How to start an Export business? A Step-by-Step guide

India has become a prime destination for global sourcing and production in recent years. The economic reforms initiated in 1991 have significantly contributed to this trend by streamlining processes. The surge in export activities has gained new momentum, mainly owing to the government’s support of the ‘Make in India’ initiative, which commenced in September 2014. This campaign aims to position India as a worldwide manufacturing powerhouse. Nowadays, companies are keen to align their goals with this initiative, taking pride in branding their products with “Made in India” and showcasing this endorsement on their digital platforms.?

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For MSMEs and SMEs with entrepreneurial ambitions, now is the perfect time to enter the export market. Exporting boosts profits through foreign exchange, strengthens the economy, and offers unlimited global opportunities for growth. International expansion can increase market share and investment opportunities and improve a company's reputation while providing resilience against market volatility.?

Mandatory Government Guidelines required for starting an Export business:?

• Will need a valid business enterprise: To initiate your export venture, it’s essential to set up a business entity such as a sole proprietorship, partnership, or corporation, adhering to the prescribed procedures, complete with a legally registered name and emblem. Subsequently, in compliance with governmental regulations, it’s necessary to establish a current account with a bank in India that is sanctioned to engage in foreign exchange transactions.?
• Get a Permanent Account Number (PAN): It’s a requirement for every exporter and importer looking to establish an export business to possess a PAN card, which is provided by the tax authorities. Most businesses and individuals with bank accounts typically already have this document. You may already have one too.?
• Get an IEC (Importer-Exporter Code) Number: Under the Foreign Trade Policy, securing an Importer-Exporter Code (IEC) is compulsory for conducting export or import activities from India. As per form ANF 2A, an IEC application can be submitted to the Directorate General of Foreign Trade (DGFT). An application fee of INR 500 must be paid through net banking or by using a credit/debit card, followed by the submission of all required documents as specified in the application form.?
• Obtain Registration and membership certificate (RCMC): It is essential to secure a Registration Cum Membership Certificate (RCMC) through an Export Promotion Council to gain authorization for your export enterprise. Additionally, you should explore various advantages and concessions available under the Foreign Trade Policy 2015-20 to avail yourself of services and guidance.?
• Establishing pricing and ensuring product quality through sample creation: You can make samples for your foreign buyers, to understand their needs. Samples can be altered as per the buyer's requirements and their country’s regulations. This will help you acquire export business orders easily. Exports of Bonafide trade and technical representatives of freely exportable items are allowed without restriction under the FTP 2015-2020.The price should be calculated based on the terms of sale, such as Free on Board (FOB), Cost, Insurance, and Freight (CIF), Cost and Freight (C&F), and so on. You must consider all expenses from sampling to export. Fix your export costs at a competitive price with a good profit margin. Make a costing sheet for each export product.?
• Preempt your payment risks: Obtain Export Credit Guarantee Corporation Ltd (ECGC) policy before accepting buyer’s order to mitigate the payment risks associated with the International Trade.??

Furthermore, Indian Trade Portal provides a comprehensive guide for starting an export business from India, outlining steps such as establishing an organization, obtaining necessary registrations, selecting products and markets, finding buyers, and managing logistics. It also details customs procedures, financing options, quality control, and documentation requirements to ensure smooth export operations. The portal serves as a valuable resource for exporters to navigate the complexities of international trade. For more details, visit the Indian Trade Portal.?

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Next phase to start with Export Business?

• When you get an order for exporting goods, check all the details carefully to ensure everything is correct.?

• Next, ensure you have all the extra information about the product, how you’ll get paid, and when it needs to be delivered. This helps avoid any problems that could cause the buyer to reject your goods. To be safer, you can make a written deal with the buyer.?

• Before sending your products out for export, label them, pack them well, and mark them.?

• It’s also a good idea to buy insurance for your goods being shipped overseas to protect them.?

• Delivering on time is very important because it could mess up everything else if you're late. So, set a date to send out the goods and make sure they get to the buyer’s place on time. After you get the order, talk to the Customs House Agent to figure out how long it will take for the shipment to get to where it needs to go. Then, get your shipment ready based on that.?

• It would help if you also talked to the shipping company early to ensure space on the ship for your goods. And arrange for the goods to be moved from your factory or warehouse to the port without damage.?

• Usually, exporters use CIF (Cost, Insurance, and Freight) terms, and importers use C&F (Cost and Freight) or FOB (Free on Board) terms.?

• It would help if you had these documents ready for exporting goods:?

• A commercial invoice with a packing list?

• A shipping bill or export invoice.?

• A Bill of Lading or Airway Bill.?

• An invoice for imports?

Additionally, you might need other papers like a certificate of origin or an inspection certificate. After you ship the goods, you must give them to the bank within 21 days (about 3 weeks) so they can handle the payment with the foreign bank.?

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What is the Future of Export Shipments??

The emergence of critical technologies has led the process of internation shipment?

• Digitalization and Blockchain: Increased use of digital platforms for documentation and communication. Integration of blockchain technology for enhanced transparency and security.?

• Sustainable Shipping Practices: Growing emphasis on sustainable and eco-friendly shipping practices. Adoption of alternative fuels and technologies to reduce the environmental impact.?

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Nitisara Value Chain Platform assists you with the detailed information on setting export business in India and make this process easy and hassle free with documentation required at each step. As the export business increases with each passing day stay informed through Nitisara Platform and Blogs and adapt to emerging trends are poised to thrive in the competitive global marketplace.?

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Frequently asked Questions (FAQs):??

1. Is GST compulsory for export business???

Yes, GST (Goods and Services Tax) is mandatory for export businesses in India. However, exports are treated as a zero-rated supply under GST, which means no GST is levied on the export of goods or services. Exporters can claim a refund for the GST paid on inputs and input services used in exported goods or services production. It’s important to note that while GST is not charged on exports, exporters must still register for GST and comply with all the related formalities.?

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2. What is the cost of an IEC license???

The cost of obtaining an Importer-Exporter Code (IEC) license in India is INR 500 for the government fee. If you choose to use professional services to assist with the application process, they may charge additional fees. Typically, professional fees can range from INR 2,000 to INR 5,000, depending on the service provider1. So, the total cost, including professional fees and GST, could be around INR 2,8601.?

3. Do we need to pay tax for export in India???

In India, exports are generally exempt from taxes, as they are considered ‘zero-rated supplies’ under the GST (Goods and Services Tax) regime. This means that while GST is not charged on the export of goods or services, exporters can claim a refund for the GST paid on inputs related to the production of those exported goods or services. Additionally, according to the Foreign Trade Policy, exports of goods and services are free from duties, and any duties paid on exported goods or inputs are refunded. It’s important to stay updated with the latest regulations as policies can change.?

4. What are the key steps in developing an export strategy???

• Identify Your Product or Service: Determine the product or service you plan to export and assess its potential in the international market.?

• Market Research: Conduct thorough research on potential foreign markets to understand demand, competition, and customer preferences.?

• Pricing Strategy: Decide on a pricing strategy that covers costs, includes a profit margin, and remains competitive in the target market.?

• Find Buyers: Develop a strategy to connect with potential buyers, which may include attending trade shows, networking, or digital marketing efforts1.?

These steps are foundational in creating a structured approach to entering international markets and ensuring a successful export business.?

Refer International Trade Administrator for more details.?

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5. How can I assess market demand for my products to be exported in the global market??

Assessing market demand for your products in the global market involves a multi-step process that combines both quantitative and qualitative research. Here’s a guide to help you understand the demand for your products internationally:?

• Market Research: Begin by conducting thorough market research to identify your target audience and understand their needs, preferences, and pain points. Look for existing competitors, study their offerings, pricing, and customer reviews.?

• Market Trends Analysis: Analyze market trends, industry statistics, and customer behavior to determine the viability of your product or service. Understanding the trends and drivers within a market can help you anticipate changes in demand and adjust your strategies accordingly.?

• Quantitative Data: Collect data on sales, pricing, and other market indicators. If available, use industry reports that provide a baseline understanding of market size and growth data. For niche markets, you may need to conduct or commission a custom market assessment.?

• Qualitative Insights: Conduct surveys, focus groups, or other research methods to understand consumer preferences and behavior. This will give you insights into what customers are looking for and how they perceive your product.?

• Competitive Analysis: Assess the strengths and weaknesses of competitors to determine how you can differentiate your product in the market. This will also help you identify potential threats and opportunities within the competitive landscape.?

• Regulatory Environment: Understand the regulatory environment within your target markets to determine any legal barriers to entry or compliance requirements.?

• Calculate Market Demand: Determine the total quantity of your product or service that consumers are willing and able to purchase at a given price within a specific market. This represents the collective desire and purchasing power of all potential customers.?

By following these steps, you can gain a clear understanding of the global market demand for your products and make informed decisions about market entry, product development, and overall strategy.?

6. What is an LC in export??

An LC, or Letter of Credit, in export is a financial document used in international trade. It’s issued by a bank on behalf of the importer (buyer) to guarantee payment to the exporter (seller) once certain conditions are met, typically related to the shipment of goods. The LC acts as a secure method of payment, ensuring that exporters receive payment upon fulfilling the terms and conditions specified in the LC. It’s a way to mitigate risks for both parties involved in the trade.?

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Views expressed does not represent companies position on the matter??

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