MBA –Elite – IV

Export –Import Documentation

Unit- 1
 Exports
Exports refer to the goods and services
produced in one country and sold to another.
In the context of international trade, exports
are a vital part of the global economy,
enabling countries to exchange goods,
services, and resources. Exporting is the
process of selling domestically produced
products or services to foreign markets.
 Types of Exports

1. Merchandise Exports: Physical goods such as machinery,

electronics, textiles, or agricultural products.
2. Service Exports: Non-tangible goods such as software
development, financial services, education, or tourism.
3. Indirect Exports Indirect exports occur when a business
does not directly sell its products to foreign buyers but
instead sells them to intermediaries, such as export agents,
trading companies, or local distributors, who then handle
the export process.
Examples of Indirect Exports: Selling goods to a domestic
distributor or wholesaler, who in turn exports the goods to
foreign markets.
4. Direct Exports In direct exports, businesses sell goods or services
directly to foreign buyers without the involvement of
intermediaries. This typically involves creating relationships with
overseas buyers, such as customers, wholesalers, or retailers, and
handling the sales process independently.
Examples of Direct Exports: Establishing a direct relationship with
international distributors or retailers.
• Exporting goods via online platforms to global customers.

5. High-Technology Exports
• These involve the export of advanced technology products and
services, including high-tech machinery, aerospace components,
electronics, and information technology products.
Examples of High-Tech Exports: Aerospace and Defense: Includes
aircraft, spacecraft, satellites, and military technology.
• Telecommunications: Includes the export of communication
systems, networks, and mobile technologies.
6. Re-exports: Re-exporting involves exporting goods that were
previously imported into the country. These goods are typically
processed, modified, or simply sold again without significant
alteration.
Examples of Re-exports:
• A country imports raw materials and then exports the finished
product to another country.
• Goods imported for a specific market that are later re-exported to a
third country where they are in demand.
7. Export of Intellectual Property (IP): This refers to the export of
intangible assets such as patents, trademarks, copyrights, and
licensing rights. Intellectual property can be sold or licensed to
foreign companies, allowing the owner to receive royalties or fees.
Examples of IP Exports:
• Licensing a patented product or process to a foreign manufacturer.
• Exporting software licenses or trademarks for use in foreign
markets.
• Exporting copyrights for books, music, films, or software.
 Exporting Process

• Production: Goods are manufactured or services are

created in the home country.
• Marketing: Companies need to find potential
international buyers, often through market research or
partnerships.
• Shipping and Logistics: After reaching an agreement,
the products are packaged, labeled, and shipped.
• Customs and Documentation: Proper documentation
and compliance with international trade laws are
necessary to clear customs.
 Export Benefits

• Economic Growth: Exports can drive

economic growth by generating revenue from
foreign buyers.
• Job Creation: Export industries often create
jobs in production, logistics, and marketing.
• Diversification: Exporting allows businesses to
reduce dependency on domestic markets by
tapping into global markets.
 Export Registration Process

• The export registration process involves

several steps to legally enable businesses to
export goods and services to foreign markets.
These steps ensure compliance with
international trade laws and help businesses
establish themselves in the global market.
Below is an outline of the typical export
registration process:
1. Obtain an Exporter Registration Number
(ERN)
• In many countries, businesses must obtain an
Exporter Registration Number (ERN), which is
issued by the relevant trade or customs
authority. This number is used for tracking and
identification purposes during exports.
• The process typically involves submitting a
formal application to the appropriate
government department, such as the Ministry
of Commerce or Customs.
2. Register with Customs Authorities
• Businesses must register with Customs to ensure they
can export goods legally. This registration may require
submitting information about the company, its
activities, and its products.
• Registration may also involve getting a Customs
Identification Number (CIN) or Tax Identification
Number (TIN), which is used in all export-related
transactions.
3. Apply for an Export License (if required)
• Some products, especially controlled goods (e.g.,
military, dual-use, or sensitive technology), may require
an Export License from the government.
• The license is typically granted by the Export Control
Authority or a similar body, depending on the nature
of the goods being exported.
4. Open an Exporter Bank Account
• It's recommended to open a separate bank account
specifically for handling export transactions. This
account helps keep business finances organized and
ensures smooth transactions with international buyers.
• Some countries require exporters to provide proof of
their business operations, including a tax registration
number and other documents related to the export.
5. Register for Taxes and Duties (if applicable)
• Businesses need to comply with domestic tax
regulations by registering for Value Added Tax (VAT) or
other applicable export duties. Some countries offer tax
exemptions or refunds for exported goods.
• For example, many countries provide VAT exemptions
for goods that are exported, which means businesses
can reclaim the VAT they paid on production.
6. Compliance with International Trade Regulations
• International Trade Agreements: Exporters must
ensure they comply with trade agreements and treaties
between the exporting and importing countries.
• Standards and Certifications: Products may need to
meet specific quality, safety, or environmental
standards that vary across countries. Certificates like
ISO, CE mark, or country-specific certifications might
be required for certain goods.
7. Product Classification and Harmonized System (HS)
Code
• Every export product must be classified according to
the Harmonized System (HS) code, which is a globally
standardized classification of products.
• Proper classification ensures accurate customs
declarations, and businesses may need to apply for an
HS Code from the Customs Department.
8. Export Documentation and Contracts
• To complete the export process, certain documents are
necessary:
– Commercial Invoice: A document providing details of the
transaction, including price, quantity, and description of
goods.
– Packing List: Details about the contents of each package,
including weight, dimensions, and packaging.
– Bill of Lading or Airway Bill: A transport document issued
by the carrier, confirming the goods have been shipped.
– Certificate of Origin: A document certifying the origin of
the goods, often required by the importing country.
• Export Contract: The business should have an export
contract with the buyer that specifies payment terms,
delivery timelines, and dispute resolution procedures.
9. Use of Export Promotion Agencies (if applicable)
• In some countries, governments provide support for
exporters through Export Promotion Agencies (EPAs),
which may help businesses with:
– Market research and identifying international buyers.
– Financial assistance or insurance for international transactions.
– Information on trade regulations and compliance.
• Examples include the Export-Import Bank and Export
Credit Agencies (ECAs).
10. Engage in International Trade Financing
• Exporters may need to explore financing options to support
their transactions, including trade credit, letter of credit, or
bank guarantees, which protect both the exporter and the
importer.
• Engaging with financial institutions and understanding
foreign exchange risk is essential for managing international
transactions.
 Selection of products and market for
exports
• When selecting products for export and
determining the best markets, there are
several key factors to consider in order to
maximize success. Below is a step-by-step
approach for selecting export products and
identifying suitable markets:
1. Analyze Domestic Product Availability and Strengths
• Resource Availability: Evaluate what your country produces in
abundance, whether it's raw materials, manufactured goods, or
unique products.
• Competitive Advantage: Consider products where your country has a
competitive advantage in terms of cost, quality, or production
efficiency.
• Product Popularity: Assess the domestic market demand. High
demand products domestically may also have potential in
international markets.
2. Conduct Market Research
• Global Trends: Identify global trends and demand patterns. For
example, if there’s a growing interest in sustainable or organic
products worldwide, this could guide your selection.
• Target Market Research: Focus on specific countries or regions
where demand for your product is likely. Use market research tools,
export statistics, trade data, and reports.
• Consumer Preferences: Understand the preferences and tastes of
consumers in the target market. A product that is popular in one
country may not necessarily be appealing in another.
3. Consider Legal and Regulatory Requirements
• Import Regulations: Research the import laws, tariffs, and
taxes that apply to your products in the target markets.
• Product Certification: Ensure the product meets the quality
and certification standards required by the importing
country.
• Trade Agreements: Take into account any trade agreements
between your country and the target market that could
reduce tariffs or offer other advantages.
4. Evaluate Product Profitability
• Cost of Production: Understand the production and
transportation costs involved in exporting the product.
• Pricing in Target Markets: Analyze the pricing structures of
your product in potential export markets to ensure
profitability.
• Market Competition: Assess the level of competition in the
foreign market and determine if your product can compete
effectively in terms of quality, price, or differentiation.
5. Logistics and Transportation Considerations
• Shipping Costs: Consider the feasibility of shipping your
product to the target market in terms of distance, shipping
methods, and costs.
• Shelf Life and Storage: If your product is perishable or
requires specific storage conditions, ensure that the market
has the necessary infrastructure to handle it.
6. Target Market Criteria
• Economic Stability: Look for markets with stable or growing
economies that have the purchasing power to buy your
products.
• Cultural and Language Factors: Ensure that your product is
culturally appropriate and has demand in the region you are
targeting. Language and cultural differences can impact
product reception.
• Geographic Proximity: Sometimes, it’s easier and cheaper to
export to nearby countries, particularly within regional trade
blocks.
7. Leverage Export Platforms and Trade Fairs
• Trade Fairs and Exhibitions: Participate in international trade fairs to
showcase your products and identify market interest.
• Online Platforms: Utilize B2B export platforms like Alibaba, TradeKey, or
other industry-specific marketplaces to connect with buyers.
Example Products for Export:
• Agricultural Products: Such as grains, coffee, tea, fruits, and vegetables,
which are in demand in various international markets.
• Textiles and Apparel: Countries with strong textile industries often export
garments, fabrics, or fashion accessories.
• Technology Products: Electronics, software, and IT services are high-
demand sectors for export.
• Handicrafts: Unique cultural products like artisanal crafts or traditional
artwork may appeal to niche markets in other countries.
• Food and Beverages: Organic, natural, or ethnic food products can have
strong demand in international markets, particularly in countries with
diverse immigrant populations.
• Energy and Raw Materials: Oil, natural gas, and minerals are highly traded
globally.
• Manufactured Goods: Items like machinery, automotive parts, and home
appliances can also be lucrative export products depending on your
country's manufacturing capacity.
 PAYMENT TERMS
1. Cash in Advance (Prepayment)
• Description: The importer (buyer) pays the exporter in full
before shipment or delivery of goods.
• Advantages:
– The exporter receives payment upfront, reducing the risk of
non-payment or delays.
– Simple and straightforward.
• Disadvantages:
– Buyers may be reluctant to agree to this, especially if they don’t
know the exporter well, as they bear the entire payment risk.
• Best for: New or untested business relationships, or when
selling to countries with higher political or economic
instability.
2. Letters of Credit (L/C)
• Description: A Letter of Credit is a financial document
issued by the importer’s bank that guarantees payment
to the exporter upon compliance with the agreed
terms. It ensures that the exporter will receive payment
once the specified conditions (like proof of shipment)
are met.
• Advantages:
– Provides a high level of security for both parties.
– Reduces the risk of non-payment, as the bank acts as a
guarantor.
• Disadvantages:
– Can be expensive due to bank fees and charges.
– Complex documentation and procedural requirements can
be cumbersome.
• Best for: Transactions involving large amounts or
dealing with unfamiliar or high-risk markets.
3. Documents Against Payment (D/P)
• Description: The exporter ships goods to the
buyer and provides shipping documents to a bank.
The buyer can only receive the documents (and
thus the goods) after paying the agreed amount.
• Advantages:
– The exporter retains control of the goods until
payment is made.
– More flexible and less expensive than an L/C.
• Disadvantages:
– Payment is only made when the buyer is able to pay,
potentially delaying the transaction.
– Less secure than a Letter of Credit.
• Best for: Established trading relationships where
both parties trust each other.
4. Documents Against Acceptance (D/A)
• Description: The buyer agrees to pay the exporter at a
later date, but they can access the goods upon
accepting a draft (a written order to pay at a specified
future date).
• Advantages:
– Offers the buyer some flexibility in terms of payment.
– Can strengthen relationships between businesses.
• Disadvantages:
– Higher risk for the exporter, as they are shipping goods
before receiving payment.
– The buyer may not pay on time or at all, especially in cases
of economic instability.
• Best for: Trusted buyers, repeat customers, or longer-
term business relationships.
5. Open Account
• Description: The exporter ships goods and allows the
importer to pay within a specified period (usually 30,
60, or 90 days after shipment).
• Advantages:
– Most favorable for buyers, as it provides time to sell the
goods and generate revenue before payment is due.
– No intermediary like a bank is required, making it more
cost-effective.
• Disadvantages:
– Very risky for the exporter because they are trusting the
buyer to pay later.
– This is typically used in cases of well-established and
trusted trade relationships.
• Best for: Long-term, trusted relationships between the
exporter and importer.
6. Cash on Delivery (COD)
• Description: Payment is made in full by the
buyer at the time of delivery, either before
receiving the goods or once they are received.
• Advantages:
– The exporter has the assurance of receiving
payment before releasing the goods.
• Disadvantages:
– Limited to small or local transactions and may not
be feasible for international trade.
• Best for: Local or short-distance exports.
7. Consignment
• Description: The exporter ships goods to a local agent
or distributor in the buyer’s country but retains
ownership of the goods until they are sold. The buyer
pays the exporter after the goods are sold to the end
customers.
• Advantages:
– Provides the buyer with the opportunity to sell goods
without upfront costs.
– The exporter can often charge higher prices by entering
into new markets or distributing through agents.
• Disadvantages:
– High risk for the exporter, as they rely on the buyer to sell
and remit payment.
– May result in delayed or incomplete payments.
• Best for: When building market presence, or for higher-
value products with longer selling cycles.
 Factors to Consider When Choosing
Payment Terms
• Trust and Relationship: The level of trust between the
buyer and seller can impact the chosen payment terms. For
new or high-risk markets, exporters tend to prefer more
secure payment options like cash in advance or letters of
credit.
• Market Risks: Political or economic instability in the buyer's
country can increase the risk of non-payment, prompting
the use of more secure terms.
• Payment Delays: Payment terms such as Open Account or
Documents Against Acceptance allow for delays in
payment, which can be more acceptable in certain
industries but pose risks to exporters.
• Transaction Size: Larger transactions often benefit from
more secure terms like letters of credit, whereas smaller
ones can often be handled with simpler arrangements.
 Export Costing

• Export costing involves identifying and calculating all costs incurred from
producing, packaging, shipping, and delivering goods to a foreign market.
It helps ensure that exporters cover all their expenses and earn a
reasonable profit.
• Key Elements of Export Costing:
1. Production Costs
– Raw Materials: The cost of the materials used to make the product.
– Labor Costs: Wages paid to workers involved in the production process.
– Manufacturing Overheads: Costs related to the production process, such as
utilities, factory maintenance, and machinery depreciation.
2. Packaging Costs
– Packaging Materials: Cost of materials like boxes, crates, and pallets to protect
goods during transport.
– Labeling and Documentation: Includes the cost of labels, export
documentation (e.g., certificates of origin), and any special packaging required
for international shipments.
3. Transportation Costs
• Freight Charges: Cost of shipping goods by sea, air, land, or rail. This includes both the main
shipping costs and the secondary transportation to/from ports and warehouses.
• Insurance: Costs associated with insuring the goods during transit to mitigate risks such as damage,
loss, or theft.
• Customs Fees and Duties: Import tariffs, taxes, and other duties levied by the exporting and
importing countries' customs authorities.
• Handling Fees: Charges for handling the goods at ports, airports, or warehouses.

4. Export Documentation and Compliance Costs

• Export Licenses: Any required licenses or permits to export goods.
• Customs Clearance: Charges for customs brokerage and the processing of export paperwork.
• Certificates and Inspections: Costs for obtaining required certifications (e.g., phytosanitary
certificates for agricultural goods) and undergoing inspections by regulatory authorities.

5. Storage Costs
• Warehouse Fees: Costs related to storing goods before shipment, whether in domestic warehouses
or at international ports.
• Inventory Management: Costs of managing inventory, including software, personnel, and storage
space.

6. Marketing and Sales Expenses

• Market Research: Costs associated with studying foreign markets, consumer preferences, and
competitor analysis.
• Advertising and Promotion: Costs for marketing campaigns tailored to the export market, including
trade shows, online marketing, and local advertising.
• Sales Commissions: Fees paid to sales agents or distributors in foreign markets.
 Export Pricing

• Export pricing refers to setting the final price of the product in the
international market. This price should cover all costs and include a profit
margin while remaining competitive. Several factors influence export
pricing decisions.
• Key Factors in Export Pricing:
1. Cost-Plus Pricing
– Description: A pricing strategy where the export price is calculated by adding a
markup to the total costs (production, packaging, transportation, etc.).
– Formula: Export Price=Total Cost+Markup\text{Export Price} = \text{Total Cost}
+ \text{Markup}Export Price=Total Cost+Markup
– Markup: Typically includes the desired profit margin and covers indirect costs
like marketing and administration.
2. Competitive Pricing
– Description: Pricing based on competitor prices in the target market. The
exporter adjusts their price to be competitive with similar products already in
the foreign market.
– Challenges: Ensuring your product offers value over competitors while
maintaining profitability.
3. Market-Oriented Pricing
• Description: Pricing is based on the perceived value of the product
in the foreign market. This may vary significantly between markets,
depending on factors such as local purchasing power and demand
for the product.
• Premium Pricing: For unique or high-quality products, exporters
may charge a premium, especially if their product has significant
differentiation from competitors.
4. Penetration Pricing
• Description: Lowering the price to quickly enter a new market and
gain market share. Once a foothold is established, the price can be
gradually increased.
• Challenges: Although this can lead to high sales volume, it may
reduce initial profitability and can be risky if not executed carefully.
5. Price Skimming
• Description: Setting a high initial price to capture the most revenue
from customers willing to pay a premium, followed by reducing the
price over time to attract a broader customer base.
• Best for: Innovative or unique products, particularly in tech or
luxury markets.
6. Currency Exchange Rates
• Description: The fluctuating value of the local currency against the target
market’s currency can impact the price. Exporters may need to adjust
prices based on exchange rate movements.
• Hedging: Some exporters use financial instruments to hedge against
exchange rate risks and stabilize pricing.
7. Tariffs, Duties, and Taxes
• Import Tariffs: Import duties levied by the importing country can affect
the final price. The exporter can either absorb the cost or pass it on to the
buyer.
• Value Added Tax (VAT): Some countries impose VAT on imports, which can
increase the cost of goods for the buyer.
8. Incoterms (International Commercial Terms)
• Description: Incoterms define the responsibilities of buyers and sellers
regarding shipping, insurance, and import/export duties. The choice of
Incoterms affects the pricing structure:
– FOB (Free On Board): The exporter is responsible for all costs until the goods
are loaded onto the transport.
– CIF (Cost, Insurance, and Freight): The exporter pays for insurance and freight
until the goods reach the destination port.
– DDP (Delivered Duty Paid): The exporter bears all costs, including duties,
taxes, and delivery to the buyer’s door.
 IEC - Import Export Code
The Import Export Code (IEC) is a unique 10-digit code issued by the Directorate
General of Foreign Trade (DGFT) in India. It is required for any business that wishes
to engage in import or export activities.
• Key Features of IEC:
• Mandatory Requirement: An IEC is necessary to engage in export or import
activities. Without it, businesses cannot clear customs or receive benefits from
government export promotion schemes.
• Application Process: The application for IEC is submitted online through the DGFT
portal. It requires basic company details, PAN number, and address proof.
• Validity: The IEC is valid for a lifetime and does not need to be renewed.
• Benefits: An IEC enables the exporter to:
– Import and export goods legally.
– Access export incentives and benefits.
– Clear customs smoothly.
– Participate in various export promotion schemes.
• When is IEC Required?
1. When applying to export goods.
2. For clearing customs at the port.
3. For receiving payments through foreign transactions.
 RCMC - Registration Cum
Membership Certificate
• The RCMC (Registration Cum Membership Certificate) is issued by various Export Promotion
Councils (EPCs) and industry associations. It is a certificate that grants the exporter access to
specific export benefits, such as export incentives, subsidies, and schemes provided by the
government.
Note: The BCMC (Broker Cum Membership Certificate) has been merged into the RCMC under the
revised export registration system.
• Key Features of RCMC:
• Issued by EPCs: Depending on the type of product being exported (e.g., textiles, chemicals, etc.),
the RCMC is issued by the respective Export Promotion Council.

• Eligibility: The exporter must be registered with the relevant EPC based on the product they deal
with. The exporter must also comply with the council’s conditions and be an active exporter.

• Validity: The RCMC is typically valid for five years and must be renewed after that period.

• Benefits: With an RCMC, exporters are eligible for:

– Export incentives and subsidies.
– Duty exemption schemes like the Duty Drawback Scheme.
– Various export-related benefits and schemes under Foreign Trade Policy (FTP).
– Facilitation in obtaining export-related documents like shipping bills.

When is RCMC Required?

1. To apply for export benefits under the Foreign Trade Policy.
2. For availing schemes such as Merchandise Export from India Scheme (MEIS) or Export
Promotion Capital Goods (EPCG).
3. When seeking duty-free import authorizations.
 EPC - Export Promotion Council
Export Promotion Councils (EPCs) are organizations that facilitate and promote the export of specific
products or services from India. They are industry-specific and play a crucial role in helping
businesses access global markets.
Key Features of EPC:

• Product-Specific: Each EPC represents a specific sector or industry, such as textiles, agriculture,
chemicals, or engineering.

• Supportive Role: EPCs offer guidance, support, and incentives for export promotion, such as:
– Organizing trade fairs, exhibitions, and market research.
– Providing information about foreign markets and export regulations.
– Assisting exporters in navigating logistics, financing, and customs.

• Issuance of RCMC: EPCs issue the RCMC to exporters in their respective sectors.
• Examples of Export Promotion Councils:
• Handloom Export Promotion Council (HEPC) – for handloom products.
• Federation of Indian Export Organisations (FIEO) – represents a wide range of export sectors.
• Chemicals and Allied Products Export Promotion Council (CAPEXIL) – for chemicals, dyes, and
related products.
• Engineering Export Promotion Council (EEPC) – for engineering products.

When is EPC Membership Required?

• When exporters need to get an RCMC.
• To participate in trade fairs or international exhibitions organized by EPCs.
• For receiving sector-specific export benefits and schemes.
 Central Excise Registration
Central Excise Registration is required for manufacturers of excisable goods. It is a tax registration under
the Central Excise Act, 1944 and is required for businesses involved in the manufacturing of goods
that are subject to excise duty.
Key Features of Central Excise Registration:
• For Manufacturers: Central Excise registration is mandatory for businesses manufacturing goods
that attract excise duty, which is levied on the production of goods.
• Excisable Goods: These include a wide range of goods such as petroleum products, alcohol,
tobacco, and certain electronics and chemicals, among others.
• Registration Process: The application is submitted online to the Central Excise Department. The
company must provide details like the business name, address, and the nature of goods being
manufactured.
• Record-Keeping: The registered entity must maintain detailed records of production, sales, and
excise duty payments.

• Benefits of Central Excise Registration:

• Duty Exemptions: Registered manufacturers can avail of various excise duty exemptions for
exported goods under the Export Promotion Scheme.
• Refunds: They are eligible for Duty Drawback (refund of excise duties) on goods that are exported.
• Tax Credit: Central Excise registration also allows manufacturers to avail of input tax credits,
thereby reducing the tax burden.

When is Central Excise Registration Required?

1. When manufacturing excisable goods (subject to excise duty).
2. If the turnover exceeds a certain threshold prescribed by the government.
3. For claiming excise duty exemptions or refunds on exported goods.