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Practical Guide on How to

Start Export-Import Business

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CA Shiva Chaudhari

2

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PRACTICAL GUIDE

HOW TO START

EXPORT-IMPORT

BUSINESS

(Unlock your future)

CA Shiva Chaudhari

(B.Com, FCA, CS, MBA, DIBF, FAFE)

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CA Shiva Chaudhari

4

Dedicated to

This book is dedicated to my beloved parent

Shri Masharubhai Chaudhari

and

Smt Shantaben Chaudhari

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INDEX

Sr Chapter Page

1 Introduction 1

2 Starting Export Import Business

1.1 Business Idea

1.2 Choosing Business Structure

1.3 Naming your business

1.4 Location of your business

1.5 General Registration & Licence

required

11

11

15

19

22

25

PART-A EXPORT

3 Choosing Products to Export 28

4 Registrations& Licences 31

5 How to Get Export Orders? 42

6 Export Contract 45

7 Export Procedure 51

8 Packing & Labelling of Goods 56

9 Custom Clearance & Documentation 62

10 Receipt of Export Proceeds 78

11 Duty Drawback & Incentives 93

12 Risk in Export and its Mitigation Process 99

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PART-B IMPORT

13 Choosing Products to Import 107

14 Registration, Licence & Legal Provisions 110

15 How to Choose a Supplier for your products? 121

16 Import Contract 125

17 Import Procedure 129

18 Payment Methods & Procedure 147

19 Risk in Import and its Mitigation Process

155

PART-C LEGAL & DOCUMENTATION

20 Related Provisions of Integrated Goods and

Services Tax Act, 2017

161

21 Applicable provisions of Foreign Exchange

Management Act, 1999

172

22 Managing General Risks in Business 191

23 Import from China 200

24 How to Solve Trade Dispute in Export & Import? 204

25 Registration of a Trademark for your Product 212

26 How to Draft a Contract? 219

27 Specimen

I. Export-Import Contract

II. Agreement Not to Deal without Consent

225

234

28 Role & Responsibilities of various Agencies

i. Shipping Line

ii. Freight Forwarder/Custom House Agent

244

245

249

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iii. Custom Freight Station

iv. Surveyor

256

258

29 Glossary of Terms & Important Websites 261

30 Summary 283

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HOW TO START EXPORT-IMPORT BUSINESS (Unlock your future)

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1. Introduction

The world is getting closer in terms of cross border trade and

investment, by distance, time zones, languages, government

regulation, culture and business. The world is not perfect. It is

characterized by considerable amount of uncertainty regarding the

demand, market price, quality and availability of own products and

those of suppliers. There are transaction costs for purchasing or

selling goods. Each country is gifted with specific natural

resources. Each country has limited resources and scarcity of some

goods. Some goods are available at relatively less price in another

country compare to home country. Due to difference in cost,

technology and expertise, one country purchases something from

another and sells something to other countries. Due to such

differences, international trade came into existence.

International trade has flourished over the years due to the many

benefits it has offered to different countries across the globe.

International trade enhances the domestic competitiveness and

takes advantage of international trade technology. The

international trade accounts for a good part of a country‘s gross

domestic product. It is also one of important sources of revenue for

a developing country.

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In India, cumulative value of exports for the period April-March

2016-17 was US$ 274645.10 million (Rs. 1841314.39 crore) as

against US$ 262290.11 million (Rs. 1716377.99 crore) registering

a positive growth of 4.71 per cent in Dollar terms and positive

growth of 7.28 per cent in Rupee terms over the same period last

year. Cumulative value of imports for the period April-March

2016-17 was US$ 380367.65 million (Rs. 2550926.19 crore) as

against US$ 381006.64 million (Rs. 2490298.03 crore) registering

a negative growth of 0.17 per cent in Dollar terms and positive

growth of 2.43 per cent in Rupee terms over the same period last

year.

Due to advanced production techniques, highly advanced

transportation systems, transnational corporations, outsourcing of

manufacturing and services, and rapid industrialization, the

international trade system is growing and spreading very fast.

Cross border transactions created many opportunities for exporters

and importers across the globe to import products having less

production cost in exporting country and thereby taking advantage

of margins in selling in domestic market. This book is written in

simple language, covering step by step practical aspects of export

& import. I hope this book will help the readers to understand the

export import procedures and laws easily. If you have any query or

doubt relating to export or import, you can email me on

ca_shiva@icai.org

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HOW TO START EXPORT-IMPORT BUSINESS (Unlock your future)

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2. Starting Export &

Import Business

Entrepreneurship is a journey that requires a lot of time, planning,

effort and hard work. There is no short cut to make business

success overnight. Many people start business with good amount

of money but end up failing and they leave the business. If you can

make your business survives, the rewards of entrepreneurship are

well worth the obstacles you'll face during initial phase.

Starting an import export business needs a proper understanding of

the foreign market, domestic as well as overseas regulations. Let us

discuss step-by-step overview of what you need to do to start a

well planned export import firm.

2.1 Business Idea

Coming up with a business idea is the first step in starting a

business. A business idea is a concept which is used for

financial gain usually centered on a product or service that can

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be offered against money. An idea is the ground structure of

the building when it comes to the business as a whole.

Business ideas can be classified into:

(1) Traditional: These are traditional in nature and selected

based on any existing business trend or market.

(2) Unique: These are unique ideas having Innovative,

Unique, Problem solving and Profitable nature.

Once you have business idea, the first step is to taste this idea

whether it is worth after considering the related factors as

under.

Taste the Business Idea

1. Expand your business idea

Expand your business idea into sub-steps to analysis from

different perspectives. E.g. if you have an idea of exporting

something, then expand it into further sub-steps like what

products, where, when and why? Every business will rely on

something that will sell to customers. The next thing that you

must to do is to clearly and accurately define those products as

result from the initial idea. You should ask yourself following

questions:

1) What product you will offer?

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2) What are the features of these products?

3) What are the benefits that your products will bring to

your potential customers?

4) What types of additional benefits will be offered by

that product?

5) How your product is different from other competitors

like it may be different in terms of quality, packing, its

duration or price.

2. Define the Market for your Product

You have an idea and defined products that will be offered to

the market. The next thing that you must to do is clearly,

precisely, and unambiguous define the market that will be

served with these products. Here are some questions that you

as an entrepreneur will need to answer:

1) On which market you will offer these products (region,

country, and continent)?

2) Who will be the customer for these products?

3) What are the characteristics of those customers who

will consume your products (manufacturers, dealers,

retailers etc)?

Your answers to the above questions should be based on

practical trade.

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3. Analysis the Market Competitors

Analysis of your competitors will give edge to launch your

business idea successfully. Always keep in mind that your

competitors have same capability to offer the products and

attract the buyers. It is necessary to define the main

competitors who are already in the market. It is advisable that

you should study the business policy and products offerings

by your competitors. To start with, focus only on medium to

large players.

1) Who are the major market players in the industry in

which your business idea is categorized?

2) What, where, and how those major market players

offer their products?

3) What are the main features & business policy of their

trade?

4) What is the resistance for entry into the market related

to your product?

5) How your product will prevail more than your

competitors in terms of price, quality, packing,

delivery and customer satisfaction?

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HOW TO START EXPORT-IMPORT BUSINESS (Unlock your future)

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Once you have decided what to export or import, where to export

or from where to import and how competitively from other market

players, your next step is to decide the business structure.

2.2 Choosing Business Structure

Before choosing the business structure, let‘s understand the

type of exporters. This will also help you in deciding the right

business structure.

Generally there are two main categories of exporters. There is

no such category for import.

An exporter can act as either a merchant exporter or a

manufacturer exporter.

1) Merchant Exporter: Refers to the exporter who buys the

goods from the manufacturer and then sells them to foreign

customers. This is one type of trading activities and works

on similar concept of general provision stores where you

buy goods directly from manufacturers or dealers and sell

to end consumers. In case of merchant exporter

organisation structure can be either Proprietorship or

Registered partnership firm or LLP. Proprietorship is not

suggested keeping in mind the legal responsibilities of the

owner.

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