PRACTICAL ASPECTS OF

FOREIGN TRADE

R K Maru10 – 11 February, 2012

Agenda• Foreign Trade – Indian Trade History, Statistics

and Facts• Foreign Trade – Introduction, Importance and

Procedures• Foreign Trade – Associated Risk, Policies and

Promotional Measures• Foreign Trade - Quiz • Questions and Answers

• From the 16th to the 18th centuries, covering the two hundred years of Mughal rule, Indian urbanization saw unexpected growth.

• Textiles from Gujarat were sent to the Arab countries and to South-east Asia

• During the Sultanate period articles of everyday use as well as luxury articles were exported to Syria, Arabia and Persia from Bengal and Cambay. These included silks, gold-embroidered cloth caps, exquisitely designed clay pots and pans, guns, knives and scissors.

History of Indian Trade

• Arab traders shipped Indian goods to European countries through the Red Sea and the Mediterranean ports. Indian products were also sent to East Africa, Malaya, China and the Far East. In China, Indian textiles were valued more than silk.

• Trade with China and Southeast Asia was mainly carried on through the port of Sonargaon now known as Dacca.

• Emergence of Mercantile community like Marwaris, Gujaratis, Multan and Khurasanis

• The political conditions in India in the 18th century was marked by decline of the Mughal government and the rise of the Maratha power.

• After Aurangzeb, who was the last of the great Mughal Emperors, the state crumbled and it could not protect the mercantile community as before.

• However, In the 18th century, the British imposed heavy duties on both imports and exports in order to disrupt the foreign trade relations of India with the other countries.

• By the time India gained Independence from the Britishers in 1947, the economy was entirely geared to only trade.

• Hardly any manufacturing facilities to suffice the needs of the growing Indian population.

• Past couple of decades in the history of Indian Trade have seen the country struggle to create manufacturing capacities

• Government Focus has been on to enable broad basing the development to move the economy from an underdeveloped status to being a developed nation.

EXPORTS (including re-exports) • Cumulative value of exports for the period April-

December 2011 -12 was US$ 217663.66 million (Rs 1024706.95 crore) as against US$ 172964.94 million (Rs.789068.93 crore) registering a growth of 25.84 per cent in Dollar terms and 29.86 per cent in Rupee terms over the same period last year.

• Export goods petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel.

• Main export partners US, UAE , China, Hong Kong.

IMPORTS

• Cumulative value of imports for the period April-December, 2011-12 was US$ 350935.69 million (Rs.1651239.75 crore) as against US$ 269175.16 million (Rs. 1228074.48 crore) registering a growth of 30.37 per cent in Dollar terms and 34.46 per cent in Rupee terms over the same period last year.

• Import goods crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

• Main import partners China, UAE, Saudi Arabia, US, Australia.

CRUDE OIL IMPORTS: • Oil imports during April-December, 2011-12 were valued at US$ 105588.7 million which was 40.39

per cent higher than the oil imports of US$ 75211.4 million in the corresponding period last year.

TRADE BALANCE • The trade deficit for April-December, 2011-12 was estimated at US$ 133272.03 million which was

higher than the deficit of US$ 96210.22 million during April-December, 2010-11.

Importance of Foreign Trade

WTO

General Agreement on Trade in Services (GATS)

General Agreement on Trade in Services (GATS)

AGREEMENT ON TRIPS"TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS"

Modes of Export

Getting Started for Export

Getting Started for Export

Sources of Information

• Internal sources: Your own files, your co.’s records

• Indian/Foreign Missions• Chambers of Commerce, FIEO, IMC etc.• Trade/Industry Associations, EPCs,

Commodity Boards, Development Authorities etc.

• Import Promotion Organization abroad• International Banks• Port Authorities• Customs House Agents• Overseas Buying Offices in India • Daily List of Exports (by customs )• D G C I & S - Libraries/Publications• Foreign Trade Policy• Handbook of Procedures

• Exchange Control Manual -• EXIM Bank• FEDAI • E C G C• I I F T• I T P O• I T C, Geneva

(www.intracen.org/tradeforum) • C B I - Rotterdam, Netherlands • Trade Fairs • Internet

(www.dgft.gov.in, www.alibaba.com, www.indiamart.com, www.kompass.com,www.ecplaza.com, www.meaindia.nic.inwww.maxyellowpages.com etc) • Personal Friends/Relatives

How to locate a buyer /Where to get Statistics from? What are the Rules & Regulations ?

INCOTERMS

Other Terms

Export Pricing1. Ex Factory Price2. Loading charges 3. Freight up to the port4. Insurance premium, wherever necessary5. Fumigation charges6. Phytosanitary Certificate7. Inspection charges8. Certificate of Origin9. Marine Insurance, if required as per L/C10.E C G C Premium11.Export Duty/Cess12. C H A service charges/Port expenses 13. Sea Freight 14. Commission of foreign agent15. Interest (depending upon the payment terms)16. ProfitLess: Incentives

Modes of Payment

Export Finance

•Shipping Bill/Bill of Export:•Free Shipping Bill•Dutiable Shipping Bill•Drawback Shipping Bill•Shipping Bill for shipment ex-bond•Coastal Shipping Bill•Softex form for software export (triplicate). Value on softex to be certified by STP official•Form SDF•Mate Receipt

Shipping Documents

•Bill of Lading/Airway Bill/RR/LR/Post parcel receipt•Negotiable/Non-negotiable B/L•Straight/To Order B/L•Freight Paid/Freight Collect B/L•Clean/Claused B/L•Direct/Through B/L•Stale B/L•On Board B/L•Charter Party/Steamship B/L•Container B/L•House B/L (MMTD)

Shipping Documents

Export Procedure•Offer letter to prospective buyers•Export enquiry•Work out the price and make an offer•Negotiate and send your confirmation and get buyer’s confirmation•Send your Export Contract•Get LC•Purchase/manufacture the goods•Excise Clearance•Transportation to the port•Pre-shipment Inspection•Customs Clearance•Get Mate Receipt/Bill of Lading•Collect all other documents required as per LC•Submit documents to the bank for negotiation•Follow up for payment with the buyer•Claim Incentives

Associated Risks

Chapter 1B: Special Focus Initiatives

1B.1 With a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.

POLICY PROVISIONS

Chapter 3 : Promotional MeasuresA S I D E (Assistance to States for Infrastructural Development of Exports)

M A I (Market Access Initiative)M D A (Market Development Assistance)Town of Export Excellence Brand Promotion and Quality

Star Export Houses:Export House………………..Rs 20 Cr.(Current plus previous 3 years) Star Export House…………Rs 100 Cr. Trading House……………….Rs 500 Cr. Star Trading House………..Rs 2500 Cr.Premier Trading House….Rs 7500 Cr .

Services Exports: Regn. with FIEO. However, for Software Exports, Regn. with Electronic & Software EPC. For 15 specific services listed in Sl no. 34 of app 2 of HBP Vol 1 are required to register themselves with Services EPC. Served from India Scheme.Vishesh Krishi and Gram Udyog Yojna (Special Agricultural and Village Industries Scheme)Focus Product Scheme, Focus Market Scheme, Market Linked Focus Product Scheme,Status Holders Incentive Scrip

Chapter 4: Duty Exemption and Remission Schemes •Duty Exemption Scheme: a) Advance Authorisation Scheme and b) Duty Free Import Authorisation Scheme (DFIA)•Duty Remission Scheme: •DEPB (Duty Entitlement Passbook Scheme)•Duty Drawback Scheme

Chapter 5•EPCG (Export Promotion Capital Goods) Scheme

Chapter 6•100% EOU•EHTP (Electronics Hardware Technology Park)•STP (Software Technology Park•BTP (Bio Technology Park

Chapter 7•SEZ (Special Economic Zones)

Chapter 8• Deemed Exports

AEZ (Agri Export Zone)

R K MaruIndoreMobile: +91 94250 77856Email: rkmaru2000@rediffmail.com