SPICES

INTERNATIONAL BUSINESS
ENVIRONMENT
SPICES
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PREPARED BY: JAY BAPODARA
ROLL NO: 32
GUIDED BY: PROF.HINAL SONGHELA

SUBMITED TO: DR. V.R.G COLLEGE
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INTRODUCTION
India, known as the home of spices, boast a long history

of trading with the ancient civilizations of Rome and China. Today,
Indian spices are the most sought-after globally, given their exquisite
aroma, texture, taste and medicinal value. India has the largest domestic
market for spices in the world. Traditionally, spices in India have been
grown in small land holdings, with organic farming gaining
prominence in recent times. India is the world's largest producer,
consumer and exporter of spices; the country produces about 75 of the
109 varieties listed by the International Organization for
Standardization (ISO) and accounts for half of the global trading in
spices.
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TYPES OF PAYMENT
There are a variety of ways that payments can be made, including a

different level risk for collection. We will try to explain these methods
from most secure to least secure for exporters.
1. Cash-in-Advance
Cash-in-advance payment terms can help an exporter avoid credit risks,

because payment is received up front before the ownership of the goods
is transferred. For international sales, wire transfers and credit cards are
the most common used cash-in-advance options available for
importers. This presents the least risk to a seller while having the most
risk to the buyer.
However, requiring payment in advance is the least favorite option for
the buyer, because it generates an unfavorable cash flow. Especially
when traders do not know each other, buyers are concerned that the
goods may not be sent if payment is made in advance. Also, exporters
who insist on this payment method as their sole manner of doing
business may lose to competitors who offer more attractive payment
terms.
2. Letters of Credit
A letter of credit, or “credit letter” is one of the most secure payment

methods available to international traders. It is a letter from a bank
guaranteeing that a buyer’s payment to a seller will be received on time
and for the correct amount and it is one of the most secure payment
methods available to international traders. The buyer sets up credit and
pays his or her bank for this service. A Letter of Credit is useful when
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well-founded credit information about a foreign buyer does not exist or
is difficult to secure, but the exporter is satisfied with the
creditworthiness of the buyer’s foreign bank. A Letter of Credit also
protects the buyer as they do not need to make a payment until the
goods have been shipped as promised.
3. Documentary Collections
In a documentary collection process, the seller instructs their bank to

forward documents related to the export of goods to a buyer’s bank
with an instruction to present these documents to the buyer for
payment, pointing when and on what circumstances these documents
can be released to the buyer. Funds are received from the importer and
transferred to the exporter through the banks involved in the collection
in exchange for those documents. Documentary Collections involve
using a draft that requires the importer to pay the face amount either at
sight (document against payment) or on a specified date (document
against acceptance). The collection letter gives instructions that specify
the documents required for the transfer of title to the goods.
Although banks do act as facilitators for their clients, Documentary
Collections offer no verification process and limited recourse in the
event of non-payment. They do not provide the same level of security
as Letters of Credit, but, as a result, the costs are lower. Unlike Letters
of Credit, for a Documentary Collection, the bank acts as a channel for
the documents but does not issue any payment covenants (does not
guarantee payment). The bank that has received a Documentary
Collection may debit the buyer’s account and make payment only if
authorized by the buyer.
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4. Open Account
An open account transaction is a sale where the goods are shipped and
delivered before payment is due, which in international sales is
typically in 30, 60 or 90 days. Obviously, this method is based on the
trustworthiness between the two parties and this is one of the most
advantageous options to the importer in terms of cash flow and cost,
but is consequently one of the highest risk options for an exporter.
Because of high competition in export markets, foreign buyers often
press exporters for open account terms since the extension of credit by
the seller to the buyer is more common abroad. Therefore, exporters
who are not willing to extend credit may lose a sale to their competitors.
Exporters can offer competitive open account terms while substantially
mitigating the risk of non-payment by using one or more of the
appropriate trade finance techniques covered later in this guide. When
exporters offer open account terms, they can also use export credit
insurance for extra protection.
5. Consignment
Consignment is another method of an open account in which payment

is sent to the exporter only after the goods are sold by the foreign
distributor to the end customer. An international consignment
transaction is based on a contractual arrangement in which the foreign
distributor receives, manages, and sells the goods for the exporter who
retains title to the goods until they are sold. Clearly, exporting on
consignment contains high risks as the exporter may not receive any
payment and its goods are in a foreign country in the hands of an
independent distributor or agent.
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Consignment increases the chances of exporters to become more
competitive on the basis of better availability and faster delivery of
goods. Selling on consignment can also help exporters reduce the direct
costs of storing and managing inventory. The key to success in
exporting on consignment is to partner with a reputable and trustworthy
foreign distributor or a third-party logistics provider. Appropriate
insurance should be in place to cover consigned goods in transit or in
possession of a foreign distributor as well as to mitigate the risk of non-
payment.
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DOCUMENTS REQUIRED
Documents Required to Start a Spice Export Business
• Incorporation Certificate for the business from the Registrar of

Companies
• Import Export Code from the Director-General of Foreign Trade
• Registration cum Membership Certificate from the Spice Board
• Goods and Service Tax registration for tax purposes
• MSME registration
• Trademark registration to protect your brand in foreign markets
• Food Safety and Standard Authority of India registration or
license
• Passport size photo
• Phytosanitary Certificate
• Authorized Dealer Code from a recognized bank
• Bank certificate and statement
• Company PAN card
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PROCEDURE OF EXPORT
➢ First and foremost, entrepreneurs will need to determine what

type of business you want to start and in which spice you want to
specialize. You could opt to become a producer, wholesaler,
supplier, retailer, or exporter, depending on your interest and
capital in hand.
➢ Next, you will have to conduct market research to understand

more about the spice market and the spices on which you are
focusing. This will help build a sustainable supply chain for the
spice.
➢ You would then have to meet with suppliers and vendors and buy
their spices in bulk. To accommodate this, you will need to locate
a suitable storage location and either rent or buy it. If you wish to
start a retail business as well, you would need to install the right
machinery and equipment to get the production facility running.
The list of machinery required for starting a spice export business
in India are as follows;
• Compressor
• Disintegrator
• Heat sealing machine
• Packaging machine
• Roster
• Spice grinders and sieves
• Weighing scale
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➢ Next, entrepreneurs will have to meet with a legal expert to
understand the legal compliances required to start such a
business. The lawyer will provide further details on what licenses
and certificates you will need to start operating in India.
➢ You will now have to start the documentation process so that you
obtain the required licenses on time. Additionally, you will also
have to register your business as a viable business structure at this
stage.
➢ You will then have to find suppliers in Europe, the US, and other
countries where you wish to export to and establish a good
working relationship with them. Once you have the buyers in
place, you can start the paperwork required to start exporting the
spices.
➢ Along the way, you will also need to find suitable investors and
creditors to help finance your operations. You might need a spice
export business plan ready before you approach investors to make
sure you are well prepared.
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INTERNATIONAL BUSINESS

GUIDED BY: PROF.HINAL SONGHELA

India, known as the home of spices, boast a long history

There are a variety of ways that payments can be made, including a

Cash-in-advance payment terms can help an exporter avoid credit risks,

A letter of credit, or “credit letter” is one of the most secure payment

In a documentary collection process, the seller instructs their bank to

Consignment is another method of an open account in which payment

Documents Required to Start a Spice Export Business

• Incorporation Certificate for the business from the Registrar of

➢ First and foremost, entrepreneurs will need to determine what

➢ Next, you will have to conduct market research to understand

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