REGISTRATION FORMALITIES

NATURE OF BUSINESS.

• Sole proprietorship.

• Partnership firm.

• Private ltd.

• JSC.

Name.

Logo.

Colour.

Opening Bank A/c.

Registration with DGFT for IEC Code/Number.

Important for every exporter & importer.

Ten digits.

Submit signed application form along with:

Bank receipt.

PAN NO.

2 PP photos.

Self addressed envelope & stamp of Rs.30/-

application should be send to www.dgft.gov.in

Jt Dgft givs IEC.

Copy of IEC is sent to Bank & customs (BIN).

Valid till it is not cancelled.

Regional tax authorities.

ECGC.

EPC’s.

FIEO.

IIFT etc.

EXPORT LICENSE

The classification of goods is given in ITC (HS) which can be exported & imported.

OR Under any other provision of FTP

OR Any other law in force.

Restricted items can be traded only under License by DGFT.

Exporter/Importer whose items come under restricted list of ITC (HS) can export only when he obtains an Export License.

DGFT issues License after scrutinizing what & where?

Application for EL may be made in ANF 2D.

EL is valid for 12 months.

Camel, beef of cows, Crude oil.

SELECTION OF EXPORT PRODUCT

Every exporter needs to select right product for the right market.

All products cannot be sold everywhere.

Selection for the manufacturer may be limited to what he is already manufacturing.

E.g. Manufacturer of Ayurvedic medicine.

There are no. of. factors which an exporter needs to consider.

Demand for the product.

there should be great demand for the product.

Continuous, regular & rising demand.

Avoid seasonal products.

Select a product which has large continuous & growing market.

Supply.

Regular & continuous.

Must avoid perishable & seasonal items.

Should have capacity to fulfill rising demand.

Export trends.

Exporter must look for the current trend of exports from his country.

Market survey reports. EXIM times. Indian trade journal. EPC’s etc.

Exporters knowledge & previous experience helps.

Production capacity & availability.

Capacity if manufacturer & availability if merchant.

Choose market depending on capacity.

Image may go down.

Must analyze production capacity & then enter the market.

Servicing facilities.

If product selected needs servicing facilities then proper arrangement has to be made.

Providing timely & efficient service is very difficult.

Locate agents or distributors or ASP’s etc.

Consumers/Customers do not consider only price but more efficient service.

Following International standards for service like BIS, ISO, CSIA etc.

Target market.

Exporter must select product depending on the market & vice-versa.

It is advisable to focus on one market initially.

Study of target market wrt product adaptation, regularity in demands, credit needs etc.

Profitability.

Product selection should be from profit making perspective.

Not high price but also less middleman will help increase profit.

Exporter should always sell as close to market as possible.

Trade restriction.

Product selected must not be restricted in home or host country.

Exporter needs to research on the items whether prohibited, restricted or free.

Must select a product which is freely exported.

Obtaining license is very difficult.

Chances for growth in future.

Find out chances to export other products which are in demand.

Select the product which will give growth & profits in future.

IDENTIFICATION & SELECTION OF MARKET FOR EXPORTS

Market screening is a crucial process which helps exporter,

To weigh opportunities against the risks involved.

To study the operational feasibility & market viability.

First screening – preliminary screening.

To identify the buyers & markets.

The basis of screening involves:

Home country govt’s trade regulations.

Current import policies of other country.

Goods & services imported by that country.

Local production & consumption level.

Demographic changes, growth, migration pattern etc.

Second screening – Financial & Economic considerations.

Reduces prospects by identifying Financial & Economical viability.

Inflation rates, availability of credit, expected ROI, Interest rates etc.

Economic viability is related to demand influencing market indicators like:

Relative size of market as a % of total world market, GDP,GNP,PCI, Size of middle class, level of industrialization etc.

Market intensity, Market growth etc.

Third screening – Political & Legal forces.

Entry barriers.

Operational flexibility.

Profit remittance.

Restriction on % equity hold.

Red tape.

Fourth screening – cultural factors.

Language.

Work habits.

Customs.

Religions.

Values, etc.

Fifth screening – Competitive environment.

Degree of competition.

Comparative advantage of the competitor.

Lead time & Imitation lag.

Final screening – matching opportunities with firm’s marketing capabilities.

Personal visits.

Talks with trade representatives, officials etc.

Availability of Logistics & other support systems.

EXPORT PRICING PRICE is the most important P’s of Marketing mix.

Price is what an exporter offers to buyer/importer, while the cost is expenses incurred by an exporter for manufacturing/exporting a product.

Setting proper export prices is crucial to a successful international sales.

Prices must be high enough to generate a reasonable profit, yet low enough to be competitive in overseas markets.

FACTORS AFFECTING EXPORT PRICING Cost.

Cost constitutes the large part of the price.

2 types of costs, viz; Fixed cost & Variable cost.

FC + VC + OTHER EXPENSES + PROFIT= PRICE

Competition.

Exporter face competition from 3 aspects. Local producers. Exporters from other countries. Suppliers from exporter’s country.

To survive in competition price should be reasonable.

However, Higher price can be charged against better quality of goods, better delivery, innovation etc.

Demand.

Price largely depends on Dd.

Increase in Dd results in increase in price, even if the cost is same.

Demand may increase due to good quality, shortage of product, economic condition etc.

Not only increase in Dd will increase the price but also other factors like costs etc.

In case of ltd Dd exporter may sell it at marginal price.

Govt policies & incentives.

Favorable FTP is important.

FTP is related to monetary, fiscal, industrial & budget policy.

Incentives offered by govt in the form of tax exemptions, export incentives, customs & excise exemption helps exporter keeps prices low.

Availability of substitutes.

Price gets affected due to presence of substitutes.

Customers always look for lowest price, therefore Dd may affect due to availability of substitutes.

Nature of consumers - like their purchasing capacity, income, buying habits etc.

Objectives of the organization.

Like increasing profitability, social welfare, target market, competition etc.

Product.

Quality, necessity, substitutes etc.

Brand Image.

Good brand image helps fetch higher profits.

Intermediary.

Longer the chain, higher the price, lesser the profit.

Other factors.

PLC.

Economic condition.

Inflation rate etc.

EXPORT PRICING QUOTATIONS / INCOTERMS 2011

WHO? WHEN? HOW? WHERE?

EXW – Ex-works or Ex-factory.

FOB – Free on Board/FOT/FOR, FCA, FAS.

C&F or CFR, CIF, CIP, CPT.

DAF, DES, DEQ, DDU, DDP.

TERMS OF PAYMENT.

The terms/method of payment in respect to export finance depends on agreement between the Exporter & Importer.

Method of Payment depend on number of factors such as.

Amount of Transaction.

Nature of Goods.

Credit standing of Buyer & Seller.

Size of Export order

Economic condition of Importers Country.

Foreign Exchange & Import control in the Importers country.

Buyer-Seller Relationship.

Competitors credit terms.

METHODS OF PAYMENT.

Cash & Carry or Advance Payment method.

Open Account.

Payment against shipment on consignment, (agent).

Letter of Credit / Documentary credit.

PARTIES TO LETTER OF CREDIT1. Applicant or Opener.

2. Issuing Bank.

3. Beneficiary.

4. Advising Bank.

5. Confirming Bank.

6. Negotiating Bank.

TYPES OF LETTER OF CREDIT Revocable & Ir-revocable.

With Re-Course & Without Re-Course.

Confirmed & Un-Confirmed.

Transferable & Non-Transferable.

Fixed & Revolving.

Restricted & Un-Restricted.

Red-Clause & Green Clause.

Back to Back.

Documentary.

ADVANTAGES OF LC TO EXPORTER. Avoid Finance problems

Prevents Bad Debts.

Fulfillment of Trade Regulations.

Avoids refusal of goods by Importer.

ADVANTAGES OF LC TO IMPORTER.

Better chances of Trade.

Timely Delivery.

Overdraft facility.

No blockage of Finance.

IMPORTS “Import” means, bringing goods inside the country

from foreign country for sale/re-sale or processing/manufacturing etc.

Import helps country in: Making available scarce resources. Exports. Technical know-how. Building good relations with other countries. Re-export/Entrepot trade.

NEGATIVE LIST OF IMPORTS.FREE GOODS.

All goods can be freely imported except those in prohibited list.

More assistance is given to Capital goods.

Can be freely imported without any restriction.

Under EPCG scheme exporters can Import CG at ZERO DUTY or concessional custom duty.

Zero duty scheme covers following sectors.

Engineering goods. Electronic goods. Basic chemicals & pharmaceuticals. Apparels & Textile products. Plastics. Handicrafts. Chemical & related products. Leather & Leather products.

Only under the condition of 6 times & 6 years rule.

CONCESSIONAL 3% duty under 8 times & 8 years rule.

PROHIBITED LIST.

Tallow, fats, oils made from any animal origin.

Animal rennet.

Animals including their parts & products.

Ivory.

RESTRICTED LIST These items can be imported only under licence & by

actual users. They include. Consumer goods. Safety security related items. Electronic items. Chemicals. Drugs & Pharmaceuticals. Pesticides. Seeds, plants & animals. Precious stones etc.

CANALIZED LIST

Only STC, NAFED, MSAMB etc can import certain items like:-

Petroleum products through IOCL.

Fertilizers through MMTC.

Cereals through FCI.

Coconut oil through STC.

CATEGORIES OF IMPORTERS

Actual user ( Industrial )

Actual users ( non-industrial )

Non actual users.