One of the major components of global or international trade is the export. Export stimulates national economic activity and facilitates international trade by creating revenues, production, and employment. India is among some of the top countries concerning the exportation of merchandise. And businesses in India export their goods and services to places with a competitive advantage.
With all the new rules and regulations, there are many opportunities for establishing a profitable exportation business. But to establish a business and start exporting globally, you must know the export procedure and how to utilise it.
Governing Authorities of the Export Procedure
The Export-Import (EXIM) Policy and Foreign Trade (Development & Regulation) Act, 1992, governs the country’s exportation. The primary governing body responsible for all the import and export policies in the country is the Directorate General of Foreign Trade (DGFT).
An export trade must follow a specific procedure, from completing the transactions to receiving inquiries. As an exporter, you must register with these governing bodies and ensure the meeting of all the legal formalities. You can even be eligible for incentives by reviewing the formalities mentioned under the different export promotion schemes.
As an exporter, you must also meet the RBI-laid guidelines. You must also have an Import-Export Code Number from the specific regional licensing authority.
Export Procedure in Detail
Generally, an export procedure includes the following steps:
Step 1: Receipt of an Order
If you are an exporter of goods, you must register yourself under several authorities, such as the RBI and the income tax department. It is one of the crucial steps of the export procedure. Along with the registration, you must appoint agents collecting orders from importers or foreign customers. You will get orders through indent houses or directly from the importer.
Step 2: Obtaining License and Quota
Once you get the order from an importer, you must also get an export license from the Government of India. For the license, you can apply to the Export Trade Control Authority. As a part of the export procedure, getting a license validates you for starting your export business.
Step 3: Letter of Credit
Generally, as an exporter of goods, you must get a letter of credit from the importer. Sometimes, the importers provide that letter by themselves with the order.
Step 4: Fixing the Exchange Rate
The foreign exchange rate is the rate at which the home currency, i.e., INR, can be exchanged with any foreign currency. The exchange rate is not fixed and periodically fluctuates. Hence, you and the importer must mutually fix the exchange rate.
Step 5: Foreign Exchange Formalities
Another important part of the export procedure is that you must comply with some foreign exchange formalities under exchange control regulations. According to FERA or the Foreign Exchange Regulation Act of India, you need to provide a declaration in a specific form as an exporter of goods. The declaration will include the following:
- The foreign exchange you will earn will be disposed of according to the way given by RBI and within the stipulated period.
- Shipping negotiations and documents must be completed through authorised foreign exchange dealers.
- You can only collect your payments for exported goods through the approved processes and methods.
Step 6: Preparation for Executing the Order
You will need to make the following arrangement for executing an order:
- Packing and marking your goods that will be exported according to the importer’s specifications.
- Get the appropriate inspection certification from the export inspection agency by getting a pre-shipment inspection.
- Get an ECGC or Export Credit Guarantee Corporation insurance policy to protect yourself from credit risks.
- Also, you need to obtain a marine insurance policy according to your requirements.
- Appoint a custom house or forwarding agent to handle all your customs-related matters.
Step 7: Formalities Performed by Forwarding Agent
Following are the formalities that your forwarding agent will perform:
- The forwarding agent will get a customs department permit for exporting the goods.
- The agent must provide all the details of the exportation goods, such as weight, quantity, and nature, to the shipping company.
- The forwarding agent will prepare a shipping order or bill.
- The agent will make two copies of the port challans and pay the dues.
Step 8: Bill of Lading
You will approach the shipping company of your goods and give them the receipt issued by the master of the ship. The receipt will be provided to you once the goods are loaded on the ship, and you will get the bill of lading from the shipping company. The bill is an official receipt that gives you the entire description of the loaded goods on the ship and the name of the destination port.
Step 9: Shipment Advise to the Importer
In this step of the export procedure, you will send shipment advice to the importer. It is so that they know about the goods dispatched. And you will also send a copy of the bill of lading, packing list, and commercial invoice accompanied by the advice note.
Step 10: Present the Documentation to the Bank
You will confirm that you have all the required shipping documents. And once you have ascertained your possession of the documents, you will hand them over to the bank.
Step 11: Realising the Export Proceeds
You need to go through the bank formalities to realise the export proceeds. Once you submit your documents, the formalities are begun. And you will also receive payment in foreign exchange.
Knowing the step-by-step export procedure is crucial for your export business. With this procedure, you can successfully export your goods internationally to your customers and get paid. Exporting can be simple if you follow the steps given above. These steps simplify the process of handling and boosting your export business.
At the same time, you must understand the authorities of the export world. And where can you get the documents, and to whom you must submit to. The entire process cannot be accomplished alone as an exporter but includes the involvement of agents that help you succeed in your business.