Export & Import Trade Operations

7/30/2019 Export & Import Trade Operations

1/46

Export & Import

Trade Operations

Dr. Anupam Varma, BIMTECH


2/46

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.


3/46

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 accessto factors of production in a range of foreigndestinations contd


4/46

A Little Bit of History contd.

Emergence of worldwide financial markets andbetter 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.


5/46

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


6/46

Phases in Moving TowardsInternational Business

Phase I

Ideation Companies robust in domesticmarket. Considering but not currently

exporting/importing

Phase II

Initial action starting sporadic, marginalexport/import. Companies see great potential.Pressure of increased attraction/externaldemand for export/import.


7/46

Phase III

Advanced action becoming robust

player in export/import. Gainingextensive overseas experience. Starting

other modes of entering overseas

market.


8/46

Companys Readiness to Export?

Motivational Factors:

Contribution to long term expansion of business

Enhancing competitiveness Exploiting unique technology & expertise

Improving return on investment


9/46

Companys Readiness to Export?Contd.

Organizational Factors:

Commitment of Management

Funding support Personal commitment & expertise

Production capabilities

Exporting goals


10/46

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 saleservice?

Is it unique or differentiated?


11/46

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 andtechnical know how (contd.)


12/46

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 informationabout foreign competition


13/46

Advantages to the Nation

For the nation, greater international trade activitymeans:

More economic growth

Effective exploitation and management of naturaland physical resources of the country

Employment generation

Foreign exchange accumulation

Infrastructure development Improved living standards

Larger economic & political clout


14/46

The Need & Importance of UnderstandingInternational 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 exportdocuments


15/46

Players in the Trade ChainORDER/PREPARE TRANSPORT CUSTOMS PAYMENT

Exporter/importer

Insurance company

Chamber of

commerce

Export/import agentLicensing

authorities

Embassies

Credit checking

companySupplier

Other

intermediaries

Freight

forwarder

Transporter/carr

ier

Shipping lineExport

inspection

agency

Other

intermediaries

Custom

clearance

Health

authorities

Portmanagement

Custom

brokers

Other

intermediaries

Bank

Financial

institutions

Other

intermediaries


16/46

exporter importer

Importers bank

Manufacturing/

Procuring

Importer warehouse

Secure transportation

and documentation

Ship

customers

bank in

exporters

country


17/46

Legal FrameworkAn Overview

Foreign Trade (Development & Regulation)

Act, 1992

Foreign Exchange Management Act(FEMA), 1999

The Customs Act, 1962

Export (Quality Control and Inspection) Act,1963


18/46

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 formatters connected therewith or incidental thereto.contd.


19/46

Foreign Trade (Development &Regulation) Act, 1992 contd.

As per the provisions of the Act, the Government :

may make provisions for facilitating and controlling foreigntrade;

may prohibit, restrict and regulate exports and imports, inall or specified cases as well as subject them toexemptions;

is authorised to formulate and announce an export andimport policy and also amend the same from time to time,by notification in the Official Gazette;

is also authorised to appoint a 'Director General ofForeign Trade' for the purpose of the Act, includingformulation and implementation of the export-import policy.


20/46

Exports & ImportGeneralProvisions in Foreign Trade Policy

The interpretation of Policy: DGFT is the final authority.Any exemption from policy or procedure also to bereferred to DGFT

Freedom to export & import except to the extent ofprovisions 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) Act1992

No agency shall withhold consignments allowed forexports. Free movement of export goods is allowed.Authority can take undertaking from exporter in case ofany doubt


21/46

Specific Provisions

Free exports

All exports in freely convertible currencyexcept in specific situations

Realization of export proceeds within aspecified time

Exports of imported goods

Export of replacement/repaired goods

Deemed exports


22/46

The Guiding FactorsForeign TradePolicy

With economic reforms, globalisation of theIndian economy has been the guiding factor informulating the trade policies.

The reform measures introduced in thesubsequent policies have focused onliberalization, openness and transparency.

Providing an export friendly environment by

simplifying the procedures for trade facilitation


23/46

Foreign Exchange Management Act,1999

Preceded by Foreign Exchange Regulations Act 1947,Foreign Exchange Regulations Act 1973, ForeignExchange Regulations (Amendment) Act, 1993

FEMA is an Act to consolidate and amend the lawrelating to foreign exchange with the objective of

revising and uniting all the laws that relate toforeign exchange

facilitating external trade and payments

promoting the orderly development andmaintenance of foreign exchange market in India. Contd.


24/46

Foreign Exchange Management Act,1999 contd.

The most noticeable aspect of FEMA is thatusually there is no imprisonment forcontraventions of the law.

FERA to FEMA is a substantial change inscope, content and approach.

FEMA is almost a new law altogether whichneeds an independent reading and

interpretation divorced from the earlier law anddecisions rendered there under.


25/46

The Customs Act, 1962

The Customs Act, 1962, is a consolidated andcomprehensive legislation, replacing earlierenactments like the Sea Customs Act, 1878, the

Land Customs Act, 1924 and the Aircraft Act,1934.

Customs revenue is a major source of incometo the Central Exchequer. The vast expansion in

trade has invested customs administration withgreat importance.Contd.


26/46

The Customs Act, 1962 Contd.

Primary objectives are to:

Regulate the genuine export & import trade

transactions Check smuggling

Collect revenue

Gather trade statistics


27/46

The Export (Quality Control andInspection) ACT, 1963

An Act to provide for the sound development ofthe export trade of India through quality controland inspection and for matters connectedtherewith.

Empowers the government to notifycommodities which may be subject tocompulsory quality control & inspection prior toexport

Export Inspection Council (EIC) & ExportInspection Agencies (EIA) were establishedunder this Act.


28/46

EIC Export Inspection Council, either directly or through Export

Inspection Agencies, its field organization, renders servicesin the areas of:

Certification of quality of export commodities through

installation of quality assurance systems (In-processQuality Control and Self Certification) in the exportingunits as well as consignment wise inspection.

Certification of quality of food items for exportthrough installation of Food safety ManagementSystem in the food processing units.

Issue of Certificates of origin to exporters undervarious preferential tariff schemes for exportproducts.


29/46

Other Rules/Guidelines

In addition to the major Acts as described in theprevious 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 whileconducting the export & import business


30/46

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 forvarious commodities with branches and regional

offices throughout the country.


31/46

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 claimexport incentives and assistance provided

by the council as per governments policy.

The Govt. provides grants under various

heads for the councils.


32/46

Role

The main role of the EPCs is to project India'simage abroad as a reliable supplier of high qualitygoods and services.

In particular, the EPCs encourage and monitor the

observance of international standards andspecifications by exporters.

The EPCs keep abreast of the trends andopportunities in international markets for goods

and services and assist their members in takingadvantage of such opportunities in order toexpand and diversify exports.


33/46

Functions

To provide commercially useful information andassistance to their members in developing andincreasing their exports

To offer professional advice to their members inareas such as technology upgradation, qualityand design improvement, standards andspecifications, product development andinnovation etc.

To organise visits of delegations of its membersabroad to explore overseas market opportunities.


34/46

Functions- contd.

To organise participation in trade fairs, exhibitionsand buyer-seller meets in India and abroad.

To promote interaction between the exportingcommunity and the Government both at theCentral and State levels

To build a statistical base and provide data on theexports and imports of the country, exports andimports of their members, as well as otherrelevant international trade data.


35/46

Support Institutions to FacilitateExports

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.


36/46

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 toIndian companies investing in joint ventures

abroad in the form of equity or loan


37/46

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


38/46

Support Institutions to FacilitateExports 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


39/46

Directorate General of Shipping

Deals with policy and implementation

regarding all things maritime


40/46

Mode of Operations

Merchant Exporter

Manufacturer Exporter

Sales Agent/Commission Agent Buying Agent

Service Provider


41/46

Registration Procedure & LicensingImporter Exporter Code (IEC)

Obtaining the IEC number

DGFT provide exporter a unique 10 digit IECcode 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 atthe DGFT web-site: http://dgft.gov.in.

contd.


42/46

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 exchangeApplication to be accompanied by relevant documents

Validity & features of IEC number

Issued in a prescribed format

Valid for all braches/divisions/units/factories of thecompany as indicated on the IEC number


43/46

Registration Procedure & Licensing -RCMC

Registration with Export PromotionCouncils/Commodity Boards/Authorities

Registration cum membership Certificate

(RCMC) given by above bodies on basis ofapplication submitted in form given in Appendix-3A alongwith prescribed documents

RCMC indicates status of applicant as

manufacturer exporter or merchant exporter inthe form given in Appendix 3B


44/46

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 ofIndian 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


45/46

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


46/46

Thank You

Export & Import Trade Operations

Documents

Transcript of Export & Import Trade Operations