Unit 5 | unit 5 export policy and practices in india

Unit 5

Export Policy and Practices in India

Q1) What is exim policy?

A1) The Exim policy for each year used to be announced by means of a public notice published in the Gazette of India. This practice continued till 1985. The current Exim policy came into force on 1st April 2002 and will remain in force co-terminus with the tenth- five year plan up to 31st March 2007. Exim policy clearly out liners and defines the various export promotion measures, policies and procedures related to foreign trade. Before starting of foreign trade, a firm is required to obtain an import export code number (IEC Number) from the directorate General of foreign trade. The principal objectives of India’s exim policy are as follows

To facilitate sustained growth in export in order to attain a share of at least 1% of global merchandise trade.
To stimulate sustained economic growth by providing firms an access to essential raw materials, intermediates components, consumables and capital goods required for augmenting.
To enhance the technological strength and efficiency of the Indian agriculture sector, industry and services to improve their competitive strength while generating new employment opportunities and to encourage the attainment of internationally accepted standard of quality
To provide consumers with good quality products and services at internationally competitive prices while at the same time create a level playing field for the domestic producers.

The Exim policy is published in 5 volumes and each volume pertains to a specific topic

1. Export-import policy- It contains provisions & schemes

2. Handbook of Procedures (Volume I)- It contains Export import procedure followed by all parties such as exporter importer, licenser or any other authorities

3. Handbook of Procedures (Volume II)- It contains input- output norms used for working out put-input proportion as to determine the advance license entitlement and DEPB rates.

4. ITC (HS) classification of EXIM Terms- It serves as a comprehensive reference manual for finding out exportability/ importability of product.

5. Schedule of DEPB Rates (Volume V) - It provides a complete rate structure of DEPB.

Important prohibition and restriction

(U/S 11 of the customer Act 1962)- This Act allows the central Government to prohibit import & export of certain goods either absolutely or subject to conditions by notifications in the official gazette. The Directorate General of foreign trade may enforce any restrictive measure in the trade policy through a notification necessary for the following

Protection of public morals
Protection of human, animal or plant life or health
Protection patents, trademarks, copyrights and prevention of deceptive practices.
Prevention of use of prison labour.
Protection of national treasures of artistic, historic or archaeological value.
Conservation of exhaustible natural resources.
Protection of trade fissionable material from which they are derived
Prevention of traffic in arms, ammunition and other war equipment.

Trade policies subsequent to 31 March 2001 provide free importability status to goods that can be freely imported; unless prohibited/ restricted by any person. These policies are completely different from the previous trade policies. Important prohibitions may be made for a number of reasons such as national security, public order, morality, and prevention of smuggling, conservation of foreign exchange and safe guarding balance of payment only few items are prohibited for imports which are as follows.

Tallow, fat, and oil rendered/ unrendered of any animal origin
Animal rennet
Wild animals, including their body parts and products and ivory.
Beef and products containing beef in any form.

Presently, the import restrictions are maintains only on a limited number of products for reasons of health, security, and public morals. These include firearms and ammunition, certain medicines and drugs, poppy seeds, and some other products used for the prevention of wildlife and environment.

Some other important points

Exim policy providing subsidy to reduce freight disadvantage for export is allowed under the rates.
All quantitative restrictions on agricultural product exports have been removed, except on a few items.
Several support measures to promote exports from the cottage and handicraft sector have been introduced. An amount of Rs. 5 crore has been allocated for promotion of items falling under Khandi & Village Industries commission.
Concept of industrial clusters for export will be used to begin with, tripur for hosiery, Panipat for blankets and Ludhiana for wollen knit wear like product identified which will be given special privileges, like eligibility to EPCG scheme, market access initiative funds etc.
Special Economic zones will continue to constitute the main institutional form to promote exports.
Overseas banking unit will be permitted under this year’s policy to be set up in SEZs.
To promote agro-exports the concept of agro-processing zones was introduced last year, 20 agro-zones have already been set up.
The policy has schemes to promote export of computer hardware from India. The Electronic hardware technology park (EHTP) scheme will be strengthened.
The assistance to states for infrastructural development for exports (ASIDE) is being strengthened.

Q2) Explain the trends in foreign trade?

A2)

Size & value of foreign trade- Since the beginning of the planning era in India the total turnover of foreign trade (imports plus exports including re-exports) has been steadily rising. In year 1950-51 import was Rs. 608 crore, export Rs. 606 rore & balance of trade was Rs 2 crore but these were increased in 1990-91 import was Rs. 43198 crore, export Rs. 32553 and balance of trade was Rs. 10645 crore and these were also increased in 2002-03 import Rs. 297206 crore, export Rs. 255137 crore and balance of trade was Rs. 420679 crore. India’s share in world trade in 1992-93 was 0.4% in 2001 was 0.7% and it increased in 2002-03 was 0.8% of world trade. India’s target was decided that 1.0% share upto 2007.

2. Composition of foreign trade- The composition or structure of foreign trade means that the product of import & export. During the British empire India’s foreign trade structure is uninformed, unsystematic, unplanned in the period two things are there

a. Export of India’s raw material to foreign

b. Import of finished goods from foreign

India’s Export’s composition divided in main 4 categories

Food grain, agriculture & allied product
Minerals & raw Materials
Manufactured goods
Fuels & capital goods

India’s import composition divided in main 3 categories

Consumable goods
Raw material
Capital goods

The policy of government is that Government wants to minimize the import & promote the export.

3. Direction of foreign trade- India has export and import links with all the regions of the world including both developing and developed countries. During the April-Feb 1997-98 Asia & Oceania accounted for 38.7% of India’s total exports. Followed by west Europe (28.1%), America (22.9%), Africa(5.5%) and East Europe (3.6%). During the year Asia and Ocenia were the largest suppliers of goods and accounted for 47% of India’s imports followed by west Europe (31.6%), America (11.5%), Africa (7.2%) and East Europe (2.8%)

4. Exports- Exports have shown an increasing growth trend and diversification of its base over the years. Commodities whose exports are increasing over the last few years include plantations. Marine products, sports goods, gems and jewellery, chemical and allied products, engineering goods, textiles and handicrafts. However, during 1997-98 negative growth has been witnessed in respect of export of ores and minerals, leather and manufacturers, carpets and petroleum products.

5. Imports- Imports are effected to meet the essential requirements of domestic consumption, investment and production. Bulk imports as a group registered a negative growth of 3.2% during 1997-98 and accounted for 36.8 percent of the total imports. This group includes fertilizers, newsprint, precious and semi-precious stones, machinery, project goods, medicinal and pharmaceutical products.

Q3) Explain the steps in starting an export business?

A3) Export business attraction has been increasing in all countries of the world along with globalization, internationalization and economic liberalization information revolution and fast progress in transportation has made export business easy. At present every businessman can start export business easily while analyzing the global socio-economic and political situation effectively. Export business provides more opportunity of developments against domestic business but with high risk and single wrong decision about export and destroy the whole business. Before entering in export business. A firm must consider the following factors carefully which may be called as basic decision steps in export business.

1. Study of legal provisions- like industrial act & policy, exim policy, FEMA & other special rules of assistance for export business etc.

2. Factors affecting export market

3. Decision of entrance of export market

4. Selection of export market- some factors are there- exporter’s capacity, capability, long term interest of the exporter, profit & risk elements, size and population of the export market, purchasing power policy direction of export markets, cost & marketing efforts, Type and level of competition in export market are major attraction factors.

5. Product planning for export market- This planning decision may be made on the basis of these points- potential market, environment of export market, government, rules & regulations, nature & level of competition and expected profits.

6. Selection of trade (export) method- Basic two methods of sales are there

Indirect Exporting
Direct Exporting

7. Decisions regarding promotional policies- Following points should be kept in mind while formulating promotional policy

c. Nature of the policy

d. Life cycle of the product

e. Nature of foreign market

f. Availability of funds

g. Firm’s goals and needs

8. Pricing

9. Determination of credit policies

10. Decisions regarding distribution channel are depend on many factors like

Availability of the channel
Types of product
Desired degree of penetration into the foreign market
Evolutionary level of retail trading in the particular country.
Size of the manufacturer and its desire to control the channel.
Managerial experience and ability
Nature of the market (industrial/ consumer)
Regional concentration
Sales possibilities in foreign market
Cost of distribution channel.

Q4) Explain product selection?

A4) An entrepreneur should select the right product for export because selection of the right export product is crucial for success in export business. The selection can be made on the basis of consideration of various factors. Some of these factors are explained below:

1) Trends in Exports:

An entrepreneur who plans to enter into exports can identify the products/product groups with potential in the foreign markets by analyzing the trends in exports – country- wise and commodity-wise – over a period of time. A study of the trends over a period of five years is expected to yield very useful information. The Ministry of Commerce, based on the analysis of the trends in exports had also prepared a matrix of fifteen countries and products.

2) Production Capacity and Product Availability:

The exporter should choose those products for which there is adequate production capacity in the country and the product can be sourced for the desired quantities. Thus, a steady supply base is essential to ensure that the exporter is able to deliver the goods to the foreign buyer as per the agreed delivery time schedules.

3) Product Adaptability:

A product may have huge potential for export in one market; yet the same product offered in another market may draw a blank. The reason for this is very simple: the physical conditions, functional requirements, cultural factors, tastes, levels of skill, and levels of technical development may be different and as such would require the changes to be made in the product offered in another market.

4) Demand in the Potential Export Markets:

The level of demand for a product in the target export markets is an important factor in the selection of the product for export.

The potential of the product in a market can be assessed by considering the impact of the following dimensions:

i) Demographic and Physical Environment:

The impact of the demographic and physical environment can be analyzed by considering the following factors:

a) Size of the population, its growth and density levels.

b) Distribution of the population by targeted age groups for the product under analysis (e.g., 1-10, 11-20, 21-30 and so on). Is the size of the target population adequate?

c) Distribution of population by urban, sub-urban and rural areas.

d) Climate and weather conditions. How will these changes affect the product or the service offered?

e) Shipping distances from the point of export.

f) Nature of the transport and telecommunications infrastructure.

g) Adequacy of the shipping, packaging, unloading, and other local distribution networks.

Ii) Political Environment:

The political environment should be analyzed by considering the following factors:

a) Is the system of government conducive to the conduct of business?

b) What is extent of government involvement in the private business transactions?

c) What is the government’s attitude towards imports?

d) Is the political system stable?

e) Does the government seek to dismantle quotas, and other trade barriers?

f) Is the country committed to fostering higher levels of exports and imports?

Iii) Economic Environment:

The exporter should analyze the economic environment of the potential market by considering the following factors:

a) Predicted economic growth levels.

b) Gross national product and the balance of payment position of the country.

c) Percentage share of exports and imports in the overall economy.

d) The country’s import to export ratio.

e) Rate of inflation, and foreign currency or the exchange regulations.

f) What is the per capita income of the target country? Is it increasing?

g) What is the discretionary income spent on the consumer goods?

Iv) Social and Cultural Environment:

Socio-cultural environment of a country affects the demand pattern of people in the country. An understanding of the factors influencing this environment helps in assessing the potential of a product and the likely changes that need to be made to make the product compatible with the socio-cultural environment of the country. Some of these factors are as follows:

a) What is the proportion of the literate population?

b) What is the average educational level of the people?

c) What is the percentage of the population identified as middle class?

d) Is the target market similar to the home market in terms of its characteristics?

e) Would the product require any modification or adaptation or translation?

v) Market Access:

An exporter can target a country for exports to the extent of market access available in the foreign market. The following factors define the level of market access for a product in a country:

a) Legal aspects of distributorship in the foreign market,

b) What are the documentary requirements, and the technical, or environmental import regulations covering the product?

c) Is the market closed to foreigners, despite the emergence of a free and open market?

d) What intellectual property protection laws would affect the product or the ervice?

e) If a commercial dispute arises, does the judicial system offer a fair and unbiased review?

f) Are the tax laws fair to foreign investors? What is the rate of tax on repatriated profits?

Vi) Product Potential:

The potential of a product in the foreign market should be assessed from the point of view of acceptance of the product in the foreign market. The following factors should be examined to assess the acceptance level of the product in the foreign market:

a) Is there an identified need for the product in the target market?

b) What is the gap between production and anticipated consumption? To what extent the gap is being filled by the imports? What is the percentage of imports to the total demand of the product?

c) Is the product or the service understood and accepted by the target market?

d) What is the general level of acceptance of the imported products in the foreign markets?

e) What is the state of competition in the foreign market for the product? Who are the competing exporters and from which countries?

5) Trade Restrictions:

A country may impose restrictions on the import of products from other countries in the form of licensing or other quantitative restrictions. However, under the Uruguay Round, countries have agreed not to impose quantitative restrictions on imports. There is a commitment by all the WTO member countries to follow open and liberal trade policies.

6) Incentives/Facilities Offered for Export:

It is quite possible that the exporting country offers various incentives or facilities to promote the exports. In India, exporters enjoy various facilities in general and for the particular products. These incentives relate to the duty drawback, facility of duty free import of raw materials and other inputs required for the manufacture of the export products, import of capital goods for the promotion of exports at concession rates of import duties. Such incentives/facilities should be taken into account while deciding the product for exports.

7) Shifting Spending Patterns:

Basic determinants of how much a consumer buys of a product are the person’s taste and preference, as well as the price of the product relative to the price of other products. Another major influence is the consumer’s income. If the consumer’s income increases, demand for most goods will rise. However, the demand for goods that people regard as necessities, such as fuel, tobacco, bread, or meat, tends to decline and exporters of such products are not likely to greatly benefit from rising consumer incomes in other countries.

8) Quality and Niche Marketing:

Several studies on export-import trade indicate that firms that have shown a sustained increase in their sales and overall profits have often emphasized quality and concentrated on niches. In this age of diversity, marketers are being awakened to the erosion of the mass market.

Q5) Explain market selection?

A5) Market selection plays a crucial role at the international level. Market selection is based on a thorough evaluation of the different markets with reference to certain well-defined criteria, given the company resources and objectives. Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities.

The following are the steps involved in the market selection process:

International Marketing Objectives - The first step in market selection process is to determine or ascertain the export marketing objectives of the organization. The market selected to serve a particular international marketing objective need not necessarily be the best suited to achieve some other international marketing objective.

2. Parameters for selection - For proper evaluation and selection of the markets, it is essential to clearly lay down the parameters and criteria for evaluation. The different parameters for the selection of a market are firm's resources, international environment, market situation, nature of competition, government policy, etc.

3. Preliminary Screening- The objective of the preliminary screening is to eliminate the markets which are not potential. The parameters used for the preliminary screening may vary from product to product. However, parameters like the size of population, per capita income, structure of the economy, infrastructural factors and political conditions are commonly used.

4. Short Listing of Markets - Preliminary screening enables to eliminate markets which obviously do not meet consideration at the very outset. There would be a large number of markets left even after the preliminary screening. They are further screened with the help of more information than was used at the preliminary screening stage.

5. Evaluation and Selection- The short listed markets are further evaluated with reference to the cost-benefit analysis and feasibility study. They are then, ranked on the basis of their overall attractiveness. Of the markets, the best one is chosen for the launching of product considering the company‘s resources and external environment

6. Test marketing - Initially, the market is tested on a smaller scale by launching the product in a part of the markets. This provides a feedback to the producer about the market. At the same time, it helps the producer in assessing overall response of the consumers from a specific market, after tested success, the production can be undertaken on a mass scale.

7. Commercial Production - Once the product is tested, in the selected market, the company goes ahead with mass production. Minor modifications, if any, are introduced in the product mix during this stage.

Q6) Explain export pricing?

A6) Price, a critical marketing mix tool, is the amount of money that customers pay for the product. In the international marketing effective pricing policy become an essential element in achieving the desired rate of growth in exports. Prices must be set to enable a company to achieve its marketing strategy to develop an overseas market. Different factors will determine a pricing strategy depending on economic and political factors, competitor pricing, consumer demand and the desired rate of return on the investment

Determinants of pricing

It is a popular fallacy to believe that price depends upon costs alone, while cost-price relationship is important it does not follow that costs alone determine prices, Very often it is the other way round over a period of time cost and quality are adjusted to the given price. Even then, there are differences in costs to different producers, they fix the price close together for a somewhat similar product.

Major determinants of pricing are cost, competition, demand and supply, legal, economic and political constraints, Inflation, devaluation and revaluation, and government controls and subsidies.

Cost

Cost represents the price floor beyond which prices cannot be dropped, normally. Sometimes, a firm may sell below cost to penetrate the market for a predetermined periods of time. Price cannot be increased with the increase of cost because of high elastic nature of price elasticity of demand. Sometimes, an increase in demand may lead to an increase in price without any increase in costs. A marketer may sell the product at a price lower than the cost when the marketer is able to sell some other product (the product) in the market (in some other market) with higher margins, The marketer may also sell at a lower price, when the marketer producing the product by utilizing the excess capacity.

Competition

There may be a marked difference between the competitors cost in offering the product. But the prices of the product cannot be fixed in different levels as equivalent to the cost of the products. If there is no direct competition in foreign markets, the price can be set as it would be by a monopolist. In most markets, competitors will quickly appear. Since price is the starting point for comparison between products, the nature and extent of competition has an important effect on market demand. Increasing competition in many world markets, also means prices must be more carefully evaluated.

Demand and supply

The demand conditions are interpreted from the market conditions and the consumer behaviours. A company should be alert to the effect of price adjustments upon demand for its products in the market. The supply conditions are interpreted by an analysis of the competition. The elasticity of demand is always an important element in pricing decisions. If demand is inelastic, there is little reason to lower price. It may even be wise to raise it. If demand is elastic, a price change may be the most important factor in increasing the size of the market. The price quality relationship has an opposite effect on demand from price elasticity. Foreign products can often compete at prices higher that local products because of its foreigness. Normally, the consumers perceive the foreign products as better than the domestic products. The objective of a business is not merely to maintain any specific gross or operating margin but to survive and operate as profitably as possible.

Legal, economical and political constraints

These are the Uncontrollable parameters outside the market forces which influence price structure. Economic policies as well as economic positions of the countries have an important bearing on price structures. Governments themselves involve in pricing decisions in many ways. They sometimes, put restrictions on minimum retail price to safeguard the local manufacturers. Price controls are established where creeping inflation threatens to dilute consumer buying power. Government, sometimes, directly enter into the market as a competitor to protect the price levels. The government is frequently a major buyer in a market for particular products.

Inflation

The rate of inflation can affect product cost and may force a company to take specific action. Inflation rates have traditionally fluctuated over time and differed from country to country. An essential requirement of pricing in an inflationary environment is the maintenance of operating profit margins

Devaluation and revaluation

One of the most unpredictable factors affecting prices is foreign exchange rate movement. Devaluation and revaluation take place when currency values fluctuate in foreign markets. Devaluation is the reduction in the value of one currency against other currencies; revaluation is an increase. Devaluation actually puts upward pressure on costs and prices in country. The effect of revaluation on an exporter or a marketer sourcing in a revaluing country is the opposite of devaluation.

Government controls and subsidies

In many countries government and regulatory agencies influence the prices of products and services. Controls may be applied to an entire economy to combat inflation or regulation may be applied only to specific industries. When government imposes selective use of price controls; foreign companies are more vulnerable to control than local business. Government subsidies can also challenge a company to use sourcing strategically in order to be price competitive. The company can take advantage of the lower cost derived from subsidies and eliminated price escalation due to tariffs and duties.

Other relevant variables

Apart from the above determinants, Range of products offered, Prompt deliveries and continuity in supply, After-sales service in products like machine tools, consumer durables, Product differentiation and brand image, Frequency of purchase, Presumed relationship between quality and price, Specialty value goods and gift items, Credit offered, Preference or prejudice for products originating from a particular source, Aggressive marketing and sales promotion, Prompt acceptance and settlement of claims, Unique value goods and gift items, etc also affect the pricing in export

Q7) Explain export finance?

A7) Export financing is often a key factor in a successful sale. Contract negotiation and closure are important, but at the end of the day, your company must get paid. Exporters naturally want to get paid as quickly as possible, while importers usually prefer to delay payment until they have received or resold the goods. Because of the intense competition for export markets, being able to offer attractive payment terms customary in the trade is often necessary to make a sale. Exporters should be aware of the many financing options open to them so that they choose the most acceptable one to both the buyer and the seller. In many cases, government assistance in export financing for small and medium-sized businesses can increase a firm's options.

The following factors are important to consider in making decisions about financing:

The need for financing to make the sale. In some cases, favorable payment terms make a product more competitive. If the competition offers better terms and has a similar product, a sale can be lost. In other cases, the buyer may have preference for buying from a particular exporter, but might buy your product because of shorter or more secure credit terms.
The length of time the product is being financed. This determines how long the exporter will have to wait before payment is received and influences the choice of how the transaction is financed.
The cost of different methods of financing. Interest rates and fees vary. Where an exporter can expect to assume some or all of the financing costs, their effect on price and profit should be well understood before a pro forma invoice is submitted to the buyer.
The risks associated with financing the transaction. The riskier the transaction, the harder and more costly it will be to finance. The political and economic stability of the buyer's country can also be an issue. To provide financing for either accounts receivable or the production or purchase of the product for sale, the lender may require the most secure methods of payment, a letter of credit (possibly confirmed), or export credit insurance or guarantee.
The need for pre-shipment finance and for post-shipment working capital. Production for an unusually large order, or for a surge of orders, may present unexpected and severe strains on the exporter's working capital. Even during normal periods, inadequate working capital may curb an exporter's growth.

Q8) Write about the sources of export finance?

A8)

Private sources - The international firm with ownership of operations in several countries is able to borrow in any of its host environments. When funds are not available in one country, subsidiaries in other areas are often able to secure funds for intra-company transfers.

2. Public sources - The most important function of public agencies in financing international business efforts has been the provision of loan guarantees to private institutions.

3. World Bank -The world bank along with its organizations The International Finance Corporation and The International Development Association give long-term loans mainly to developing nations. The World Bank acts as an intermediary between the private capital markets and developing nations. The international development association lends what may be termed soft money to developing nations.

4. The Export –Import bank - EXIM bank has special services for short-term, medium-term, and long-term financing requirements. Export–Import Bank of India is the premier export finance institution in India, established in 1982 under Export-Import Bank of India Act 1981. Since its inception, EXIM Bank of India has been both a catalyst and a key player in the promotion of cross border trade and investment.

5. Financing through commercial banks -Commercial banks both in domestic and foreign are interested in financing transactions of first-rate credit risks. Large multinational banks are generally thought to be the most experienced in trade finance. These banks are less interested in working with small businesses because of smaller deal size and volumes accompanied by greater risk.

6. Government sponsored financing - Government Subsidized financing now exceeds that which commercial banks and exporters formerly provided. Governments all over the world have realized that government sponsored banks can faster exports and, therefore employment.

Q9) What are the documents for foreign trade?

A9) Export documentation is, however complex as the number of documents to be filled in is large so able is the number of concerned authorities to whom is relevant documents are to be submitted. These documents must be properly and correctly filled. An exporter should have the complete knowledge of these documents and he should be well familiar with complete export procedure. Export documents may be divided in 4 categories

a. Commercial documents

b. Regulatory documents

c. Export assistance document

d. Documentation required by importing countries.

Main documents used in export transactions

Commercial Invoice- This is basic documents with the help of this document all other documents are prepared because all information contained in such invoice- Invoice number, Date of dispatch, Goods description, Price charged, terms of shipments, nature and address of both the buyer & seller. Shipping vessel name, marks & number on the packages & port of debarkation. On the basis of price charged as per agreement the commercial invoice may be of the following types
1. FOB invoice
2. C & F Invoice
3. C & F Invoice
4. FAS Invoice
5. Ex-ship Price
6. Franco invoice
7. Proforma invoice
G.R.I Form- This form has been devised by the RBI. It is a declaration from prescribed by the RBI
Letter of credit (L/C)- Letter of credit popularly know as L/C; is the most important form in the export trade
Bill of Exchange (B/E)- When a draft bill is drawn on a foreign bank it is known as foreign draft or B/E. Types of B/E- Sight B/E, Arrival B/E, Date B/E. Documentary B/E
Shipping Bill- This is customs documents. There are three types of shipping bills namely

a. Shipping bill fore free goods

b. Shipping bill for dutiable goods known as dutiable S/B

c. Drawback shipping bill if duty drawback scheme is applicable to the goods exported.

6. Marine Insurance policy- A policy is a contract and a legal document. An exporter must put up this policy as a collateral security when he gets an advance against his bank credit.

7. Bill of lading (B/L)- It is a document which is issued by the shipping company acknowledging that the goods mentioned there in have been placed on board the ship and an undertaking that the goods in like order and conditions as received will ne delivered to the consignee, provided that the freight specified there in has been duly paid two types of bill are there

a. Clean Bill of lading

b. Foul Bill of lading

8. Mate’s Receipt- This document issue as receipt by the captain of ship after examining a packing and counting of the packages.

9. Certificate of origin- This certificate as the name implies, are documents which certifying the place of origin of the merchandise. It is a basic instrument in marine insurance

10. Packing note and list- An export packing list indicates that the type of package itemises the material in each individual package indicates the type of package, and is attached to the outside of the package. It should be noted here that no particular form has been prescribed for the packing note and packing list.

11. Other documents

a. Certificate of inspection

b. G.P. Forms

c. Cart Ticket

d. Custom formalities

e. License

f. Shipper’s export declaration

g. Indent/ Order

h. Principal export document

Q10) What is export procedure?

A10) There are two types of export. First who buys goods form local manufactures & export, and second who manufacture the goods in factory and they exporting the goods.

When exporter process export order; than he has two follow a set of procedures- likewise, verification of business terms, find out the need of documents, preparation of delivery note, inspection of goods and insurance, shipment of goods, negotiation of documents and profit making by registered exporter.

Code number
Obtaining Export Licensea) Established Exports, b) Producer Exporters, c) New comer Exporter.
Registration with the export promotion council
Offered and orders

a) Demanding letter of credit

b) Documentation

c) Delivery Schedule

d) Inspection Agency

e) Other like Packing labeling & Marketing

5. Confirmation of order.

6. Collecting goats/ Delivery notes

7. Pre-shipment inspection

8. Packing of goods.

9. Appointment of clearing and forwarding agent

10. Dispatching goods to the port

11. Obtaining custom permit

12. Obtaining the shipping order

13. Export duty and shipping bill

14. Dock challan

15. Shipment of goods

16. Mate’s receipt extra

17. Bill of loading

18. Charter party

19. Insurance of goods

20. Advised by the forwarding agent

21. Exporter invoice

22. Payment of goods

23. Advise of importer

Q11) Explain export assistance and incentive?

A11) Export assistance and incentives is a financial help given by the Government to Indian exporters to improve their ability to compete in foreign markets. Indian exporters can survive provided they can produce good quality goods at reasonable cost. In the domestic market practically everything is highly taxed. We can export our goods but not taxes. The exporters need various concessions and rebates to make the price competitive.

The main export incentives are as follows.

1) Export Promotion Capital Goods Scheme – The scheme allow import of new capital goods at 5% customs duty subject to an export equivalent to 5 times. CIF value of capital goods to be fulfilled over a period of 8 years. Both new and second hand capital goods can be imported.

2) Duty Drawback (DBK) – The exporters are entitled to claim the refund of the customs duty paid on the imported materials and components. DBK also involves refund of central excise duty paid on indigenous materials used in the manufacture of the finished goods. Such refunds are described as “drawback”.

3) Exemption from Excise Duty – Finished goods, when exported are exempted from payment of excise duty. Exemption can be made in two ways i.e. Export under rebate and Export under bond. In case of export under rebate, the exporter has to initially pay the duty which he can claim refund at a later stage. In case of export under bond, goods can be exported without prior payment of duty but an indemnity bond is executed in favour of excise authorities.

4) Exemption from VAT – Export goods are also exempted from the payment of sales tax. Necessary documents are to be provided to the sales tax authorities, giving proof of export, in order to claim sales tax exemption.

5) Marketing Development Assistance – Large exporters such as export houses, trading houses, star trading houses and SSTH are given marketing development assistance which ranges between 25% to 60% of the actual expenditure incurred MDA is provided in respect of conducting market surveys, advertising and publicity abroad, opening showrooms in India and abroad, etc.

6) Octroi and Rail Freight Refund – The exporters can claim Octroi refund from local authorities. Octroi is the levy imposed by local authorities like Municipal Corporation on goods entering from outside the local area jurisdiction. The exporters can also claim railway freight refund paid on transportation of goods by railways from the place of production to the ports or docks.

7) Exemption from Income Tax – Out Government has provided income tax relief to all exporters. Under section 80 HHC, exporters are given 100% exemption from the payment of income tax on export profits. Similarly, FTZs / EPZs and 100% EOUs enjoy a five year tax holiday.

8) Duty Free Credit – Exporters get duty free credit on various items depending on the FOB value of goods. For example, under Vishesh Krishi Gram Udyog Yojana, exporters get 5% duty free credit on FOB value of exports. Also service provides are eligible for duty free credit of 10% of FOB earned by them under the “Served from India” scheme.

9) Special Incentives to SEZ Units – The SEZ units are given special incentives to boost export performance. For example a five year tax holiday is given to SEZ units. The SEZ units are also given extension in credit realization from 180 days to 360 days.

10) Market Access Initiative – Under this scheme, Govt. Provides financial assistance to undertake market studies, and marketing development activities in respect of certain „ Focus Products‟ and „Focus Markets‟. The assistance is provided to various agencies such as Departments of Central and State Governments, Export promotion Councils, Individual exporters and others. The amount of assistance ranges from 25% to 100% of the total cost depending upon the activity and the implementation agency.

Q12) Explain types of export incentive?

A12)

Q13) What are the objectives of exim policy?

A13) The Exim policy for each year used to be announced by means of a public notice published in the Gazette of India. This practice continued till 1985. The current Exim policy came into force on 1st April 2002 and will remain in force co-terminus with the tenth- five year plan up to 31st March 2007. Exim policy clearly out liners and defines the various export promotion measures, policies and procedures related to foreign trade. Before starting of foreign trade, a firm is required to obtain an import export code number (IEC Number) from the directorate General of foreign trade. The principal objectives of India’s exim policy are as follows

To facilitate sustained growth in export in order to attain a share of at least 1% of global merchandise trade.
To stimulate sustained economic growth by providing firms an access to essential raw materials, intermediates components, consumables and capital goods required for augmenting.
To enhance the technological strength and efficiency of the Indian agriculture sector, industry and services to improve their competitive strength while generating new employment opportunities and to encourage the attainment of internationally accepted standard of quality
To provide consumers with good quality products and services at internationally competitive prices while at the same time create a level playing field for the domestic producers.

Q14) Write in how many volumes exim policy published?

A14)

1. Export-import policy- It contains provisions & schemes

2. Handbook of Procedures (Volume I)- It contains Export import procedure followed by all parties such as exporter importer, licenser or any other authorities

3. Handbook of Procedures (Volume II)- It contains input- output norms used for working out put-input proportion as to determine the advance license entitlement and DEPB rates.

4. ITC (HS) classification of EXIM Terms- It serves as a comprehensive reference manual for finding out exportability/ importability of product.

5. Schedule of DEPB Rates (Volume V) - It provides a complete rate structure of DEPB.

Q15) Write about socio cultural environment?

A15)

a) What is the proportion of the literate population?

b) What is the average educational level of the people?

c) What is the percentage of the population identified as middle class?

d) Is the target market similar to the home market in terms of its characteristics?

e) Would the product require any modification or adaptation or translation?

Q16) How does cost determine pricing?

A16) Cost represents the price floor beyond which prices cannot be dropped, normally. Sometimes, a firm may sell below cost to penetrate the market for a predetermined periods of time. Price cannot be increased with the increase of cost because of high elastic nature of price elasticity of demand. Some times, an increase in demand may lead to an increase in price without any increase in costs . A marketer may sell the product at a price lower than the cost when the marketer is able to sell some other product (the product) in the market ( in some other market) with higher margins, The marketer may also sell at a lower price, when the marketer producing the product by utilizing the excess capacity.

Q17) How does demand and supply determine pricing?

A17)

Q18) What are the factors helps in making decision about export financing?

A18)

The need for financing to make the sale. In some cases, favorable payment terms make a product more competitive. If the competition offers better terms and has a similar product, a sale can be lost. In other cases, the buyer may have preference for buying from a particular exporter, but might buy your product because of shorter or more secure credit terms.
The length of time the product is being financed. This determines how long the exporter will have to wait before payment is received and influences the choice of how the transaction is financed.
The cost of different methods of financing. Interest rates and fees vary. Where an exporter can expect to assume some or all of the financing costs, their effect on price and profit should be well understood before a pro forma invoice is submitted to the buyer.
The risks associated with financing the transaction. The riskier the transaction, the harder and more costly it will be to finance. The political and economic stability of the buyer's country can also be an issue. To provide financing for either accounts receivable or the production or purchase of the product for sale, the lender may require the most secure methods of payment, a letter of credit (possibly confirmed), or export credit insurance or guarantee.
The need for pre-shipment finance and for post-shipment working capital. Production for an unusually large order, or for a surge of orders, may present unexpected and severe strains on the exporter's working capital. Even during normal periods, inadequate working capital may curb an exporter's growth.

Q19) What document used in export transaction?

A19)

Commercial Invoice- This is basic documents with the help of this document all other documents are prepared because all information contained in such invoice- Invoice number, Date of dispatch, Goods description, Price charged, terms of shipments, nature and address of both the buyer & seller. Shipping vessel name, marks & number on the packages & port of debarkation. On the basis of price charged as per agreement the commercial invoice may be of the following types
1. FOB invoice
2. C & F Invoice
3. C & F Invoice
4. FAS Invoice
5. Ex-ship Price
6. Franco invoice
7. Proforma invoice
G.R.I Form- This form has been devised by the RBI. It is a declaration from prescribed by the RBI
Letter of credit (L/C)- Letter of credit popularly know as L/C; is the most important form in the export trade
Bill of Exchange (B/E)- When a draft bill is drawn on a foreign bank it is known as foreign draft or B/E. Types of B/E- Sight B/E, Arrival B/E, Date B/E. Documentary B/E
Shipping Bill- This is customs documents. There are three types of shipping bills namely