How to start export business in India – Things you must know

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.

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?


How Solar Powered Air Conditioner Is Going to Change Your Life

The solar-powered air conditioner is a great invention that will replace Conventional Air Conditioning system and it provides us the cooling system that meets the requirement as desired.

Solar air conditioning system uses solar power that could be done by passive solar, solar thermal energy conversion and photovoltaic conversion.

With huge potential and opportunity, the solar-powered air conditioner is the future and it is still unexplored.

Many things are gifted to the world by nature and one of them is Sunlight.

Sunlight is a key source of energy for earth’s climate. Everything living on the earth needs sunlight to get energy; be it human, animal or plants or other creatures.

Many forms of energy we consume in our daily lives and solar energy have become a vital part of an Energy system which seems to be going to play an important role to provide us energy as an alternative to electricity in the future.

Solar energy is a bit wider field meaning any technology that converts sun’s energy into a form of energy whereas solar power is a technology that converts the sun’s energy into electricity either directly or indirectly.

A technology that converts sunlight into electricity directly is called photovoltaic.

A technology that converts sunlight into electricity indirectly is called Solar thermal.

Now let us discuss our main point of the Solar powered air conditioner.

A solar air conditioner is an air conditioning system that converts sunlight into electricity and removes heat from our rooms and makes the temperature cool inside as desired.

Solar air conditioning system plays a fantastic role to decrease the cost of electricity to zero.

Solar AC will get you rid of paying a huge electric bill every month although the one time investments likely to be made for Solar AC are bit high the consumption of electricity from the day one will be zero and the investment will get back to you in 3 to 4 years.

Encouraging for using solar panel air conditioner to meet our Air Conditioning requirement is a step ahead to get rid of the pollution generated by a conventional air conditioning system that we face significantly in our daily lives.

There are two sources of getting energy;

1- Conventional

2- Non-Conventional

Sources of conventional energy are wood, a flow of water and fossil fuels ( coal, petroleum, natural gas).

This kind of source is limited and will be depleted at a point in time.

Sources of non-conventional energy are solar energy, wind energy, biomass energy, ocean energy, geothermal energy etc.

These are renewable and will be the best source as an alternative to the conventional energy.

In this blog, I will focus on the solar air conditioner for home which uses solar energy that stands renewable and pollution free.

Solar air conditioner residential is a product of alternatives to conventional AC and will be the best for future to provide us a cooling system with no pollution while conventional Air Conditioners are not environmentally friendly and releases pollution we inhale increasing risks to our lives.

In the light of our export requirement of Solar Powered Air Conditioners, I attended a Renewable Energy India Expo lasted for three days from 20th September to 22nd September 2017 at the India Expo Centre and Mart – IECM in Greater Noida that was organized by UBM.

The expo shows products ranging from Solar, Wind, Bio-mass & fuel, Small Hydro, Geothermal and Energy Efficiency Sectors in the Power & Energy, Power & Renewable Energy and Solar Energy industries.

It was a very good experience for me to visit the expo and enjoyed a lot visiting various stalls exhibiting products pertaining to solar ACs as to meet our requirements.

What is Solar Air Conditioner?

This is similar to conventional AC in terms of cooling but the technology adopted is completely different.

An Air Conditioning system that takes energy from the sun to operate AC is called Solar AC and also known as Green Energy Air Conditioner.

Type of Solar AC

There is mainly two type of Solar Air conditioner.

1- Photovoltaic Solar powered AC

Solar Air conditioners that work on photovoltaic technology can be 100% Solar powered or conventional air conditioner as well.

The air conditioner that works solely from solar energy known as 100% solar powered air conditioner.

In this system, Air conditioner operates on DC directly from a Solar panel by the conversion of sunlight through charge controller into electricity without the solar panel. Solar AC in this case, is connected with the Solar Panel and Charge controller only.

If the requirement for air conditioning is for only daytime, battery banks are also not required.

If needed for a night as well, the battery banks are required to provide backups at the night.

By doing this, an efficiency of using solar power is great and wastage of power not converting DC to AC becomes minimal.

In this scenario, direct current ( DC ) is not required to be converted to alternating current ( AC). Thus the efficiency of powering gets improved and wastage of power for conversion is completely eliminated.

For the above, Air Conditioners are to be 100% solar powered AC that can also be connected with electricity main power in case of emergency using an additional device Power Adaptor for Main Inputs.

Conventional Air Conditioner that also operates from solar energy.

The sunlight is converted through a solar inverter from direct current -DC to alternating current-AC and used in operating the conventional air conditioner.

This is also called Solar AC but it is not 100% solar powered AC.

In this, a Solar panel is connected to a solar inverter that converts sunlight from direct current ( DC) to alternating current (AC) and solar inverter is connected to an air conditioner that supplies alternating current for daytime.

If required for a night, the battery banks are also connected with an inverter to get them charged and provide backups at night.

The conversion from DC to AC reduces the efficiency of the power since it gets wasted in the conversion process while using direct current without conversion, efficiency is great.

To have a backup for 8 hours at night, we need to have 4 batteries with 180-200 AH each unit.

In this case, Conventional AC, as well as solar powered AC, can work.

For individual houses or less consumption, 48v solar air conditioner under photovoltaic technology is recommended.

If the requirement for the cooling system is huge, thermal and hybrid AC will come into the picture and they are more suitable for Industrial and commercial usages.

2- Solar Thermal AC

We need to understand the basic concept here for Photovoltaic (PV) and Solar Thermal.

Photovoltaic acquires sun rays and convert it into electricity while Solar thermal collects sunlight and transforms it into heat that is stored and that heat is transformed into electricity later on.

A solar thermal air conditioner is also known as a hybrid solar air conditioner.

One more interesting technology related to solar technology is passive solar.

Passive solar collects solar energy, stores and distributes heat in the winter and protects room and building from the heat in summer. The building, windows, and walls are designed in such a way that these start working as passive solar depending on the weather.

Designing buildings for passive solar are very expensive, such technology is rarely found in India and other countries as well.

working principles

100% Solar powered air conditioner gets power directly from the solar panel and works on DC at daytime and no inverter is required to transform from DC to AC.

Solar panels are connected to a solar charge controller that converts sunlight into electricity directly and provides power to AC as well as charges batteries that operate AC at night for 5-8 hours depending on batteries backup capacity.

Solar thermal ACs does not work directly from DC, thus solar inverter is required to convert from DC to AC to run solar AC and the technology used for conversion is completely different from the photovoltaic.

For Solar Thermal AC and Hybrid Solar AC, heat generated by sunlight is collected by a solar collector and transformed into electricity and later on it is used to run AC.

This is what the same is called thermal solar air conditioner as well as solar air conditioner hybrid.

In this technology, a conventional air conditioner is used and it consumes converted solar energy as well as electrical power if required.

Let us understand a few more related points here, they are;

Off Grid Power System – The supply of power generated by our solar system is not connected to the electrical grid and the power generated is for consumption of individuals only.

On Grid Power System – Extra power above the consumption of individual is supplied to the electrical grid so that the power can be used by others also.

Components used in Solar AC

Parts used in a Solar AC are following;

Air conditioner

Solar Panel

Solar control charger

Solar Inverter

Batteries Banks

Air conditioner

Air conditioners can be 100% solar powered, hybrid, thermal and conventional AC.

Air conditioners to be used depend on technology and requirement of usage.

If the requirement is for individuals, 100% solar power air conditioner for home is suggested. If the requirement is huge for commercial, the thermal and Hybrid solar AC is to be chosen.

Solar Panel

For 100% solar powered AC, Photovoltaic Solar is used and for thermal and Hybrid Solar AC, a Solar collector is used.

Photovoltaic is a new invention and good technology to power solar AC. It converts sunlight into electricity directly.

Thermal Solar Technology is a bit old technology collecting heat from the sunlight, storing heat and then converting it into electricity.

how many solar panels are required to run an air conditioner

A number of solar panels depend on the capacity of air conditioners. The panels required for solar powered room ac units is below for example;

  • 3 panels of 250 watts for 0.75 TR
  • 4 panels of 250 watts for 1 TR
  • 5 panels of 250 watts for 1.25 TR
  • 6 panels of 250 watts for 1.5 TR

Solar charge controller

This is nothing but a device that converts sunlight into electricity as well as charges batteries. This is connected with the solar panel and battery banks.

Solar charge controller also controls power fluctuations and supplies as per the requirement.

Solar Inverter

A solar inverter is used to convert direct current – DC to alternating current -AC to power air conditioner if the AC is not 100% solar powered AC. This is also used for charging batteries.

The solar inverter also works as a controller to balance power fluctuations.

Solar Battery Banks

These are used to store energy to provide backups for the air conditioner at night.

These batteries are charged from sunlight at daytime and provide backups at night.

There are two type of batteries used in solar air conditioning system;

Lead Acid Batteries also are known as deep cycle batteries- These batteries are starter batteries and less expensive. They charge and discharge from 45% to 75% of its capacity depending on quality.

Lithium-ion Batteries- This seems to be best in terms of charging and discharging that can reach up to 100% of its capacity. This is also very lightweight.

Lithium-ion is used in mobile and best for the solar air conditioner as well but it is very expensive compared to deep cycle battery.

Comparison between Solar AC and Conventional AC

Solar Air Conditioner works completely on solar power with zero electricity consumption and provides your cooling system with no pollution.

You can enjoy cooling as well as the clean energy that will make you healthy.

In Solar AC, ultimately, you would be enjoying the clean energy and you would be helping your neighbors and the world to get pollution free air conditioning.

A conventional Air conditioner will get you the huge burden of paying electricity bill repeatedly over the years till you keep using this.

Moreover, this produces pollution that is hazardous to the health and will keep your health deteriorating over the years.

In this conventional system, you would be enjoying cooling system but you are increasing risks for your health as well as no contribution to the world to get pollution free.

Cost of Solar AC and Conventional AC – an overview of cost-effectiveness

As regards to the price, conventional air conditioning system is surely damn cheap and affordable in terms of one-time investment but for a longer period of usage, it becomes costlier than Solar AC.

For example, you can buy a conventional AC of 1 ton in a range of Rs 15000 – Rs 20000 in India and will connect with the electric power and will start enjoying cooling.

Contrary to this, solar ac unit cost is a bit expensive and will demand you to make a sizable amount of investments. Let`s say around Rs 1,14,000/- at a time but it will pay you off during 3-4 years and you can start enjoying cooling system completely free of cost later on.

Let us say if 1 TR AC consumes 2 unit of electricity for Rs 7.5 per unit, the calculation can be as below;

Rs. 15 per hour ( Rs.7.5*2)

Rs 225/- per day if used for 15 hours on an average a day ( Rs.15*15).

Rs. 6750/- per month ( 225*30)

Rs. 54,000/- for 8 months in a year  ( Rs 6,750*8) if 4 months excluded for winter.

Rs. 1,62,000/- in 3 years excluding 12 months for winter of 3 years ( Rs. 54,000*3)

In a span of 3 years, the one time investments seem to be coming back and no further expenses required although expenses for payment of electric bills even after 3 years in case of using conventional AC will continue.

If a person uses solar AC for 6 years and another person uses conventional AC for 6 years, Rs. 162,000 can be saved in case, solar AC is used.

solar air conditioner advantages and disadvantages


There are various advantages of the usage of  Solar AC. Few of them are mentioned here

  • It provides green and clean energy with no pollution
  • It is completely independent and no electrical power is required so it can work in a remote area as well where no electric power is available.
  • Zero electricity consumption and zero electricity bill


  • Solar AC depends on sunlight, there would an issue in cloudy and rainy days to get solar energy enough to operate AC.
  • Solar AC is expensive and it requires a good amount of one time investments and later on, it will become free of cost
  • More spaces are required for components to get installed like a solar panel,  control chargers, solar inverters and battery banks.

Difficulties in installation

Installation process as informed by the engineers and technicians is quite easy but you need to have skilled labor to get the job done or you need to learn how to install them.

I will try to make a video later on installation that would educate us how to install and get it done without skilled laborer from our own.

A trend for Solar AC

A trend for 100% solar powered air conditioner is on upwards and demands are on the rise. People are keen on using such solar ACs to save themselves from the brunt of paying the huge electricity bill and to save the environment from pollution.

Being capable of getting operated with naturally accessed energy, Solar AC is the future.

Availability of Solar air conditioner

The solar AC available is 0.75 TR, 1 TR, 1.25 TR, 1.5 TR and 2 TR.


The energy to run solar air conditioner is least in use and the demand for energy usage is on increase.

The energy to obtain conventionally to meet the increased requirement of energy is to increase more burden on authorities to provide supplies since the conventional sources will be depleting gradually, the demand for solar power and solar ac will be automatically increasing.

The potential of solar AC is huge and it is still unexplored.  The market for solar AC is increasing 17% every year and market size of it is 0.05% (2112 Mw ) of Conventional AC market ( 4.75 million Mw)

This data shows a huge potential in India itself. At the moment, even 1% of conventional ac market is not yet explored.

For more on this, you can read this article Market Potential for Solar A/C in India

This is a right time to work upon on solar AC  to explore the market and make it available in the market at a reasonable price for potential users.

The prices of Solar AC is quite high at the moment as a one-time investment, but it may go down as soon as technology gets simplified.

Which countries are using Solar ACs

Countries with harsh weather are more likely to be using Air Conditioners so Solar AC will find its existence in those countries.

Few countries with harsh climate are showing more interest to use solar air conditioners like China, India, Indonesia, Brazil, Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, Pakistan, and Africa.

Export market

China is one among countries to use solar AC most and also more capable of supplying overseas as well.

At the moment, China is largely enjoying to export Solar ACs to most of the countries demanding Solar ACs in their region.

India seems to be on second as users of Solar AC. India has started exporting quality products for Solar AC.

India is stepping ahead fast in manufacturing solar ACs in-house to cater its huge domestic demand as well as export orders.

As an exporter, we receive a good amount of inquiries for export order from GCC countries and African countries most.

Top Countries importing Solar AC from India

Soar Air Conditioners manufactured in India are widely consumed in the domestic market as well as being exported to the United Arab Emirates, Saudi Arabia, Oman and African Countries.

Solar Powered Air Conditioner Prices in India

The prices mentioned here are for 48 V DC air conditioner and the prices provided below may differ based on quality and manufacturers.

  • Price for 0.75 TR solar AC: Rs 70,000/-
  • Price for 1TR solar AC: Rs 75,000/-
  • Price for 1.25 TR solar AC: Rs 80,000/-

The above prices do not include accessories like solar panels, Battery banks, and solar charge controllers.

The prices provided below include all accessories required for solar powered AC.

  • Price for 0.75 TR solar AC with panels of 750 watts, 4 batteries, and charge controller: Rs 1,54,500/-
  • Price for 1 TR solar AC with panels of 1000 watt, 4 batteries, and charge controller: Rs 1,95,500/-
  • Price for 1.25 TR solar AC with panels of 1250 watt, 4 batteries, and charge controller: Rs 2,30,000/-

All the prices mentioned above are approx


Solar Air Conditioner is slowly getting momentum in India and overseas. In future, it may replace conventional air conditioner to some extent. As regards to health perspective and clean energy, Solar powered air conditioner is the most desired.

In terms of prices, it is very expensive compared to the conventional AC. I hope, the prices will go down as soon as technology gets advanced.

Users can go with solar AC if they are able to invest required amount at one time else keep using Conventional AC.


World’s top 10 export products

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.


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


How to manage risks involved in Export & Import

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 

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.

EximInsight Club

Introducing EximInsight Export Club

Exim Insight Club is an online club created by Exim Insight on Facebook where we will exchange our ideas & experiences, will share our real time inputs and learn lot on exports & Imports.

To become a member of this club, all you need is to fill this form and explore the horizon.

This club is mainly created for newcomers and those who will be willing to learn how to export and import for free and would like to become a successfull exporter.

To make the group great, few expert exporters with real time export experiences including me will be here on the board to impart us their knowledge and great experiences earned during the process of handling their own shipments over a period of time.

This group will consist of newbie, mid level and experienced exporters to come together at one platform and learn with each other and will become a family of exporters.

What you can learn from this club in brief;

1- step by step process of how to export and import

2- What all licences are required to start an export company

3- what all the documentations involved in the process of export and Import

4- how you can find out suitable products for export or import

5- How you can find out suitable market for your product

6- How you can find out overseas buyers for your products

7- how you can find out your competitors and tips to compete with them

8- how you can export your existing products you are already selling in the domestic market

There would be many more on the board to learn

Yes, the most important things are you will learn all these for FREE