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A Guide to Successful Export from India

A Guide to Successful Export from India

CA Ajmal Muhajir
Head Consultant : Taxation & Audit

A Guide to Successful Export from India

1. Introduction

The International business is the purchasing and selling of the goods, commodities and services outside its national borders. Exporting refers to the selling of goods and services from the home country to a foreign nation. India is amongst the world’s top 20 nations with respect to the export of merchandise. For undertaking an export business, an entrepreneur should have a clear understanding of the rules and regulations along with the documentation pertaining to these export transactions.

2. Governing Authorities

  • Exports are governed by Foreign Trade (Development & Regulation) Act, 1992 and Export-Import (EXIM) Policy.
  • Directorate General of Foreign Trade (DGFT) is the primary governing body responsible for the export and import policies in the country.
  • Since an export trade has to follow a specific set of procedures from receiving inquiries to completion of the transaction, exporters need to get themselves registered with these authorities for ensuring all the legal formalities as required by them are met and also for receiving incentives which are allowed under the export promotion schemes.
  • The Reserve Bank of India (RBI) guidelines have to be met by the exporter. An exporter also requires an Import-Export Code Number from the concerned regional licensing authority.

3. Export Procedure

In general, an export procedure flows as stated below:

  • Obtaining License
    The exporter of goods is required to register with various authorities such as the income tax department and Reserve Bank of India (RBI). Exporter is required to secure an export license from the Government of India, for which the exporter has to apply to the Export Trade Control Authority and get a valid license.
  • Receipt of an Order
    The exporter has to appoint agents who can collect orders from foreign customers (importer). The Indian exporter receives orders either directly from the importer or through indent houses.
  • Letter of Credit
    The exporter of the goods generally demands the importer for the letter of credit, or sometimes the importer himself sends the letter of credit along with the order.
  • Fixing the Exchange Rate
    Foreign exchange rate signifies the rate at which the home currency can be exchanged with the foreign currency i.e. the rate of the Indian rupee against the American Dollar. The foreign exchange rate fluctuates from time to time. Thus, the importer and exporter fix the exchange rate mutually.
  • Foreign Exchange Formalities
    Indian exporter has to comply with certain foreign exchange formalities under exchange control regulations. As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to furnish a declaration in the form prescribed in a manner.
    The declaration states:-
  • The foreign exchange earned by the exporter on exports is required to be disposed of in the manner specified by RBI and within the specified period.
  • Shipping documents and negotiations are required to be done through authorized dealers in foreign exchange.
  • The payment against the goods exported will be collected through only approved methods.

4. Preparation for Executing the Order
The exporter should make required arrangements for executing the order:

  1. Marking and packing of the goods to be exported as per the importer’s specifications.
  2. Getting the inspection certificate from the Export Inspection Agency by arranging the pre-shipment inspection.
  3. Obtaining insurance policy from the Export Credit Guarantee Corporation (ECGC) to get protection against the credit risks.
  4. Obtaining a marine insurance policy as required.
  5. Appointing a forwarding agent (also known as custom house agent) for handling the customs and other related matters.


5. Formalities by a Forwarding Agent
The formalities to be performed by the agent include –

  1. For exporting the goods, the forwarding agent first obtains a permit from the customs department.
  2. He must disclose all the required details of the goods to be exported such as nature, quantity, and weight to the shipping company.
  3. The forwarding agent has to prepare a shipping bill/order.
  4. The forwarding agent is required to make two copies of the port challans and pays the dues.
  5. The master of the ship is responsible for the loading of the goods on the ship. The loading is to be done on the basis of the shipping order in the presence of customs officers.
  6. Once the goods are loaded on the ship, the master of the ship issues a receipt for the same.


6. Bill of Lading
The Indian exporter of the goods approaches the shipping company and presents the receipt copy issued by the master of the ship and in return gets the Bill of Lading. Bill of lading is an official receipt which provides the full description of the goods loaded on the ship and the name of the port of destination.


7. Shipment Advise to the Importer
The Indian exporter sends shipment advice to the importer of the goods so that the importer gets informed about the dispatch of the goods. The exporter sends a copy of the packing list, a non-negotiable copy of the Bill of Lading, and commercial invoice along with the advice note.


8. Presentation of Documents to the Bank
The Indian exporter confirms that he possesses all necessary shipping documents namely;

  • Marine Insurance Policy
  • The Consular Invoice
  • Certificate of Origin
  • The Commercial Invoice
  • The Bill of Lading

Then the exporter draws a Bill of Exchange on the basis of the commercial invoice. The Bill of Exchange along with these documents is called Documentary Bill of Exchange. The exporter then hands over the same to his bank.


9. The Realization of Export Proceeds
In order to realize the proceeds of the export, the exporter of the goods has to undergo specific banking formalities. On submission of the bill of exchange, these formalities are initiated. Generally, the exporter receives payment in foreign exchange