EximInsight

The Export business is nothing but to explore a new horizon where you find an interesting place that accommodates different people staying together by limiting the world for you. .

The market scenario in our country has been witnessing major shifts in the recent economic scenario. There has been an exponential growth in the import and export industries.

Globalization has opened up new avenues for export and import of goods to and from India. India now deals in almost everything worldwide.

With such a flourishing export and import scenario, a number of entrepreneurs are shifting over to harness the benefits of this arena. We see a large number of start-ups that are trying their luck in the export and import business.

But, is the road that easy? Well, if you are planning to enter the area of export business from India, there are a few things you need to keep in mind. Because, if you do not weigh in the proper pros and cons in the business, you might end up in a fix!

In this blog, we will tell you all the basic information that you need to get started with your own export business in India. We will go step by step, so brace yourselves!

How to get started?

So, where do you start from?

Having an office? License? Investment plan? NO.

Let us discuss explore what you need to have step by step.

1. Business Idea

Every business starts with an idea first. There are a variety of options when it comes to export business. You first need to decide what you would like to deal with. You may refer to your family, friends or other colleagues for more ideas on the same.

We will also discuss ideas for what to start within next blog.

1. Business set up

Once you have decided WHAT you want to venture into, we would move on to the next step of HOW you do that. The first thing you would want is a set up for your business. And, how do you go about it?

One thing recommended is that in the initial stage, you opt for a sole proprietorship. You should go to the GSTIN registration.

Is the GST Registration mandatory to export products from India? The answer is yes and will explain about it in the next blog, keep following EximInsight.

If you would like to know more about the impacts of GST on Export  Please read it.

Do not forget to get a catchy name and a logo for your business name. Try to hire a freelance professional designer to get you a logo as it would represent your thoughts and your business.

1. Get a business PAN Card

Once you are through with your business name and GST registration, you need to get your business PAN card issued by the IT (Income Tax) Department.

Please note that your personal PAN card will not suffice for your business purposes.

1. A current account with a commercial bank

After you get your PAN card issued, you must open a current account with any leading commercial bank in the name of your business. It would make it easier for you to keep a track of your transactions.

1. The Import Export Code (IEC)

This is the most vital requirement for you if you are planning to opt for getting your import export business started in India. This code is very important to export goods and services internationally.

However, you need to keep in mind that you cannot use this code to deal in prohibited or restricted goods and services.

There are mainly three broader categories for products to be exported;

• Free
• Restricted
• Prohibited

What are the free products?

Any product lies under the free category, it means the product is freely allowed to export from India.

What are the restricted products?

Products are allowed to be exported but with limited quantity.

Once the export of such products touches its limitation of supply restricted by the government, the same cannot be further exported for the year.

What are the prohibited products?

There is much product that cannot be exported from India to overseas. Prohibition of such products` export has been imposed but the government of India.

How can you know which product is in which category, we will explain in our next blog, please keep visiting EximInsight.

So, where do you get the IEC from?

You can apply for the Import Export Code from the DGFT website online. Below are the documents that you would require to get the IEC.

1. Photograph of the business applicant
2. Personal PAN card and also Company PAN card
3. A canceled cheque from your business current account

You must also keep in mind that you can get only one IEC per PAN card. So, you must be very careful about these small details.

1. Registration cum Membership Certificate

The next important step in the process of starting your own export business is obtaining the Registration cum Membership Certificate (RCMC).

This certificate is obtained from the various Export Promotion Councils and it gives you certain benefits to avail from the Customs and Central Excise authorities for the concerned goods and services exported or imported.

In India, there are about 26 such export promotion councils. You need to select the correct one according to the nature of your business requirement.

For further information please read “Registration-cum-Membership-Certificate (RCMC Certificate”

Once you are done with these steps, you can go ahead and get started with your import-export business. However, this is not the end but this the start. There are many avenues that you will have to explore so that you can get your business flourishing well.

Where do you attract more business opportunities from?

1- Online marketplaces are the most easily accessible and give you access to a wide range of products worldwide

You can have a look at below online marketplaces that will give you an insight which products you can go for.

• Alibaba
• IndiaMART
• eWorldtrade
• Made-inChina
• GlobalSources
• DHgate
• TradeIndia
• iOffer
• ECplaza
• ECVV
• Fibre2Fashion
• ExportersIndia

In a new blog, we will also provide you the comprehensive insights on these marketplaces and how you can get benefited from them.

These websites give a tremendous opportunity to the exporters to list their business as vendors and connect with customers worldwide.

2- Making the most of international markets is something you must concentrate on. You can go for a trade in a good that is a deficit in a particular country. That will give you an edge over the other competitors.

3- Selecting the right product is also essential. You need to conduct a proper market study of the various goods and services that are in demand and look at their market behavior.

Some of the best export businesses include leather products, apparels, machinery, and medical appliances.

So, whatever your business goal be, a proper strategy and plan is the first thing you need to be prepared with.

Yes, it is true that opportunities are infinite in today’s market. However, execution and materialization of those opportunities are what will make you stand out from the rest in the market.

We hope the information given above will help you to feel encouraged about the booming import export business opportunities in our country. Check out our other blogs for more information on export business in India.

Please let me know if you are going to start thinking about starting your own export or import business today?

An exporter needs to know export products ranked in top 10 to have a fair idea that will help him choose a suitable product to export.

Top export products indicate to its demands. If the demand is more and supply is not adequate, it creates an opportunity for us to explore and try to export few of those top exports. The chances of success to export top export products are more.

Being an exporter, having an eye on demands and its supplies are most desired to get updated on world`s top export products and market demands.

You can also explore Top 10 Export Products from India and Its top Export destinations here and what risks are associated with export and import business and how to manage them, you are suggested to read this blog.

As mentioning top 10 export products here is worth, similarly listing down top exporters for these products is also very important.

To keep it short, I have mentioned top 10 export products and top 5 exporting countries for each product.

#1- Electrical machinery and equipment, and its parts

The total export value of the product is $ 2325.746 billion and exported by top five exporting countries are China – 23.8% of world exports, Hong Kong – 11.2% of world exports, United States of America – 7.2% of world exports, Germany – 5.8% of world exports and Korea with Share of 5.77% in the world exports.

#2- Machinery, mechanical appliances, nuclear reactors, boilers and parts

The entire exports counted $ 1884.069 billion exported by the top five countries in terms of shares of world exports for the product are China – 18.2% shares, Germany – 11.8% shares, USA – 10.1% shares, Japan – 6.6% shares and Italy – 4.9% shares.

#3- Mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral

$1521.861 billion is the entire exports of the world topped in export shares by Saudi Arabia – 10.8% Shares, Russian Federation – 8.9%, USA – 6.2%, UAE – 4.6% Shares and Canada – 4.1% shares.

#4- Vehicles other than railway or tramway rolling stock, and parts and accessories thereof

The entire exports show $ 1341.234 billion topped in export shares by 5 countries; Germany – 18.2 % Shares, Japan – 10.6% shares, USA – 9.3% shares, Mexico – 6.6% shares and Canada – 4.8% shares.

#5- Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad

$ 638.001 billion is the total exports topped in shares of export by Switzerland – 15.4% shares, Hong Kong China – 13.2% shares, USA – 9% shares, India – 6.6% Shares and UAE – 5.7%.

#6- Plastics and articles thereof

The entire exports of the product are $ 542.895 billion exported by the world and topped by China – 11.5%, Germany – 11.4%, USA – 10.8%, Korea – 5.1% and Belgium – 5%.

#7- Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical

$534.658 billion is the entire exports made by the world and the exporting countries are USA – 15.3% shares, China – 12.6% shares, Germany – 12.2% shares, Japan – 6.7% shares and Korea – 5.2% shares.

#8- Pharmaceutical products

$504.653 billion shows the total export and top 5 exporters are Germany – 15.3% shares, Switzerland – 13.4% shares, USA – 9.3% shares, Belgium – 8.3% shares and United Kingdom 6.5% shares.

#9-Organic chemicals

$348.931 billion is exported by the world and top 5 countries are China – 12.1% shares, USA – 9.7% shares, Belgium – 8.9% shares, Ireland – 7.9% shares and Germany – 7.3% shares.

#10- Aircraft, spacecraft and its parts

$328.884 billion is the entire export topped by countries as exporters; USA – 40.9% shares, France – 16.2% shares, Germany – 13.5% shares, United Kingdom – 6.4% shares and Canada – 3.1% shares.

The data shown above looks very interesting and will give an insight to the exporter to have overview handy of word exports into the world and top 5 countries of each in terms of world export shares.

Conclusion

The statistics provided above is taken from 2016 data. The data looks very interesting and gives us the insight to have an overview handy knowledge of word exports from world to world and top 5 countries of each product along with world export shares.

If you need any further information, kindly leave your comment below in the comment section

Export and Import business is very lucrative and profitable business and it serves interest of the exporter as well as of the Nation but the risk attached to it needs to be considered and taken care off wisely.

The business is nothing but a risk. No pain, there is no gain, no risk, there is no return. There is a risk, there is return. Risks and returns are always correlated with each other.

I have lost my own hard earned money over a period of time while trying for exports during a span of last 6 years due to many reasons. Top one of them is lack of experience with no guidance.

Initially I was much excited dreaming to be millionaire and billionaire overnight but it did not happen and I ended up loosing a significant amount of money.

After few days, I got frustrated and started thinking to give up.

However I continued and managed to control my frustration somehow and went on travelling with no clue.

In the beginning, I was running behind each and every product if  asked by any buyer to export them. While doing this, I hardly exported one or two products and ended up with no profit since the cost for researching new product, travelling to meet and coordination with new manufacturers each time outweighed the profits realized.

latter on I realized, this is not a correct method to pursue. It took lot of time for me to decide a particular product to work on. Choosing an appropriate product and targeting the same for export is very important.

Now the plant made 6 years back started growing up and giving us fruits and investments started coming back and I feel if i had given up in the middle, I would have lost all my investments.

There are two way to learn;

i- By own experience that comes over a period of time by investing significant amount of time and money. This is a riskiest move but gets us a real time exposure.

ii- By other`s experience that gets us nice learning with time investments and few penny if required. This is the safest mode of experiencing to explore under anyone`s guidance.  

In the first case, you might loose lot of money as I did.

In the second case, you can learn lot with minimal risk.

If you want to become an entrepreneur, you have to be prepared to take risk a lot in the entire process of the business and you need to be careful all the time. I will share my experience as well acquired during my own shipments.

At not a single point in the entire journey of a business, you can perfectly say, now the risk is gone , what all you can do is to mitigate the risk by experience earned over a period of time or by learning with other`s experience and can follow some one to get guidance. As longer as you are into business, you have to be cautious.

We need to understand risks involved in export and import business. There is strong relationship between risk and return as depicted below;

Here major risks faced by exporters & importers are numerated;

• Credit risk
• Poor quality risk
• Transportation and logistic risks
• Political risks
• Natural risks
• Exchange rate risks
• Cultural and Language risks

Credit risk

The exporter faces many challenges and one of them is to get buyer whom he can start exporting to. Once it is set, the next challenge is payment terms. There are three popular payments terms;

i- Advance – This is preferred and safe payment mode you need to try your best to have it, although getting advance from new client is much more difficult. This type of payment method will reduce the payment risk and will give you an edge to handle cash liquidity as well.

An expert businessman always tries to do business on other`s money, the advance payment would be the best example for this..

I exported my first consignment to Saudi Arabia and luckily I got 100% advance payment and completed my shipment as per the scheduled time. Advance payment is the best payment method and 100% in favor of exporter and high risk for importers. This fact you also need to know that the business against advance payment is only 1%. 

ii- Letter of credit (LC) – this is a documentary letter of credit issued by bank of the buyer to the exporter with terms and conditions laid down in the agreement approved by both the parties.

Once those terms and agreement are met while doing shipments, the exporter gets payment by negotiating that LC with Bank. On the acceptance of the LC, few points need to be kept in mind that the LC should be irrevocable, confirmed and top issuing banks.

Although this arrangement is safe for both the parties but the exporter needs cash for raw material to prepare finished goods for export till the shipment happens.

Since the exporter is always in cash crunch, he/she is pressurized to arrange cash and has to bear charges of issuance of LC which will be an extra burden above cost of goods and shipments. The business in LC happens only 20%.

On behalf of my client, I was sourcing teak wood from Ghana through a company based in Dubai and we issued  him LC of 1.5 crore with 90 days validity and handed it to the supplier.

Even after 90 days, the supplier did not supply the goods and requested us to extend the LC for one month more, we did the same but again he failed to supply and the LC got expired. We ended up with losses of LC charges amounting to Rs 3 lac and time invested in for 4 months.

Suppose, if we had given him an advance, we would have lost our entire amount. This is the reason, Payment through LC is safe specially for importers. If you are an importer, this type of arrangement is highly recommended.

iii- Payment against document – the payment is received from the client against the document issued to. The buyer – importer will receive the original document once he makes the full payment to the exporter.

In this arrangement, an exporter needs to wait for the payment till the shipment reaches at the destination port.  The exporter also needs cash to handle all activities related to shipments.

While I am writing this article, one of our shipment with 2 nos of Dynapac soil compactors – CA 255D for Vietnam is in transit and waiting eagerly and impatiently for the payment to come since a sizable amount of our funds is blocked in this payment terms against document.

This arrangement is exercised most and frequent as payment terms and it does not attract an extra charges as well as seen in issuance of LC. This is recommended for those exporters who are already doing business with old clients and have developed trust to some extent.

iv- Credit –  This is the worst kind of payment for exporter and the best for importer. Goods are sold to the buyer on credit payment for 30 days, 60 days or 90 days.

This kind of payment is never recommended until or unless you have developed very strong business relationship with your client. We have bitter experience in this arrangement.  We have done a multiple shipments to our Malaysian client for $ 85000 and got the payment and the last shipment for $ 5000 we did on credit for 15-20 days but we have not yet received even after 5 months from now.

Before you avail this kind of arrangement as payment terms. You should check creditworthiness of the customer and there are many commercial agencies that can do on your behalf. ( more on this latter in a new blog) 

Poor quality risk

Many suppliers ship substandard and low quality of goods. Sometimes, they ship different goods altogether as it happens to one of my friend, he imported copper from china and the shipment was received in Dubai with block of bricks. It was a big loss.

You need to have an eye on the quality of goods you have finalized either you get sample before you get shipments or you need to be present at the loading port to minimize such risks or you can ask third party agency to have quality check and issue certificate for it like SGS etc.

Transportation and logistic risks

The consignment travels from one place to another and reaches at the client place. The goods being shipped to the importer is exposed to the risk for damages while loading, unloading and risk for sinking ship in the sea with the goods. In between, there is alone discussion when the risk will get transferred to the buyer`s account. The risk is transferred to the buyer based on the contract and INCOTERMS. There are two main INCOMTERMS and famous which we can cover it here;

• FOB 
• CNF/CIFT

FOB means Free on Board where exporter arranges for goods to be transported to the port loaded on ship and the importer needs to pay freight, insurance and unloading at the destination port. In this incoterm, once the goods are loaded to ship, the risk is  transferred to the buyer and ownership depends on bill of lading ( the same will be covered in a separate blog on INCOTERM)

CNF / CIF- In both the terms, the difference is only insurance. CNF means Cost and Freight arranged by the exporter and Insurance arranged by the importer and CIF means Cost, Insurance and Freight – all arranged by the exporter. In this case, exporter needs to arrange FOB plus freight in CNF and insurance as well in CIF but the risk is transferred to buyer once the goods is loaded to the ship as in FOB.

Apart from these two, there are various INCOTERMS for export and import to have delivery contracts which be elaborated in separate blog.

As regards to the transfer of ownership, it differs a bit from transfer of risk that will be covered in next blog on INCOTERMS.

Political risks

There are various risks involved politically in export and import. Most popular risk is policy change when a government gets changed. You need to have an eye on export & import policies of your target countries where you export to and import from to get updated of any change occurring and take care of it well in advance to reduce the political risk.

By measuring and getting updates on political situation on export and import, the risk could be managed and controlled to some extent.

Natural risks

Natural disaster such as an earthquake, flood and hurricane or any other natural calamities can cause a great risk damaging goods exported or imported and will end up affecting export and import business lot. Such risk can not be controlled and eliminated. Thus exporters are highly advised to ensure a force majeure clause in the export contracts.

Exchange rate risks

The most important thing in export and import is Forex. A slight change in foreign currency exchange rate will impact lot on the profit of exporters and importers.

The price is always freezed in advance and the product is delivered later. Exchange rate on delivery date differs from the date the price fixed.

It could go up and go down possibly;

Suppose if you have made of an export for 1000 US dollar to your client. The price agreed between both the parties at 5th August 2017 and the rate of 1 USD was Rs 64.07 so the amount of 1000 USD was expected to be Rs 64,070/- and the payment received at the time of delivery on 5th September 2017 and the rate of 1 US dollar was Rs 64.11 and the total amount realized was Rs 64,110.

The exporter will earn extra Rs 40 ( 64,110-64040) than expected amount to receive and to the contrary, if the rate goes down, the exporter’s profit will get reduced and sometimes the exchange rate fluctuations eat up exporter’s entire profit and some loss of capital invested in. Similarly, importers fall in such losses and profits due to change in foreign exchange rates.

To avoid this risk, you can start hedging your currencies. ( Hedging currencies will be elaborated in new blog) 

Cultural and Language risks

Once you start trying for export and import, you will explore various cultures and different languages across the globe.

Becoming familiar with buyer country`s culture will give you an edge over your competitor and scale your business. Speaking with the client in his local language will get you one step ahead towards closure of the deal.

There are many business getting spoiled due to lack of understanding buyers` language and culture.  

Meeting and greeting will be completely different from one country to another that needs to be well taken care off..

For example;

Shaking hands with girls in United states and European countries are considered to be good while in gulf countries, it will be very awkward and embarrassing if hands are shaken off with girls.

Communication gap due to lack of understanding local language will ruin the entire business as well. Thus understanding the culture and local language plays a very vital role in the success of a business.

Apart form this, there are various risks involved in export and import business.

As beginner, you need to understand the procedure of exports and documents involved in. you can read introduction to export here  and you also need to know what are top products you can choose to export. For this, you can access here Top 10 export products from India you must know. You are also recommended to have knowledge of tax updates and its impacts on exports. GST newly implemented in India will impact exporters. For more, read it here.

Final word

Doing export is most desired to widen scope of our business and to explore the world for our products. It will benefit us as well our country.

We need to learn how to minimize the risk associated with it as mentioned here and other risks also to accomplish our goals and to be in the business for a longer time.

Learning with own experience is desired but riskiest and learning with other`s experience under someone`s  guidance is recommended for beginners.

You need to be open to learn always from all the aspects and keep assessing potential risks of any kind. Be safe and do export from your heart.

If you need further info, please leave your comments.