How to Export from India: A Ultimate Step-by-Step Guide
Mastering the Export Process from India
Exporting goods from India offers immense opportunities to connect with global markets and grow your business. However, understanding the export process is crucial for success.
Navigating the export process requires a strong understanding of regulations, documentation, and strategic planning. This comprehensive guide walks you through each stage, from understanding the basics to shipping your products overseas and receiving payment, making it easier to venture into exporting with confidence. It simplifies the journey, covering every step in detail.
Start with essential preparations like obtaining a PAN, Import Export Code (IEC), and Registration-cum-Membership Certificate (RCMC).
Learn how to select the right products and markets, set competitive pricing, and find buyers through trade fairs, B2B portals, and export promotion councils.
Dive into the intricacies of export documentation, customs clearance, and logistics management. Ensure compliance with regulations and quality standards to build credibility with international buyers. Secure your payments using reliable methods like Letters of Credit and explore government incentives to maximize profitability.
Whether you’re new to exporting or looking to refine your strategy, this guide equips you with the knowledge to navigate the process seamlessly and expand your business globally.
What is Export? Process, Types, and Importance
Exporting involves the sale of goods or services across international borders. This process is a significant contributor to India’s economy, creating jobs, strengthening industries, and generating foreign exchange earnings. Exports can be categorized as follows:
Direct Exporting: Selling directly to an international buyer or distributor, giving you control over sales and a direct connection with the customer.
Indirect Exporting: Using intermediaries like export management companies to handle the process, which is helpful for businesses with limited export experience.
Exporting contributes to a nation’s economic growth by tapping into global demand, diversifying revenue sources, and fostering domestic production. Understanding the importance of exports will help you appreciate the scope and impact of this business activity on a global scale.
Understanding the Export Landscape in India
Exporting goods is crucial for India’s economy, bringing in foreign exchange, strengthening international ties, and fostering local industries. Some top exports include textiles, pharmaceuticals, leather goods, and machinery. For new exporters, the export process can seem daunting, especially with all the documentation, compliance, and logistics involved. You can navigate the process smoothly, by following a structured approach.
Everything You Need to Know About Exporting Goods from India: Step-by-Step Process
A well-planned export strategy is essential to ensure smooth and profitable operations. While creating your strategy, considering below key elements would be of utmost help.
Step 1: Develop a Robust Export Strategy
A clear export strategy helps ensure you’re well-prepared to meet market demands, comply with regulations, and address logistical challenges. Developing an export strategy involves several key steps:
Conduct Market Research:
Analyze international markets to understand where demand exists for your product. Tools like trade data portals, reports, and consultations with export promotion councils can help identify markets where Indian goods are in demand.
Product Demand Analysis & Compliance:
Each country has specific regulations for imports, such as product standards, labeling, and quality requirements. Ensure your product meets these regulations before you export.
Competitor Analysis:
Study competitors from other countries exporting similar products to your target market. Analyze their pricing, quality standards, and customer expectations.
Costing and Pricing:
Determine pricing by calculating production costs, freight, tariffs, and potential taxes. Offering competitive yet profitable prices will make your product attractive in foreign markets.
A strategic approach to exporting will give you an edge and help you make informed decisions throughout the process.
Setting Goals and Objectives
- Define short-term and long-term goals: Include sales targets, profit margins, and market reach. This will help you stay focused and measure your export growth.
- Partnering with Logistics companies: Consider partnering with logistics companies to improve distribution and reach new markets more efficiently.
Step 2: Register Your Business for Export – Key Requirements
Setting up a business for export from India involves several foundational steps. Before you start exporting, you must ensure that your business is fully compliant and legally prepared to engage in international trade:
Business Registration:
Register your business as a legal entity in India, ensuring it can engage in international trade activities.
Obtaining a Permanent Account Number (PAN)
Every business involved in export activities in India requires a Permanent Account Number (PAN) from the Income Tax Department. This PAN will be used in all financial transactions, ensuring regulatory compliance.
Bank Account:
Open a current bank account in a bank that’s authorized to handle foreign exchange transactions.
Securing Import Export Code (IEC):
The Import Export Code (IEC), obtained from the Directorate General of Foreign Trade (DGFT), is mandatory for conducting export activities and serves as your business’s unique identifier in international trade.
Why IEC is Important:
An Import Export Code (IEC) is a unique identifier that allows a business to trade internationally. This code is mandatory for all import-export activities in India.
- How to Apply: You can apply online via the DGFT (Directorate General of Foreign Trade) website. Required documents include your PAN card, address proof, bank details, and a cancelled cheque. The process is straightforward, and once issued, the IEC remains valid for a lifetime.
Step 3: Choose the Right Product for Export
Selecting the right product is crucial for successful exporting. Some factors to consider include:
Profitability:
Analyze whether your product has the potential to generate profits after factoring in costs like production, packaging, and shipping.
International Demand:
Select a product that meets the needs of your target market. This is especially important for products with seasonal demand, like agricultural produce or textiles.
Product Restrictions:
Certain items are restricted for export under India’s Foreign Trade Policy. Check the policy to ensure your product is eligible, as some items require special permits.
Foreign Trade Policy Compliance:
Check if your product category has any specific guidelines under India’s Foreign Trade Policy. Some products might be restricted, while others may qualify for export incentives or duty exemptions.
Choosing products with stable demand, favorable competition, and regulatory ease can give your business a strong start.
Step 4: Register with Export Promotion Councils and Obtain RCMC
Registering with an Export Promotion Council (EPC) can be highly beneficial. EPCs are industry-specific organizations established to support Indian exporters by providing resources and assistance:
Registration cum Membership Certificate (RCMC):
Required to access certain government export incentives, this certificate is issued by relevant EPCs. The RCMC helps exporters gain credibility and access to essential information, support, and events in their industry.
Trade Fairs and Market Assistance:
EPCs provide members with opportunities to participate in trade fairs, buyer-seller meets, and training programs.
Joining an EPC gives your business valuable industry insights, networking opportunities, and credibility with foreign buyers.
Step 5: Find Buyers for Export
Finding the right buyers is one of the biggest challenges for new exporters.
One of the biggest challenge for any business for new exporters is finding the suitable buyers. It is essential for sustained business growth. Here are some effective ways to connect with potential buyers:
Trade Fairs and Exhibitions
Trade fairs are excellent venues to showcase your products and connect directly with buyers. Many countries and industries host annual trade fairs, offering a platform for exporters to network and secure business deals.
Online B2B Marketplaces
Platforms like Alibaba, IndiaMART, and TradeIndia can connect you with international buyers. Ensure your profile includes a detailed product catalog, pricing information, and terms of sale.
Export Promotion Councils (EPCs)
EPCs are industry-specific councils that support exporters by providing guidance, connecting with buyers, and organizing trade fairs. Joining the EPC related to your product category can help you gain credibility and expand your buyer network.
Finding the right buyers can significantly impact your business’s growth and brand reputation in the global market.
Step 6: Price Your Product Competitively
Pricing plays a critical role in your success as an exporter. Here’s how to approach it effectively:
Cost Analysis:
Include all costs related to production, transportation, packaging, and duties. Also, account for insurance, warehousing, and administrative costs.
Market Price Assessment:
Study the price at which similar products are sold in your target market. Adjust your price to ensure competitiveness.
Proforma Invoice Preparation:
After determining the price, create a proforma invoice to offer potential buyers, outlining product cost, shipping terms, and payment options.
Step 7: Providing Samples and Pricing Strategy
Providing samples and setting a competitive price are key steps in gaining buyer interest:
Sample Customization:
Tailor samples to meet buyers’ specifications and quality expectations. Customized samples demonstrate your commitment to quality and help secure orders.
Costing and Quotations:
Accurately calculate production costs, packaging, shipping, and customs duties to determine a competitive price. Present a Proforma Invoice to potential buyers, which includes detailed product information, pricing, and shipping terms.
Setting the right price with clear, professional communication increases your chance of securing profitable export deals.
Step 8: Negotiating Contracts and Securing Payment Terms
Once you’ve identified a buyer, it’s essential to establish clear terms through a formal contract. Contracts should cover product specifications, payment methods, delivery timelines, and risk-sharing terms.
Payment Terms:
For secure payments, consider methods like Letters of Credit (LC), Advance Payments, or Documents Against Payment (DAP). Letters of Credit are often preferred as they minimize payment risk.
Export Credit Guarantee Corporation (ECGC):
Insurance from ECGC can protect against payment defaults and buyer insolvency, providing a safety net.
A well-drafted contract helps mitigate risk and establishes a strong business relationship.
Step 9: Arrange for Financing
Exporting often requires upfront capital to cover costs like production, packaging, and shipping. Some financing options include:
Pre-shipment Financing:
Banks offer loans to cover production and packaging costs before shipment.
Post-shipment Financing:
This covers expenses after goods are shipped but before payment is received.
Export Credit Guarantee Corporation (ECGC):
ECGC helps exporters manage risks by offering insurance against buyer defaults.
Step 10: Manufacturing, Quality Control, and Packaging
After securing an order, focus on manufacturing, quality control, and packaging:
Quality Control:
Make sure your product satisfies both national and international quality requirements. Non-compliance can lead to penalties or rejection of goods at the destination.
Packaging Standards:
Proper packaging protects goods in transit and meets regulatory requirements. Labeling should include all necessary information for customs and consumer safety.
Compliance with quality and packaging standards is essential to avoid shipment delays and build a reputation for reliability.
Step 11: Logistics and Shipping for Indian Exports: Arranging Transportation
Transportation logistics play a vital role in successful exports to ensure products reach buyers in perfect conditions. Here’s what you need to manage:
Freight Forwarding:
Consider working with a freight forwarder who can handle customs clearance, documentation, warehousing and transport & shipping arrangements. They can help you find the most cost-effective and efficient shipping methods.
Choosing the Mode of Transport:
Your product type and destination determine the mode of transport (air, sea, or land). Cost, delivery speed, and handling requirements should guide your choice.
Incoterms:
Incoterms like FOB (Free On Board) and CIF (Cost, Insurance, and Freight) define who bears costs and risks at different shipping stages. Be clear about these terms in your contract with buyers.
Coordinating with an experienced logistics provider will simplify the export process and ensure timely deliveries.
Step 12: Customs Clearance and Final Shipping
Customs clearance is a multi-step process that ensures goods meet both Indian and foreign regulatory requirements.
Required Customs Documents:
- Shipping Bill or Bill of Export: The primary document required and approved by Indian customs to authorize the export.
- Commercial Invoice and Packing List: Required by customs to verify goods and their values.
- Bill of Lading or Airway Bill: Proof of shipment, issued by the shipping company. Shows that the goods have been shipped and who is responsible for their delivery.
- Certificate of Origin:A document certifying the goods’ country of manufacture.
Documentation errors can lead to delays, so work closely with your freight forwarder to ensure all paperwork is accurate.
Step 13: Shipping Goods and Realization of Export Proceeds
Once goods have cleared customs, they are shipped. Payment realization follows these steps:
Track Shipments:
- Use tracking services to monitor shipments in transit. Notify the buyer of estimated arrival dates and any updates.
Document Submission for Payment:
- Submit relevant documents to the buyer’s bank (for a Letter of Credit) or directly to the buyer (for other payment methods) to receive payment.
Timely communication and accurate documentation will support smooth payment processing and enhance your credibility.
Step 13: Receive Payment and Claiming Export Benefits and Incentives for Indian Exporters
Securing payment from international buyers is the final step in the export process. Common payment methods include:
Letters of Credit (LC):
Provides payment security, as it guarantees payment once shipment conditions are met.
Documents Against Payment (DAP):
Goods are released to the buyer after payment, adding a layer of security.
Advance Payments:
Partial or full payment before goods are shipped, ideal for small orders.
Claiming Export Incentives
The Indian government offers several incentives to promote exports. Taking advantage of the Indian government’s export incentive schemes can boost profitability:
Duty Drawback Scheme:
Get refunds on import duties paid for raw materials used in export production.
Merchandise Exports from India Scheme (MEIS):
This scheme provides duty credits based on export performance, incentivizing exporters to scale up their activities. Claiming incentives can help reduce costs and make your pricing more competitive in global markets.
Conclusion
Exporting from India is a complex but rewarding process that requires preparation and compliance at each stage. Breaking it down into these actionable steps, businesses can successfully navigate the requirements and grow in international markets.
With the right strategy, careful planning, and compliance with regulations, Indian exporters have a vast potential for success.
You can successfully expand your Businesses to reach an international markets, achieve profitability, and contribute to India’s global trade presence.
Whether you are new to exporting or looking to expand your business globally, following these steps will put you on the right path to profitable international trade.
Also read our article on Essential Insights for Buyers Sourcing from India
