Export & Import

Trade Operations

Dr. Anupam Varma, BIMTECH

A Little Bit of History
 Scenario pre 1991
 Requirement for licenses
 The inspector raj
 Bureaucratic controls
 Complex legislations & manufacturer protective
policies
 High import duties contd.
A Little Bit of History contd.

 Scenario post 1991

 End of licensed raj
 A marked shift from protecting ‘producers’ to benefiting
‘consumers’.
 Process of global integration of Indian economy
commenced
 Markets opened up for import, simplification in rules
 Drastic cut in import duties
 Emergence of world wide production, broader access to
factors of production in a range of foreign destinations
contd
A Little Bit of History contd.

 Emergence of worldwide financial markets and better

access to external financing
 Realization of a common global market, based on the
freedom of exchange of goods and capital
 Increase in information flow between geographically
remote locations
 Growth of cross cultural contacts.
 Our merchandise exports till 1991 (in 44 years after
independence) were US$ 17.86 b and in the last 19 years
these have grown (in 2009-10) to US$ 176b !!
The Drivers
 Opportunity cost
 Declining trade & investment barriers
 Role of technological change
- Information technology,
- Communication
- Transport
 Infrastructure development – roads, ports, airports
 Implications of globalisation of markets
 Implications of globalisation of products
Company’s Readiness to Export?
 Motivational Factors:
 Contribution to long term expansion of business
 Enhancing competitiveness
 Exploiting unique technology & expertise
 Improving return on investment
Company’s Readiness to Export?
Contd.

 Organizational Factors:
 Commitment of Management
 Funding support
 Personal commitment & expertise
 Production capabilities
 Exporting goals
Product Readiness to Export
 Product success in domestic markets
 Does it require modifications for the selected
markets
 Does it require extensive training to operate
or use
 Does it require considerable after sale service
 Is it unique or differentiated
Advantages of International Trade -
Firm
 Increase in domestic competitiveness
 Increase in sales, profit and turnover
 Increase in global market share
 Decrease in dependence on existing
markets. Spread of business risk
 Better use of corporate technology and
technical know how (contd.)
Advantages of International Trade -
Firm (contd.)

 Control on cyclical market fluctuations

 Better chances of corporate expansion.
Additional incentives from the government
 Using excess production capacity
effectively
 Better learning curve through information
about foreign competition
Advantages to the Nation
For the nation, greater international trade activity
means:
 More economic growth
 Effective exploitation and management of natural
and physical resources of the country
 Employment generation
 Foreign exchange accumulation
 Infrastructure development
 Improved living standards
 Larger economic & political clout
The Need & Importance of Understanding
International Trade Operations
 To facilitate smooth flow of cargo from exporter to
the importer
 Ensure receipt of payment from the importer
 Ensure safe voyage and risk cover
 Ensure timely receipt of the cargo in good
condition from the exporter
 To secure export incentives on the basis of export
documents
Players in the Trade Chain
ORDER/PREPARE TRANSPORT CUSTOMS PAYMENT

§Exporter/importer §Freight §Custom §Bank

§Insurance company forwarder clearance §Financial
§Chamber of §Transporter/carr §Health institutions
commerce ier authorities §Other
§Export/import agent §Shipping line §Port intermediaries
§Licensing §Export management
authorities inspection §Custom
§Embassies agency brokers
§Credit checking §Other §Other
company intermediaries intermediarie
§Supplier s
§Other
intermediaries
 exporter importer

bank in
exporters Importers bank
country
Importer warehouse

Manufacturing/
Procuring
customers

Secure transportation
and documentation
Ship
Legal Framework – An Overview
 Foreign Trade (Development & Regulation)
Act, 1992
 Foreign Exchange Management Act
(FEMA), 1999
 The Customs Act, 1962
 Export (Quality Control and Inspection) Act,
1963
Foreign Trade (Development &
Regulation) Act, 1992
 Preceded by Imports and Exports (Control) Act,
1947, Import (Control) Order, 1955 & Export
(Control) Order, 1988
 It is the main legislation concerning foreign trade
 The Act provides for the development and
regulation of foreign trade by facilitating imports
into, and augmenting exports from, India and for
matters connected therewith or incidental thereto.
contd.
Foreign Trade (Development &
Regulation) Act, 1992 contd.

 As per the provisions of the Act, the Government :

 may make provisions for facilitating and controlling foreign
trade;
 may prohibit, restrict and regulate exports and imports, in
all or specified cases as well as subject them to
exemptions;
 is authorised to formulate and announce an export and
import policy and also amend the same from time to time,
by notification in the Official Gazette;
 is also authorised to appoint a 'Director General of
Foreign Trade' for the purpose of the Act, including
formulation and implementation of the export-import
policy.
Exports & Import – General
Provisions in FTP
 The interpretation of Policy: DGFT is the final authority.
Any exemption from policy or procedure also to be
referred to DGFT
 Freedom to export & import except to the extent of
provisions in the Foreign Trade Policy or any other law in
force
 Every exporter/importer must comply with the provisions
of the Foreign Trade (Development & Regulation) Act
1992
 No agency shall withhold consignments allowed for
exports. Free movement of export goods is allowed.
Authority can take undertaking from exporter in case of
any doubt
 Specific Provisions
 Free exports
 All exports in freely convertible currency
except in specific situations
 Realization of export proceeds within a
specified time
 Exports of imported goods
 Export of replacement/repaired goods
 Deemed exports
The Guiding Factors – Foreign Trade
Policy
 With economic reforms, globalisation of the
Indian economy has been the guiding factor in
formulating the trade policies.
 The reform measures introduced in the
subsequent policies have focused on
liberalization, openness and transparency.
 They have provided an export friendly
environment by simplifying the procedures for
trade facilitation
Foreign Exchange Management Act,
1999
 Preceded by Foreign Exchange Regulations Act 1947,
Foreign Exchange Regulations Act 1973, Foreign
Exchange Regulations (Amendment) Act, 1993
 FEMA is an Act to consolidate and amend the law relating
to foreign exchange with the objective of
 revising and uniting all the laws that relate to
foreign exchange
 facilitating external trade and payments
 promoting the orderly development and
maintenance of foreign exchange market in India.
Contd.
Foreign Exchange Management Act,
1999 contd.

 The most noticeable aspect of FEMA is that

usually there is no imprisonment for
contraventions of the law.
 FERA to FEMA is a substantial change in
scope, content and approach.
 FEMA is almost a new law altogether which
needs an independent reading and
interpretation divorced from the earlier law and
decisions rendered there under.
The Customs Act, 1962
 The Customs Act, 1962, is a consolidated and
comprehensive legislation, replacing earlier enactments
like the Sea Customs Act, 1878, the Land Customs Act,
1924 and the Aircraft Act, 1934.
 Customs revenue is a major source of income to the
Central Exchequer. The vast expansion in trade has
invested customs administration with great importance.
 The law relating to customs stands necessarily
interlinked with exports and imports, foreign exchange
regulations, prevention of smuggling, etc. Contd.
The Customs Act, 1962 Contd.

 Primary objectives are to:

 Regulate the genuine export & import trade
transactions
 Check smuggling
 Collect revenue
 Gather trade statistics
The Export (Quality Control and
Inspection) ACT, 1963
 An Act to provide for the sound development of
the export trade of India through quality control
and inspection and for matters connected
therewith.
 Empowers the government to notify
commodities which may be subject to
compulsory quality control & inspection prior to
export
 Export Inspection Council (EIC) & Export
Inspection Agencies (EIA) were established
under this Act.
EIC
 Export Inspection Council, either directly or through Export
Inspection Agencies, its field organisation renders services in
the areas of:
 Certification of quality of export commodities through
installation of quality assurance systems (In-process Quality
Control and Self Certification) in the exporting units as well as
consignment wise inspection. 

Certification of quality of food items for export through

installation of Food safety Management System in the food
processing units. 

Issue of Certificates of origin to exporters under various

preferential tariff schemes for export products.
Other Rules/Guidelines
In addition to the major Acts as described in the
previous slides, there are a number of other rules
& regulations, government guidelines relating to
 Export/import of commodities,
 Documentation,
 modes of insurance,
 modes of transportation,
 international conventions,
These also need to be strictly observed while
conducting the export & import business
Export Promotion Councils/Boards
 With a view to securing active co-operation of
producers and exporters in the drive for export
promotion Govt. of India has sponsored number
of export promotion councils /boards
 These are non profit organisations under the
Company’s Act
 There are about 30 such councils / boards for
various commodities with branches and regional
offices throughout the country.
Export Promotion Councils/Boards
 All exporters of products coming under the
council are entitled to become the members
of the council if they wish to claim export
incentives and assistance provided by the
council as per government’s policy.
 The Govt. provides grants under various
heads for the councils.
Role
 The main role of the EPCs is to project India's
image abroad as a reliable supplier of high quality
goods and services.
 In particular, the EPCs encourage and monitor the
observance of international standards and
specifications by exporters.
 The EPCs keep abreast of the trends and
opportunities in international markets for goods
and services and assist their members in taking
advantage of such opportunities in order to
expand and diversify exports.
Functions
 To provide commercially useful information and
assistance to their members in developing and
increasing their exports

 To offer professional advice to their members in

areas such as technology upgradation, quality
and design improvement, standards and
specifications, product development and
innovation etc.

 To organise visits of delegations of its members

abroad to explore overseas market opportunities.
Functions- contd.
 To organise participation in trade fairs, exhibitions
and buyer-seller meets in India and abroad.

 To promote interaction between the exporting

community and the Government both at the
Central and State levels

 To build a statistical base and provide data on the

exports and imports of the country, exports and
imports of their members, as well as other
relevant international trade data.
Support Institutions to Facilitate
Exports
Some of these institutions are:
 Export Credit Guarantee Corporation
(ECGC)
 Exim Bank of India
 India Trade Promotion Organisation (ITPO)
 Export Inspection council (EIC)
 Indian Institute of Packaging (IIP) contd.
ECGC
 Provides a range of credit risk insurance covers to
exporters against loss in export of goods and
services
 Offers guarantees to banks and financial
institutions to enable exporters to obtain better
facilities from them
 Provides Overseas Investment Insurance to
Indian companies investing in joint ventures
abroad in the form of equity or loan
How does ECGC help exporters?
 Offers insurance protection to exporters against
payment risks
 Provides guidance in export-related activities
 Makes available information on different countries
with its own credit ratings
 Makes it easy to obtain export finance from
banks/financial institutions
 Assists exporters in recovering bad debts
Provides information on credit-worthiness of
overseas buyers
EXIM Bank
 http://www.eximbankindia.com/corpo_pres.
pdf
Support Institutions to Facilitate
Exports contd.

 Indian Council of Arbitration (ICA)

 Directorate General of Shipping
 All India Shipper’s Council
 Department of Commercial Intelligence and
statistics
 Board of trade
 Zonal Export Import Advisory Committees
Directorate General of Shipping
 Deals with policy and implementation
regarding all things maritime
Mode of Operations
 Merchant Exporter
 Manufacturer Exporter
 Sales Agent/Commission Agent
 Buying Agent
 Service Provider
Registration Procedure & Licensing –
Importer Exporter Code (IEC)
Obtaining the IEC number
 DGFT provide exporter a unique 10 digit IEC
code number required for export or import. No
export allowed without IEC number.
 Application for IEC number to be submitted to
the nearest regional authority of DGFT.
 Application form known as "Aayaat Niryaat
Form - ANF2A" can also be submitted online at
the DGFT web-site: http://dgft.gov.in.
contd.
Registration Procedure & Licensing
-Importer Exporter Code (IEC) (contd.)

 Pre-requirements for IEC application

 PAN No. from IT authorities,
 a bank account in the name of your company with any

commercial bank authorized to deal in foreign exchange

Application to be accompanied by relevant documents
 Validity & features of IEC number

 Issued in a prescribed format

 Valid for all braches/divisions/units/factories of the

company as indicated on the IEC number

Registration Procedure & Licensing -
RCMC
 Registration with Export Promotion
Councils/Commodity Boards/Authorities
 Registration cum membership Certificate
(RCMC) given by above bodies on basis of
application submitted in form given in Appendix-
3A alongwith prescribed documents
 RCMC indicates status of applicant as
manufacturer exporter or merchant exporter in
the form given in Appendix 3B
Registration Procedure & Licensing -
RCMC
 RCMC is deemed to be valid from1st April of the
licensing year in which it was issued and remains valid
for 5 years, unless otherwise specified.
 Status holder may obtain RCMC from Federation of
Indian Export Organization (FIEO)
 For any product not covered by EPCs/CBs, RCMC may
be issued by FIEO
 For claiming any incentives, holding RCMC is essential
Registration Procedure & Licensing
 Registration with Export Credit Guarantee
Corporation (ECGC) for export credit
insurance helps in covering risks
 Export/Import license for specific products
 Prohibited items
 Restricted items
 Canalised items
Thank You