions and find out about his ideas and interests as regards your

business proposal.

There are 3 outcomes after having communicated with your friend or relative.

i) The person you contacted has no connection or knowledge regarding your

product and business, hence your source fails and you have to look for analternative.

ii) The person you contact is in the import business but not the same productyou propose to export. He can give you some contact who is dealing in your

proposed line. You should take a lead from this information and contact the

concern person.

iii) The last possibility is that your friend or relative is in the same field as

you wanted to enter in. This will be the best situation. Your chances to get

the entry in the market through your relative will be very easy provided youboth can agree to business proposition.

Doing business with friends and relatives has many advantages anddisadvantages. One advantage would be that you would have an individual

rapport with the person on the other side. He knows who you are, what kind

of a person you are, your background and your limitations. He will trust youand believe that will not cheat him/her. With an unknown person you have to

introduce yourself.

Another advantage would be that a friend or relative would understand you

better. To convince him will not be very difficult. With an unknown person,

you have to try very hard and make them believe about yourselves and your

products.

A disadvantage of involving a friend or relative in a business is that if

something goes wrong, then your relationship can end. There are manychances of misunderstanding during the business, which will lead, to a

strained relationship.

Correspondence

/ Internet:Before writing a letter to a buyer you have to have addresse

prospective buyers. These addresses can be obtained from the follosources.


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i. FIEO, Export Promotion Councils, Commodity

Boards.ii. Organizations in the importing countries.

iii. Overseas directories such as yellow pages.iv. Internet.v. Consulates will give you a list of buyers without

showing any preferences.

vi. Publications such as magazines and newspapers.

Once you have obtained the addresses you can write to all of them or if there

are many then you have to choose. You should rearrange the addresses to

suit you. While selecting the addresses you should select geographically, i.e.consider the area in which the buyer is situated and look at the PO Box

Number. You should not go for vague far off addresses. Look out for the

number of telephone numbers the buyer has listed, whether there is a faxnumber or an e-mail address. You should use your initiative and logically

decide to whom you should write to.

If you write about 100 letters you might only hear from 5. Normally about

5% of the buyers reply. This is to be considered as normal. However better

percentage of response can be obtained if the drafting of the letter is excellent

and the letter is carrying sufficient enclosures, catalogue and samples.

The source from where you had got the addresses directly reflects the number

of replies you receive. For example if you have a list from the councils and ifthe same is not updated, then your letter writing will results in waste of time

and money. Hence ensure that when you get the addresses they are updated

addresses. Sometimes the reason for some of your letters to be returned canbe due to the fact that certain countries have quick exit policies therefore

factories and businesses can quickly shutdown or move to new addresses.

Correspondence is the oldest and well-accepted method of communication.

The advantage of this kind of communication is that you can reach people

preliminarily, by introducing yourself. It announces your activities and your

aims. It is a very cost-effective way to reach people. It is the perfect form ofcommunication because of the fact that you can write in detail and whatever

you write will be remembered by the buyer; i.e. it has long retention value.

There is also scope for presentation, which will give the buyer an idea of howyou think and present yourself and how creative you are.

The only drawback of letter writing is that it takes a long time for the letter toreach to the buyer. Some people consider it as an out-dated mode of

communication. In todays age when the latest modes of communications are

available, it would be much quicker to send an e-mail to the buyer. Letter


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writing has also lost its punch and so does not create much of an impact due

to its overuse.

Drafting a good letter is the most important thing. You have to convince thebuyer that you can fulfill his/her needs with the utmost dedication. The buyer

will not be interested in your prolong background but will be interested whatyou can offer him. Wording has to be correct. Overseas buyers usually lookout for someone who is a reliable seller and will be dedicated to his business.

You have to create an impression on his mind. The following points should

be considered:

i. Limit the letter to one page only and keep it to the point.

ii. You should start off with a short introduction of the company.

iii. You should then write about the business aspects, you must touchupon his profit sense.

iv. Then write about the product and by selecting the correct

wordings try and convince him to buy your product.v. The letter should include all information necessary for the buyer,

i.e. the price, the packaging, the delivery etc.

vi. You must also enclose a catalogue and a sample.

You can change your talk depending on what he says. The most hard-core

business comes from personal visits. It is the best way.

The only disadvantage of a personal visit is the high cost that is involved for

airfare, accommodation and travel permits. It is especially not suitable for

someone who is conducting his business alone, as a sole proprietor with fund

constrain. There would not be anyone to take care of business at home whenhe is on overseas tour.

Personal

Visit:

If you can afford to go abroad then a personal visit is the best option. Th

because you can meet the buyer in person and convince him. You can get a ch

to find what he likes and dislikes. You can get an insight into the way he thin

behaves.

Meeting the buyer personally gives you tremendous scope because you can try an

convince him on the spot.

Agent:

An agent is a middle man who brings buyer and seller together. A key to succe

export business is the selection and appointment of right agent.

Successful, well established agents are very selective about additional product

They are cautious about dealings with firms that are inexperienced in exportingwill take a superior selling effort to convince them. Of course, if your produ

unique, you wont have problems.


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The agent who says he is interested in your line may not have the contracts or

track record to sell your product.

Another trade-off is large versus small. The large firm will have manysalesmen, but your product may get lost among hundreds of other lines. A

smaller firm can devote more time to your products but it may lack theresources needed for full market coverage.

An agent is your extended arm in overseas market. He represents you. He

collects the information, market intelligence and sell your product to theprospective buyer. Between principal and an agent, a document known as

Agency Agreement is required to be signed. Reserve Bank of India

permits 12.5% of FOB as commission without prior approval.

There are certain countries, where appointing an agent is the most important

aspect without which is difficult to do the business e.g.: Saudi Arabia.

If you decide to take part in an exhibition you must consider the fact that the

buyers who visit will be comparing your products and prices with that of yourcompetitors. Therefore your pricing has to be the best. You must convince

the buyer since there will be severe competition from others.

The disadvantages of participating in an exhibition is the high costs that are

charged for the space and a stall. It can only be to your advantage if you can

afford to pay for the space and have enough money to spend on display.You are there to attract buyers so your stall has to be outstanding enough to

attract attention. Due to the fact that it is such an extremely competitive

environment you have to make sure that your stall stands out from the rest. It

should have a great impact on the buyer, inviting him/her to the stall.

Exhibitions:

Exhibitions are a very good launch pad, if you are trying to introduce a

product. You can reach the buyers from many countries, under one

without having to go to all the countries personally. You may even cacross buyers whom you may not have thought of approaching earlier. It

gives you a good opportunity to know who your competitors are.

Advertising:

Advertisements are announcements for a particular product. Advertisem

are made to achieve three things:

To create general awareness for consumer product.

To introduce your product to a buyer.

To introduce your products to an agent.


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For advertisements that are targeted a consumers the common media such as

newspapers and magazines should be used. This should be written in the

local language spoken. For advertisements that are for buyers you should

advertise in business related newspapers such as the Business Times,technical directories and publications that a buyer will read. It should be

written in the terms of the trade and language used should be English. Whenadvertising to attract agents all the above points should be considered alongwith the advantages for the agent himself.

Meeting the delegations requires registration or payment of fees as the case

may be. Many a times these meetings are on Free of cost basis. The

delegations are here to find out about new contracts. This gives the exporteran excellent opportunity to get direct contracts. Visiting a delegation can be

very informative too, since you can find out about all the finer points that

your need to know about their country. An exporter can also join a

delegation organized by the FIEO.

FIEO/EPC/CB then approaches its members and informs them about the

buyers visit along with the list of the products required by the buyer.

Generally merchant exporters are not allowed to participate in BSM. Only

those exporters who have manufacturing units or factories are called toparticipate in BSM. These manufactures/exporters are then screened and

identified. FIEO/EPC/CB usually select a mixed variety of manufacturers,

i.e. a couple of small-scale companies, a couple of companies with largeturnovers (Rs. 20 crore and above) and a couple of companies from Mumbai.

Once you enroll for the BSM you may have to pay participation fees.

Similarly, Indian companies are also taken abroad for BSMs.

Delegations:

Delegations consist of people who are officially visiting out countr

represent interest of their company for the purpose of buying or selling. T

come to India regularly. If it is not possible for an exporter to go abroad

visiting a foreign delegation would be the next best thing. These visitsforeign delegations are usually advertised in newspapers such as The Econ

Times. You can also find out from the FIEO.

BSM

(Buyer Seller

Meet):

This a meeting organized by the FIEO / Export Promotion Councils (EPCommodity Board (CB) for the buyers and exporters. By extensive rese

FIEO/EPC/CB identifies potential importers in other countries who arepreviously dealing with India. The list is narrowed down to 10 prospebuyers who have the capability of buying a sizable amount. These 10 bu

are invited at FIEO/EPC/CBs cost to visit India.

E-Commerce

& Internet:

Electronic Commerce (E-Commerce) is one of the most powerful tools in

present world. The future trends in the world indicate that E-Commerce an

Business will become an integral part of world business. The scope is immand billions of dollars business will be possible with the help of Inte

Company of every size, any industry or service will see the future i

commerce.


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There are several sites available where you may get the list of the buyers andlist of sellers for particular products. Visiting these sites provide liveinquiries.

e.g. www.alibaba.com / www.ec21.com / www.ec51.com are some of theactive site
http://www.alibaba.com/http://www.alibaba.com/http://www.ec21.com/http://www.ec51.com/http://www.ec51.com/http://www.alibaba.com/http://www.ec21.com/http://www.ec51.com/


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STEP 13 INQUIRY AND OFFER

Hopefully, having put a lot of effort into marketing your product abroad, you will receivean enquiry from a potential foreign customer - the importer. An inquiry is a request from a

prospective importer about description of goods, their standard or grade, size, weight or

quantity, terms of payments, etc. The importer will almost certainly ask you to quote on aparticular order.

On getting an inquiry, the exporter must process it immediately by making an offer in the

form of quotation / proforma invoice and send it to the importer

STEP 14 CONFIRMATION AND PROCESSING OF EXPORT ORDER

If your offer is acceptable, the importer will come back to you with an order. More likely,however, is that the importer will come back to you asking for better terms and you will

then go through a negotiation process before you come to some sort of agreement.

Once the negotiations are completed and the terms and conditions are finalized, the

exporter sends three copies of proforma invoice to the importer for the confirmation oforder. The importer signs these copies and sends back two copies to the exporter.

After confirmation of the export order, in the meanwhile, you should proceed to enter intoa formal export contract with the overseas buyer.

STEP 15 ENTERING INTO EXPORT CONTRACT

In order to avoid disputes, it is necessary to enter into an export contract with the overseas

buyers. For this purpose, export contract should be carefully drafted incorporating

comprehensive but in precise terms, all relevant and important conditions of the trade deal.There should not be any ambiguity regarding the exact specifications of goods and terms of

sale including export price, mode of payment, storage and distribution methods, type of

packaging, port of shipment, delivery schedule etc. The different aspects of an exportcontract are enumerated as under :

i) Product, Standards and Specificationsii) Quantity

iii) Inspection

iv) Total value of the contract

v) Terms of Deliveryvi) Taxes, Duties and Charges

vii) Period of Delivery/Shipment

viii) Packing, Labelling and Markingix) Terms of Payment Amount / Mode & Currency

x) Discounts and Commissions

xi) Licenses and Permitsxii) Insurance

xiii) Documentary requirements

xiv) Arbitration

STEP 16 OPENING LETTER OF CREDIT


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The Documentary or Irrevocable letter of credit is the most appropriate and secured method

of payment adopted to settle international transactions. On finalization of the exportcontract, the importer opens a letter of credit in favour of the exporter, if agreed upon in the

contract.

STEP 17 ARRANGEMENT OF PRE-SHIPMENT FINANCE

On securing the letter of credit, the exporter procures a pre-shipment finance from his bankfor procuring raw materials and other components, processing and packing of goods and

transfer of goods to the port of shipment.

STEP 18 PROCURING/MANUFACTURING GOODS FOR EXPORT & THEIRINSPECTION BY GOVERNMENT AUTHORITIES

I. Procuring / Manufacturing Goods

On securing the pre-shipment finance from the bank, the exporter either arranges for the

production of the required goods or procures them from the domestic market as per thespecifications of the importer.

II. Compulsory Quality Control & Preshipment Inspection

An important aspect about the goods to be exported is compulsory quality control and

pre-shipment inspection. Under the Export(Quality Control and Inspection) Act, 1963,about 1000 commodities under the major groups of Food and Agriculture, Fishery,

Minerals, Organic and Inorganic Chemicals, Rubber Products, Refractoriness, CeramicProducts, Pesticides, Light Engineering, Steel Products, Jute Products, Coir and CoirProducts, Footwear and Footwear Products / Components are subject to compulsory

pre-shipment inspection.

At times, foreign buyers lay down their own standards / specifications which may or

may not be in consonance with the Indian standards. They may also insist uponinspection by their own nominated agencies. These issues should be sorted out before

confirmation of order. Specific provisions have also been made for compulsory

inspection of textile goods.

Products having ISI Certification mark or Agmark are not required to be inspected byany agency. These products do not fall within the purview of the export inspection

agencies network. The Customs Authorities allow export of such goods even if not

accompanied by any pre-shipment inspection certificate, provided they are otherwisesatisfied that the goods carry ISI Certification or the Agmark.

Depending upon the nature of products, goods meant for export are inspected for

quality in the following manner: Consignment to Consignment Inspection Each


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individual consignment is inspected by the Export Inspection Agency, Commodity

Board and certificate of inspection is issued. The application for inspection for goods

has to be submitted well in advance before the expected date of shipment of theconsignment. Inspection of the consignment is generally carried out either at the

premises of the exporter, provided adequate facilities exist therein for inspection, or at

the port of shipment. The export inspection agency has a right to exercise supervisionof inspected consignment(s) at any place or time.

The application should be made in duplicate in the new prescribed form 'Intimation for

Inspection' as per standardised pre-shipment export documents to the nearest office of

the respective Export Inspection Agency along with the following documents :

Particulars of the consignment intended to be exported. A crossed cheque/draft for the

amount of requisite inspection fees or an Indian Postal Order.

o Copy of the Commercial Invoice.

o

Copy of letter of credit.o Details of packing specifications.

o Copy of the export order/contract, indicating inter alia the buyer's

requirement that goods are strictly according to the prescribedspecifications, or as per samples etc.

After satisfying itself that the consignment of exportable goods meets the requirements

stipulated in the export contract/order, the inspection agency issues, generally within

four days of receipt of intimation for inspection, the necessary certificate of inspectionto the exporter in the prescribed proforma in five copies.

The certificate is issued in the standardised form which is aligned pre-shipment exportdocument. (Three copies for exporter, original copy for customs use, the second copy

for the use of the foreign buyer and the third copy for the exporter's use, fourth copy forData Bank, Export Inspection Council, New Delhi and the fifth copy is retained with

the agency for their own office record).

In-Process Quality Control (IPQC)

Certain products like chemicals or engineering goods are subject to this control. Theinspection is done at various stages of production. The exporter has to get his unit

registered as "Export Worthy" and keep record of processing and production.

Inspection by the officers of Export Inspection Agency is done from time to time. Thecertification of inspection on the end-products is then given without in-depth study at

the shipment stage. Under this system, export is allowed on the basis of adequacy of in-

process quality control and inspection measures exercised by the manufacturing units

themselves. The certificates of inspection in favor of the units approved under thescheme are issued by the Export Inspection Agencies (EIAs) in the normal course.

However, these units are kept under surveillance by the EIAs and random spot checks

of the consignments are carried out by them.


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Self Certification Scheme

Large manufacturers/exporters, export houses/trading houses are allowed the facility of

Self-Certification on the theory that the exporter himself is the best judge of the qualityof his products and will not allow his reputation to be spoiled in the international

market by compromising on quality. The industrial units having proven reputation andadequate testing facilities have to apply to the Director (Inspection and Quality

Control), Export Inspection Council of India, 11th Floor, Pragati Tower, 26 RajendraPlace, New Delhi-110008. They are granted a certificate valid for a period of one year,

allowing them self-certification facility. The facility is available to manufacturers of

engineering products, chemical and allied products and marine products. During thisperiod the exporter can issue a certificate signed by himself or by a person authorised

by him. The certificate has to indicate the number and date of EIA's reference for

registration under Self-Certification Scheme. It has to be issued in the aligned format asper new standardised pre-shipment documents.

III. ISO 9000

The discussion on quality control and preshipment inspection will be incomplete

without saying a few words about ISO 9000.The ISO-9000 Series of Standards

evolved by the International Standards Organisation has been accepted worldwideas the norm assuring high quality of goods. The ISO-9000 is also the hallmark of a

good quality- oriented system for suppliers and manufacturers. It identifies the

basic principles underlying quality, and specifies the procedures and criteria to befollowed to ensure that what leaves the manufacturer / supplier's premises fully

meets the customers requirements. The ISO-9000 series of standards are basically

quality assurance standards and not product standards. ISO-9000 spells out how a

company can establish, document and maintain an effective and economic qualitycontrol system which will demonstrate to the customer that the company is

committed to quality. The series of Standards aims the following:

o Increased customer confidence in the company

o Shift from a system of inspection, to one of quality management

o Removing the need for multiple assessments of suppliers

o Gaining management commitment

o Linking quality to cost-effectiveness

o Giving customers what they need

The implementation of ISO-9000 Standards involves:

o Management education

o Writing quality policy

o Nominating a quality representative

o Identifying responsibilities

o Identifying business processes

o Writing a quality manual


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o Writing procedures

o Writing work instructions

It is thus clear that the ISO-9000 series of standards constitute of concept of TotalQuality Management (TQM).

STEP 19 LABELING, PACKAGING, PACKING AND MARKING GOODS

An important stage after manufacturing of goods or their procurement is their preparationfor shipment. This involves labeling, packaging, packing and marking of export

consignments. Labeling requirements differ from country to country and the same should

be ascertained well in advance from the buyer. The label should indicate quality, quantity,method of use etc.

Packaging fulfills a vital role in helping to get your export products to the market in top

condition, as well as in presenting your goods to the overseas buyer in an attractive way.While packaging, quality should not be compromised merely to cut down costs, packaging

should also be in conformity with the instructions issued by the importer. Packing refers tothe external containers used for transportation . The shape of packing cases play a very

important role in packing the cargo, and the nature of packing material to be used willdepend upon the items exported As regard specification for the size, weight and strength

care must be taken to ensure that the weight of standard case does not exceed 50 Kg. for

easy handling of the cargo. Before packing and sealing the goods, it should be ensured thatall the contents are properly placed in the case and the list of contents of packing notes

should be prepared so that the buyer, the Customs authorities and the Insurance authorities

can easily check the contents of each and every case.Marking means to mark the address, number of packages etc. on the packets. It is essential

for identification purpose and should provide information on exporters' mark, port of

destination, place of destination, order number and date, gross, net and tare weight andhandling instructions.If required assistance can be taken from the Indian Institute of Packing (IIP)

STEP 20 PREPARATION OF VAROIUS EXPORT DOCUMENTS NEEDED

The export process is made more complex by the wide variety of documents that the

exporter needs to complete to ensure that the order reaches its destination quickly, safetlyand without problems.

export preliminaries

Documents