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 20 years these have
grown (in 2010-11) to US$ 246 b !!

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

Phases in Moving Towards

International Business

Phase I
Ideation Companies robust in domestic
market. Considering but not currently
exporting/importing

Phase II
Initial action starting sporadic, marginal
export/import. Companies see great potential.
Pressure of increased attraction/external
demand for export/import.

Phase III
Advanced action becoming robust
player in export/import. Gaining
extensive overseas experience. Starting
other modes of entering overseas
market.

Companys Readiness to Export?

Motivational Factors:

Contribution to long term expansion of business

Enhancing competitiveness
Exploiting unique technology & expertise
Improving return on investment

Companys 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

clearance
Health
authorities
Port
management
Custom
brokers
Other
intermediarie
s

Financial

Insurance company forwarder

Chamber of
Transporter/carr

commerce
Export/import agent
Licensing
authorities
Embassies
Credit checking
company
Supplier
Other
intermediaries

ier
Shipping line
Export
inspection
agency
Other
intermediaries

institutions
Other
intermediaries

exporter

bank in
exporters
country

importer

Importers bank
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 Foreign Trade Policy
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.
Providing 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.
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 organization, 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
Companys 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 governments 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

Support Institutions to Facilitate

Exports
contd.

Indian Council of Arbitration (ICA)

Directorate General of Shipping
All India Shippers 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 Appendix3A 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