This might just be the opportune time for someone wanting to kick-start their export venture. If you are taking your business overseas, there are a couple of things that you should take into account before making the jump.
Import and export in India is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices spread across the country. All transactions involving foreign exchange are governed by the Foreign Exchange Management Act, 1999. Under this, the Foreign Exchange Management (Export of goods and services) Regulations, 2000, were framed.
Not all products can be exported. The DGFT has prepared a list of products that can be exported and the restrictions attached to each.
According to the DGFT guidelines, import and export is permitted on the basis of the Most Favoured Nation (MFN) status. However, on account of international conventions or UN sanctions, import and export of some goods are prohibited to and from certain countries, such as Iran and North Korea.
Understanding prices and costs
It goes without saying that running an export business requires your undivided time and attention as challenges can appear from every end. “Whether you are an exporter or retailer, you will always have challenges — both on the backward integration and forward linkages. You will have to predict them and be ready. In backward integration, you have to see the quality and packaging, and foresee any other complications. Looking forward, the exporter has to find the right market and the right prices for the product,” says Rakesh Kumar, Director General, EPCH India.
Adding to this, Arvind Sharma, Partner, Shardul Amarchand Mangaldas, says before deciding to export a product, the business person should make sure they are ready to scale up their production to match international levels.
“If you are ready to scale up and have the interest and backing of investors, you are ready to export. Creditworthiness is another important aspect. When talking about selling in a larger market, credit is one of the key elements that will give you confidence and support to do a trade,” he says.
For any business, fiscal discipline is important to cut costs and ensure the business can sustain even during dry days. Before getting into exports, map out all your expenses and also save some for unprecedented or overlooked costs and charges. Once you know you are ready financially, it will boost your confidence.
Another element that can help is the collective support and strength of your stuff. As mentioned earlier, going global will require you to scale up production and that means having the capability. Aspiring exporters need to make sure they have enough skilled manpower, machinery and infrastructure and are willing to add more as the workload is likely to increase.
Shardul Amarchand Mangaldas’ Sharma says aspiring exporters should also see if their product is bringing some kind of value-addition to the global value chain. This will further help them make more connections and market linkages, which will help them move forward and sustain momentum.
Further, he advises a look into intellectual property laws. “If you are working in a sector where it makes a lot of difference socially and economically, you have to start looking into how you will protect your intellectual property.”
Logistics is another important aspect. Sharma advises exporters to ensure that they have experienced hands with them to handle the various challenges. “These people should be able to handle your logistics documentation and make sure your money comes in time,” he says.
Papers in order
Before you venture into the export world, there are several formalities to be fulfilled. You have to make sure all your papers are in order. In case you find it time consuming, hire a freight forwarder to make the processes and paperwork easier.
Some of the mandatory documents for exporting from India are bill of lading/lorry receipt/airway bill, commercial invoice cum packing list, and shipping bill or bill of export. Also, export documents need to be submitted to the banks concerned within 21 days of export date.
Sharma recommends taking the help of a third party or building an in-house team to deal with documentation. For a novice exporter, he says, it will be much easier to engage advisers and consultants and to learn from them.
“They know exactly how the customs authority and international trade authorities work, what they need, and it just makes the job faster. We live in the world of hyper-specialisation or rather micro-specialisation and it will definitely help if we outsource these processes, or if we have an in-house team that specialises in documentation,” he says.
The decision to become an exporter is ambitious and it can take one through an arduous path. A lot of informed decisions, research, hard work and learning is required to make it big in the world of international trade.