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In today’s rapidly globalizing world, engaging in the export-import business can be both rewarding and challenging. One needs to navigate through various regulations, international standards, and intricate details to ensure smooth, hassle-free transactions. Today, I will walk you through some essential aspects and terminologies to equip you with a robust foundation for your export-import endeavors.

Understanding Nautical Miles and International Borders

Our journey begins with understanding the measurement of distance in the maritime world. One nautical mile equates to 1.852 km, a standard recognized globally. Transporting goods via sea is economically efficient; it can be up to 60 times cheaper than air freight, making it a preferred option for bulk shipping.

International waters are another crucial aspect. Every country is allotted 12 nautical miles from their coastline, up to a sea depth of 100 meters, recognized as their territorial waters. Beyond this boundary, the waters are international, unclaimed by any country. This rule ensures that nations can manage and utilize their maritime resources effectively while facilitating free navigation for all.

Initial Registration and Company Formation

Before diving into the export-import business, certain legal prerequisites and registrations are essential. The business formation and registration process includes acquiring a GST number, IEC code, and RCMC, and opening a current account in the company’s name.

The question arises – which type of company should one establish? There are multiple options, including Proprietorship, Partnership, and Private Limited. The choice depends on various factors like the scale of business, risk appetite, and taxation structure.

The Udyog Aadhar registration is a pivotal step. Ensure that the legal name aligns with the PAN card details, while the trade name corresponds with the Udyog Aadhar company name. An IEC code, obtainable from the DGFT website at a nominal fee, is another prerequisite.

Crucial EXIM Terms to Know

In the world of export-import, familiarity with specific terms and organizations is instrumental. The Custom House is a government-regulated body overseeing export-import and customs clearance. The World Customs Organization standardizes HS codes for products globally, facilitating international trade.

ICC (International Chamber of Commerce) and WTO (World Trade Organization) play pivotal roles in ensuring fair and formalized trade practices globally. When goods are transported out of India, they pass through ICS (Land Custom Station), essentially a country’s border check-post.

Goods can be shipped via various methods, including Factory Stuffing, Warehouse Stuffing, and through CFS (Container Freight Station). Understanding these terminologies and processes is essential for efficient and cost-effective shipping.

Navigating through Business Structures

While setting up your export-import business, choosing the right business structure is paramount. Proprietorship is often preferred for its friendly taxation rules. In contrast, a private limited company offers the benefit of limited liability, albeit with more documentation requirements.

For those considering a partnership, it’s crucial to remember that while it allows up to 10 partners, the liability is unlimited. A well-drafted partnership deed, executed on a stamp paper, is essential to delineate roles, responsibilities, and profit-sharing mechanisms.

RCMC - Your Gateway to Export Promotion Councils

The Registration cum Membership Certificate (RCMC) is a passport to the esteemed Export Promotion Councils (EPCs), government-established bodies crafted to bolster exports. Each council specializes in different product categories: APEDA for agricultural products, dedicated councils for pharmaceuticals, and so on.

FIEO (Federation of Indian Export Organizations) steps in when a product doesn’t fall under any specific council. Being a member of EPCs not only legitimizes your business but also endows it with exhaustive trade details and buyer insights. These councils play a pivotal role, offering platforms like trade fairs to showcase your products to international buyers.

APEDA and RCMC - A Closer Look

APEDA, the authority for agro products, is a treasure trove of trade information. New exporters are advised to focus on established parties and maintain an immaculate bank record. An IEC code is your first step to obtaining an RCMC, making you an esteemed member of your respective council.

The advantages of RCMC are multifold, opening doors to FTP benefits under the Foreign Trade Policy and MES schemes, crucial for businesses that thrive on incentives.

Decoding Incoterms

Crafted by the International Chamber of Commerce, Incoterms are standardized pre-defined commercial terms used in international trade. These terms define the responsibilities and risks borne by buyers and sellers.

1. EXW (Ex Works): This term implies that the seller’s responsibility is limited to making the goods available at their premises. The buyer bears all the costs and risks associated with transporting the goods to their destination.

2. FCA (Free Carrier): Under FCA, the seller’s risk ends at the Inland Container Depot (ICD), and the buyer assumes responsibility from thereon. The named place, often close to the seller, is where the transfer of responsibility occurs.

3. FAS (Free Alongside Ship): In FAS, the seller delivers goods alongside the ship, after which the buyer assumes all costs and risks.

4. FOB (Free on Board): A widely practiced term where the seller is responsible for delivering the goods on board the ship. The buyer takes over the costs and risks from that point, often taking up insurance to mitigate potential losses.

5. CFR (Cost and Freight): Here, the seller covers costs and freight to the buyer's port but doesn’t insure the goods. The risk transfers to the buyer once the goods are on board.

6. CIF (Cost, Insurance, and Freight): Similar to CFR but includes insurance. The seller procures transport insurance, mitigating the risk of loss or damage during transit.

7. CPT (Carriage Paid To): The seller pays carriage costs to the named destination but isn’t responsible for insuring the goods or any additional costs post-delivery.

8. DDP (Delivered Duty Paid): The seller bears all costs and risks, including import duty, delivering the goods directly to the buyer’s premises. This term often requires the seller to have an office in the buyer’s country.

In this enlightening journey through the intricate corridors of the export-import business, understanding the diverse payment terms that govern international trade transactions is paramount. An adept grasp of these terms not only safeguards your business dealings but also aids in building enduring relationships with trading partners. Let’s unfurl these terms to illuminate your trading path.

1. Advance Payment

Advance payment hinges on the Bill of Lading (BL). The exporter releases the original BL to the importer only after receiving full payment, ensuring payment security. However, there’s an element of risk for both parties. For exporters, the risk lies in the buyer not picking up the goods, leading to demurrage charges.

2. Open Account

This is a trust-based transaction where the exporter extends an open credit to the buyer. It's typically reserved for trusted associates or relatives, given its risky nature. The exporter provides the BL directly to the buyer, who can make the payment at their convenience.

3. D/P (Documents Against Payment) Via Bank

The exporter’s bank holds the BL and releases it to the importer’s bank once the payment is made. Partial D/P transactions are also common. However, there’s a risk of the importer denying acceptance of the goods, leading to potential losses for the exporter.

4. DA (Document Against Acceptance)

Under DA, the exporter extends a credit period (usance) to the buyer. If the buyer defaults, the exporter can claim the money through ECGC (Export Credit Guarantee Corporation), making DA a relatively secure payment term. However, RBI restrictions limit the usance to 180 days.

5. LC (Letter of Credit)

A highly secure method where the importer’s bank guarantees the exporter’s payment. Yet, it’s not impervious to risks, especially with revocable LCs or if the goods aren’t shipped on time. Precision in documentation and adherence to timelines are critical.

6. Escrow

An intermediary holds the payment and releases it to the exporter upon the fulfillment of agreed terms. It adds a layer of security to transactions, especially beneficial for parties engaging in trade for the first time.

7. PayPal

A popular method for small transactions, offering ease and speed. However, be mindful of the fees and the potential for chargebacks.

8. Own Foreign Setup

Sending goods to a trusted individual overseas can mitigate risks. However, this method’s security is as robust as the trustworthiness of the individual involved.

Balancing Risks and Rewards

Each payment term, from advance payments rooted in the sanctity of the Bill of Lading to the security offered by Letters of Credit, is imbued with unique advantages and inherent risks. The quintessence of mastering these terms lies in balancing the imperatives of security with the fluid dynamics of international trade.

Closing Insights

In the evanescent yet impactful world of international trade, the judicious selection of payment terms is analogous to setting the sails right on a seafaring voyage. The winds of global markets are unpredictable, yet with knowledge as your compass, navigating these tumultuous waters becomes an achievable feat.

In subsequent editions of this enlightening series, we shall delve deeper into nuanced strategies, unwrapping the enigmas of regulatory landscapes and unveiling the art of leveraging alliances for exponential growth. Till then, may every transaction be a step towards global dominance, and every business decision, a melody of strategic harmony.

Reminder: Always couple this knowledge with bespoke professional advice to craft a payment strategy tailored to your specific business needs and market dynamics.

Embarking on the export journey is akin to navigating through a complex labyrinth of codes, procedures, and terminologies. However, equipped with the right knowledge and tools, transforming this intricate journey into a seamless experience is possible. In this segment, we delineate the nuanced steps to sculpt a successful export venture.

1. Obtaining the IEC Code

The first stepping stone in the export odyssey is acquiring the Importer Exporter Code (IEC), an indispensable asset for every international trader in India. It’s akin to a passport, granting permission to embark on international trade journeys.

2. Choosing the Right Product

Identifying and selecting the apt product is pivotal. Market research, demand analysis, and understanding the regulatory landscapes are fundamental steps in this phase.

3. Finding the Right Buyer

A credible buyer is the linchpin that anchors the export journey. Utilizing resources like India’s embassy can be invaluable. Embassies can provide insights and verified lists of potential buyers, ensuring that you engage with credible partners.

Example: A well-crafted request to an embassy could be:

“Respected Sir/Madam, I’m Samyak Bafna from SE Group, engaged in the local trade of turmeric in Rajkot. We are aspiring to elevate our business to the global echelons and seek your esteemed assistance in procuring a list of verified turmeric importers in Australia. Kindly visit our website www.exportimport.guru for more insights into our enterprise.”

4. Document Preparation

Precision in preparing and managing documents is paramount. Every document, especially the HSN (Harmonized System of Nomenclity) code or ITC code, plays a crucial role in the trade process. These codes are accessible on government platforms like indiantradeportal.in.

5. Shipping the Goods

Leveraging the expertise of Custom House Agents (CHA) or Freight Forwarders (FF) ensures the meticulous handling and shipping of goods. Their adeptness in managing the complex shipping protocols is invaluable.

6. Sending Documents via Banks

Ensuring that the documents, especially the Bill of Lading, are securely sent via banks safeguards the transaction and underpins the trust between trading partners.

7. Receiving Payment

Implementing secure payment terms as discussed in the previous segment ensures that the receipt of payment is streamlined and secure.

Exploring Drawback on Export

Drawback is an instrumental aspect, offering a rebate on duties on the materials used in the manufacturing of exported goods. The exporter can claim this rebate, adding a financial cushion to the export venture.

Navigating Through the Intricacies of Export Pricing In the international trading ecosystem, determining the accurate price for your goods can be a complex process but is crucial for ensuring profitability. Consider a scenario where you have an order of 400 shirts for a Canadian buyer who’s offered to pay in FOB terms with a 10% drawback on the product.

Here's the catch – your calculation should be precise. The ex-factory price of 400 shirts is ?60,000. With additional transportation costs of ?1200 to the Chennai port, plus stuffing and packing expenses, an incorrect calculation might lead you astray. Remember, the profit should only be calculated on the ex-factory price. So, it’s ?60,000 + 30% profit (?18,000) = ?78,000.

In this scenario, the government provides a drawback on the FOB value, a mechanism introduced to lower fraud instances through a set drawback cap. Don’t forget to account for insurance on the full investment amount, especially in CIF terms.

Diverse Modules of Export:

1. Counter Trade: A modernized barter system requiring RBI’s nod. It's an exchange of goods or services without the typical monetary transaction.

2. Offshore Trading/High Sea Sale: It occurs when goods are sold while still in transit. Benefits include reduced GST, owing to the absence of country law applicability in mid-sea.

3. Deemed Export: When you manufacture a product but a vendor executes the export, you’re dubbed a deemed exporter.

4. Sale on Consignment Basis: Sell what gets sold, and return the unsold. The buyer bears the cost of returning unsold goods.

5. String Sale: In case of dubious buyers, your goods can be sold to a different exporter. It’s a safety net against fraud.

6. Service Export & Project Export: Offering services or projects in foreign countries and earning in their currency.

7. Re-Export and Re-Import: Specific terms for goods imported and then exported or sent out for repairs and returned.

Custom House Agent (CHA) and Freight Forwarder (FF) – The Unseen Pillars

CHA: They navigate through the complex customs transactions, ensuring smooth operations. They are the torchbearers in the nebulous terrains of customs, duties, and regulations.

FF: These entities are your allies in booking container space, managing port dues, and ensuring your goods reach their destination intact and on time.

Strategic Product Selection:

In the intricate dance of international trade, choosing the right product and market is the first step. Whether it’s the volume-driven rice export or niche markets like pomegranate or cactus leaf, your investment capacity is the compass.

Use tools like DGFT and trademap.org for insights, and explore platforms like dollarbusiness.com and infodriveindia for data analytics and trends.

Prohibition on Imports and Exported Goods

International trade isn’t a free-for-all. It's bounded by strict regulations to curb smuggling, safeguard national security, prevent shortage of essential goods, and protect domestic production. These restrictions ensure a balanced economy and protect human, animal, and plant lives, sustaining environmental health. Import and export prohibitions align with these broader objectives.

Claim for Refund of Duty

The clock ticks fast in international trade. A claim for refund of duty must be staked within six months. No time to dawdle, for every tick of the clock inches you closer to the claim expiration.

Waving the Flag

A vessel’s arrival in India isn’t quiet; it is announced with a flag wave. The Import General Manifest (IGM) number is a mandatory filing within 24 hours of arrival. And when goods are exported, an Export General Manifest (EGM) ascends in importance. It not only facilitates the GST refund but signifies the official embarkation of goods on their international journey.

Unloading and Loading Protocols

Customs officials are the gatekeepers here; without their nod, no goods move. Every piece of cargo unloaded or loaded is under their watchful eyes, ensuring compliance with India’s stringent customs regulations.

Export Documentation

The paperwork in international trade is a world of its own. An invoice isn’t just a piece of paper but a ticket to global markets. It’s augmented by a packing list, which is sometimes amalgamated into an ‘Invoice cum Packing List’.

Certificates Galore

The Certificate of Origin stands testament to the goods’ Indian roots. But there’s a bifurcation here – non-preferential and preferential. The former is a straightforward attestation of origin while the latter involves a stringent verification by the Export Inspection Agency.

Bill of Lading

After the CHA files the shipping bill, and the Let Export Order (LEO) number is granted, the Bill of Lading (BL) or Airway bill becomes the golden ticket, a testament of the goods’ embarkation on their international journey.

Specialized Documents

Every country, every product, brings along a unique set of document requirements. The Consular Invoice, for instance, requires verification by the buyer’s country’s embassy. The Certificate of Inspection and the Health/Sanitary Certificate are often prerequisites for food products.

Why Nearby Markets?

In the labyrinth of international trade, nearby markets like Dubai, Middle East countries, Sri Lanka, and even Africa, emerge as lucrative destinations. Their customs regulations aren’t as stringent as those of the UK or USA. The proximity facilitates faster billing and delivery, easing the complexities of the export-import dance.

SGS - The Assurance of Quality

Quality isn’t a mere word but a pledge, and SGS ensures that this pledge is upheld. A resampling of goods during stuffing, accompanied by video documentation, makes SGS a trusted partner in the export journey, especially in countries with strict customs regulations.

Stuffing Varieties: An Insight

Every journey begins with the first step, and in the world of export, it’s all about stuffing - the process where your goods are carefully packaged and readied for their overseas journey. It is art and science, combining precision, care, and regulatory adherence.

1. Factory Stuffing

Imagine a container arriving at your factory, a blank canvas ready to be filled with your products. Every item is an artwork, meticulously prepared and reviewed. In the international market, the ‘produced by’ tag reigns supreme, echoing the origin's voice. But remember, documents are your companions. Some, like business registration, IEC code, and GST code, are static. Others, like the factory stuffing certificate and LUT, accompany each journey. With the mandatory seal affixed, the CHA takes the reins, steering the goods through the next stages.

2. ICD Stuffing

Welcome to the Inland Container Depot, a space where flexibility meets functionality. Whether it’s a small consignment or a container-load, the ICD accommodates all. With the shipping bill in hand, you’re not just sending goods; you’re dispatching trust, packaged with care.

3. Dock Stuffing

At the dock, amidst the serene chaos, lies the Container Freight Station (CFS). It’s here where goods are bestowed the final touch before embarking on their aquatic sojourn.

Navigating the Startup Landscape in Export

Entrepreneurs, gear up! The international market is not a distant dream but a tangible reality. Every deal, a stepping stone; every transaction, a learning curve.

1. Startup with a Deal

In the intricate dance between brokers and exporters, knowledge is power. The choice between a fixed price and commission can be the difference between profit and extraordinary profit.

Fixed Price:

The deal is set, the numbers etched in stone. Your profit is predefined, unaffected by the market's whims. But remember, the potential upside is a distant star, observable but unreachable.

Commission:

It’s a journey through the market’s waves, riding the tides of price fluctuations. Every rise, a potential gain; every fall, a learning. Ensure your questions are precise, your agreements clear. Every percentage point in commission, every sale rate, and the security of your money - these aren’t just numbers but the alphabets of your international trade story.

Calculating the Pulse of Profit

In the fixed price saga, every invoice is a narrative of agreed profit. The international market might dance to the tunes of fluctuating prices, but your profit remains unmoved, a testament to the agreed terms. However, the commission tale is woven with threads of market pulses. Every rise and fall in the market is mirrored in your profit chronicles.

Securing the Deal

Questions aren’t just queries; they are shields, armoring you against unforeseen challenges. Whether it’s fixed or commission, clarity is your ally. What are the commission parameters? How is the security of your money ensured? In the world of international trade, every question answered is a risk mitigated.

Navigating through the intricate lanes of international trade, document preparation emerges as a critical cornerstone. It's a blend of precision, compliance, and strategic insight. Let’s delve deeper into Chapter 8, shedding light on the meticulous art of document preparation.

Commercial Invoice Insights

Your journey might begin at the commercial invoice, a critical document available in varied formats including on the export import.guru website. In this document, every column, every entry is a narrative of your trade journey. The exporter column echoes your identity, while the consigned column narrates the tale of the importers. Remember, the buyer isn’t always the consignee. When these identities diverge, the buyer column paints the complete picture.

The Spectrum of Information

From the intricate details of pre-carriage to the final destination, every entry is a piece of the puzzle. Whether it's the notifications by the shipping company or the terms of delivery and payment, precision is key. And then there are marks, numbers, descriptions, quantity, and the total package—all culminating into the final signature, the seal of authenticity.

Packing List Precision

Where the commercial invoice is a narrative, the packing list is quantitative poetry. It’s a tale of numbers, weights, and quantities. Net weight narrates the core product’s tale, while gross weight weaves in the packaging story, offering a holistic view.

Navigating the Export Declaration Form

Here, dialogue transitions from trade to regulatory compliance, a critical interface with the bank and RBI. Every tick, every entry is a dance of compliance. From the nature of cargo to the mode of realization, information flows, echoing the trade’s every pulse. Categories of exporters, modes of realization, ports of loading, and destinations—all converge, painting a comprehensive picture.

IEC Code & AD Code Narrative

In the realm of international trade, the IEC Code is your identity, while the AD Code is the authorized dealer’s testament. The IEC code is not a mere number but a passport to the global trade arena.

Certificates of Origin and Inspection

The certificates of origin stand as sentinels of authenticity. Whether it’s non-preferential, echoing the general authenticity, or preferential, validated by EIA, each certificate is a seal of trust. On the parallel lane, the inspection certificate emerges as the quality’s testament, a narrative validated by agencies like SGS.

The Majestic Bill of Lading

In the intricate dance of documents, the Bill of Lading emerges as the crescendo. Prepared by the shipping line, it’s not just a document but the trade’s soul, echoing every detail, every compliance, and every agreement. It's the silent observer and the loud proclaimer, a testament to the trade's integrity and compliance.

Exim Packaging:

Packaging is a critical aspect in the export-import business, influencing the safety, integrity, and acceptability of goods across borders. Here's an expanded insight into various facets of Exim packaging:

Key Aspects:

• Language: It’s essential to consider the language requirements. Some buyers prefer labels and documentation in their native language to enhance understanding and accessibility.
• Accepted Colour & Size: The color and size of the packaging can be specified by the buyer or be a requirement of the importing country’s regulations.
• Regulations of the Importing Country: Adherence to regulatory norms of the destination country is critical. Export councils can provide assistance in understanding these norms.
• Transit & Handling: Consideration for ease of handling and transit to ensure goods remain intact and are easy to transport.
• Storage Condition, Climate, and Nature of Goods: Goods must be packed considering the climatic conditions of the transit route and the destination, as well as the specific nature of the goods.

Visit lip-in.com for additional insights on packaging.

Types of Export Packaging:

• Loose or Unpacked: Often used for bulk goods like scrap.
• Boxes or Crates: Suitable for a variety of goods, offering protection and ease of handling.
• Drums/Cargo: Ideal for liquids and goods requiring containment.
• Wrapping: Used for protecting goods against environmental factors.
• Pallets: Facilitates easy handling and storage.

Export Management Steps:

From product selection to receiving payment, each step requires meticulous planning and execution:

1. Product Decision
2. Obtain IEC Code
3. Get RCMC
4. Optional FIEO Registration
5. Focus on Domestic Sourcing and Export Incentives
6. Calculate Costs
7. Decide on Insurance
8. Outsource Necessary Services
9. Global Marketing Strategies
10. Find and Confirm Buyers
11. Stuff Goods with Appropriate Packaging
12. Prepare & Dispatch Documents
13. Monitor the Export Process
14. Receive Payment

Insurance Clarity:

Insurance plays a pivotal role in securing the transaction and goods. Detailed comprehension of different types of insurance, their coverage, and claim procedures is essential.

ICC Clauses:

• A: Comprehensive cover including piracy.
• B: Mid-level cover, including damage during loading/unloading.
• C: Basic cover focusing on major incidents like fire, explosion, or sinking of the vessel.

Claim Procedure:

• Obtain original insurance policy.
• Have the bill of lading.
• Prepare commercial invoice cum PKL.
• Obtain a certificate of loss and master protest detailing the incident.

Detailed Insights on LC (Letter of Credit):

LC acts as a guarantee of payment, offered by the buyer's bank. Various types of LCs like Irrevocable, Revocable, Transferable, and others offer flexibility and security in international trade.

Key Documents in LC:

• Invoice cum PKL
• Certificate of Origin
• Bill of Lading / AWB
• Insurance Document
• Inspection Certificate (if required)
• Others as specified in the LC

ECGC Cover:

Export Credit Guarantee Corporation offers specialized covers ensuring payment security. Specific Shipment Policy (SSP) and other covers for startups safeguard against defaulting buyers and other risks.

In-Depth on Irrevocable LC:

An Irrevocable Letter of Credit is a financial instrument that cannot be canceled or amended without the agreement of all parties involved, including the issuing bank, the beneficiary, and the applicant. This type of LC provides the seller with a guarantee that they will be paid as long as they meet the terms and conditions stipulated in the LC.

Key Points:

• Security: It offers enhanced security to the seller as the payment is assured.
• Bank's Role: The issuing bank commits to paying the beneficiary upon the presentation of compliant documents.
• Trade Confidence: Enhances confidence in international trade as it mitigates risks associated with non-payment.
• In transactions facilitated by Letter of Credit (LC), the preparation of the invoice and packing list is a crucial step that requires meticulous attention to detail. These documents need to align with the terms and conditions outlined in the LC to ensure seamless processing and payment.

• The consignee's section should detail the importing bank’s name, as the bank acts on behalf of the buyer in LC transactions. Simultaneously, the buyer’s information, including name and address, is distinctly mentioned to avoid any confusion and streamline the documentation process.

• Ship From & To: The document indicates the shipper's name and address and specifies ‘TO ORDER OF BANK’ under the ship to section, aligning with the LC’s terms.
• Third Party Freight Charge: It's usually directed to the buyer, ensuring that all associated costs are transparently documented.
• Carrier Name: Indicates the shipping line name, establishing the carrier’s identity.
• Seal Number: Custom seal number is documented for security and verification purposes.
• Latest Shipment Date: Always consider having a margin in the latest shipment date to accommodate unforeseen delays and ensure that the shipment aligns with the LC’s terms.
• Goods Condition: Buyers can reject goods if damage exceeds a specified threshold (e.g., 5%). Hence, ensuring the goods' quality and integrity during transit is paramount.

• Include detailed product information and specify ‘said to contain’ to outline the goods contained without verifying the exact content. It’s a standard practice to provide a general description of the goods without an item-by-item inventory.

Domain Age & Google Party Name Check

Before diving into a partnership or transaction, utilize tools like webconfs.com and smallseotools.com to check the domain age of a company's website. This process aids in determining their credibility. Also, appending "fake" or "fraud" after the company's name in a Google search can unearth any negative feedback or scam alerts associated with them.

Container Stuffing and LCL Calculation

Virtual Container Stuffing

Utilize software like magiclogic.com for virtual container stuffing. These tools assist in optimizing the arrangement of goods within a container to maximize space efficiency.

LCL Calculation

For Less than Container Load (LCL) shipments, both volume and weight are critical. Freight is charged on CBM (Cubic Meter) or 1000 kg, whichever is higher. Understanding this is crucial, especially for items like machinery which can be voluminous yet lightweight.

Exchange Rate - The Dollar Dominance

The Prevalence of Dollar in International Trade

The US dollar is predominant in international trade due to its low conversion cost and stability. In instances where payment delays are inevitable, dealing in dollars shields businesses from severe exchange rate fluctuations.

Custom Rates vs. Forex Rates

When trading via banks, forex rates are applicable. In contrast, custom rates are used for incentives, drawbacks, and import duties. Websites like EXIMIN.NET offer real-time data on these rates.

Negotiating Exchange Rates

It’s a lesser-known fact that exchange rates with banks are negotiable. A conversation with the forex manager can potentially lead to better dollar conversion rates, positively impacting the bottom line.

Essential Questions for the Bank

1. Loan Against LC (Packing Credit):

Can the bank provide a loan against the LC, offering pre-shipment finance?

2. Bill Discounting:

What's the bank's process and criteria for bill discounting? This involves providing cash against pending invoices.

3. Exchange Rates:

Is there room to negotiate better dollar to INR exchange rates?

4. AD Code or Bank Certificate:

Is the issuance of AD code or bank certificates (required for RCMC) free of cost?

5. Direct Routing of Documents:

Can documents be routed directly to the buyer?

6. EEFC Account:

Clarification on the turnover requirements and limitations of the Exchange Earner's Foreign Currency account.

7. Forward Cover/Contract:

Is it possible to book the dollar rate to mitigate the risk of currency fluctuations?

8. DNB Report:

What are the charges for obtaining a Dun & Bradstreet report?

9. Interest Subvention Scheme:

How can exporters benefit from this, and what are the specific criteria and rates?

10. Document Charges:

What are the applicable charges for processing and handling various documents?

11. ED Verification:

What criteria are considered during Exporter Documentation verification?

Canals and Currency Considerations

Artificial waterways, like canals, facilitate international shipping, with sites like ports.com offering insights on transit times between ports. Certain countries like Iran accept INR, eliminating currency conversion charges. For risky routes, like those passing Somalia, comprehensive insurance (Cover A) is a must to mitigate piracy risks.

The Freight Forwarding and Bill of Lading

Freight forwarding encapsulates the movement of goods, facilitated by shipping lines or airlines. The Bill of Lading (BL), issued upon the loading of goods onto a vessel, is pivotal in international trade. Here’s a breakdown of its types:

1. Ocean BL: Used for goods transported by sea.
2. Inland BL: Relevant for land-based transit, such as shipments to Nepal.
3. Multimodal Transport BL: Applicable for shipments involving multiple modes of transport.
4. Clean On Board BL: The default, indicating goods were received in good condition.
5. Unclean BL: Indicates potential damage to goods, can complicate payments.
6. Stale BL: Issued when the LC date is missed.
7. Straight BL: Applicable when the entire payment is made in advance.
8. To Order of BL: The safest option, involves bank participation ensuring payment security.
9. Bearer BL: Ownership is assigned to whoever holds the original document.

Containers and Vessels Types

• Bulk Vessel: For large orders.
• Breakbulk Vessel: Goods are individually packed.
• Ro-Ro Vessel: Specifically for vehicles.
• Tanker Vessel: For liquid goods.
• Reefer Vessel: For refrigerated cargo.

Demurrage vs. Detention

• Demurrage: Charges incurred if goods are not cleared within the specified timeframe post-arrival at the port.
• Detention: Applicable if the container is not returned within the agreed period post-clearance.

Liner vs. Tramp Service

• Liner: Fixed routes and schedules, offering reliability.
• Tramp Service: More flexible, stopping at various ports as required, but less punctual.

Cost Adjustment Factors

• BAF (Bunker Adjustment Factor): Aligns with fluctuations in fuel prices.
• CAF (Currency Adjustment Factor): Accounts for variations in currency exchange rates.

These adjustments can impact the final cost, making it essential to have a solid understanding and agreement on these elements to avoid unexpected charges.

Telex and Express Release

• Telex Release: Indicates the surrendering of the original BL; it's generally avoided.
• Express Release: Direct surrender without creating a BL; often used when dealing with trusted parties overseas.

Transshipment Ports and Bill of Lading Variants

Prominent transshipment ports include Singapore, China, and Dubai. Distinctly, there are:

• House BL: Issued by the freight forwarder to the shipper.
• Master BL: Issued by the main carrier to the freight forwarder.

Pro Merchanting

This involves re-exporting, where goods imported from one country (e.g., China to India) are sold to another (India to UK). Custom bonded warehouses play a critical role in this process, offering duty-free storage.

Navigating through the intricate landscape of international trade, understanding the RBI norms and air import-export regulations is crucial for businesses aiming to make a mark in the global market.

RBI Norms:

1. Self "Write-off" 5%:

Business owners have the liberty to offer a self-discount up to 5%. For instance, if the buyer is unable to settle a bill worth INR 1 lakh due to fluctuations in the dollar rate, the seller can send a swift message via the bank to write-off a specific amount within the 5% limit. Crossing this threshold may warrant RBI’s intervention.

2. Stake Holders 10%:

Market leaders fall into this category, carrying more clout in the international market.

3. LIBOR (London Interbank Offered Rate):

In international trade, businesses that utilize funds of others for a specific period must pay interest, benchmarked against LIBOR.

4. Direct Negotiations:

Direct deals, circumventing banks, are allowed. However, such transactions require prior notification to the concerned bank.

5. Exchange Earners Foreign Currency Account (EEFC):

Businesses can hold foreign currency in EEFC accounts for up to a month, aiding in managing currency fluctuations.

Air Import Export Norms:

IATA (International Airport Transport Association) plays a pivotal role when goods are transported via air. The association's agents operate similarly to CHA, offering a plethora of services:

Scope of Work for Cargo Agents:

• Pick-up
• Insurance
• Packing
• Preparation of shipping bill
• Creation of Airway Bill (AWB)
• Handling over to airlines
• Delivering final documents to the shipper
• Tracking shipments till destination

Airlines’ liability is restricted to $20 per kg, known as Special Drawing Rates (SDR). For agro products, obtaining a PHYTO certificate is mandatory.

Calculating Air Freight:

Freight is calculated based on the higher amount between gross weight and volumetric weight. The formula for calculating volumetric weight is:

• L x B x H / 6000 (for CM)
• L x B x H / 366 (for inches)

Example: For a wooden case measuring 75x75x75 cm and weighing 89 kg, the volumetric weight is 70.3125 kg, but the charge is based on the gross weight of 89 kg.

General Cargo Rate:

Businesses should obtain this rate from IATA agents. Rates vary according to the weight slabs, and it's essential to know the accurate rates to avoid overcharging.

Airway Bills:

There are two types - HAWB (House Airway Bill) and Master Airway Bill. To conceal party details, businesses can use "to order of" in the consignee name. The notify party details section can be used to insert the actual party name.

In the multifaceted world of international trade, delving into export-import business can be both rewarding and complex. Every aspirant seeking to carve a niche in this sector must be well-equipped with a profound understanding of various essential processes, regulatory compliances, and strategic alliances. This comprehensive guide aims to unveil the intricate layers, offering insights to start and manage your export-import business proficiently.

Beginning the Journey

1. Business Registration Embarking on this journey mandates the formal registration of your business. It is the preliminary step, affirming your business’s legal existence and eligibility to operate within and beyond national borders.

2. Opening a Current Account A current account in a bank is indispensable. It not only aids in managing financial transactions efficiently but also is a prerequisite for obtaining the IEC code, a pivotal requirement for every export-import business.

3. Obtaining IEC Code The Importer Exporter Code (IEC) is a key that unlocks international trade. Acquiring this code is synonymous with getting official permission to import and export goods across countries.

4. Port Registration and Compliances For businesses dealing in food products, acquiring a Phyto certificate, RCMC, and Port registration becomes pivotal. These affirm the quality and safety of the products being traded internationally.

5. Business Visiting Card A professional visiting card is your business’s identity, ensuring that your business contact information is easily accessible to partners and clients.

Engaging with Clearing and Forwarding Agent

Meeting with CHA

1. Compliance Check Ensure all export and import compliance requirements are met. Special products like spices require certifications from respective boards.

2. Freight Rates Negotiate and understand freight rates. Familiarize yourself with Full Container Load (FCL) and Less than Container Load (LCL) to optimize your shipping costs.

3. Additional Registrations Ensure that all required registrations, including port and Phyto, are intact to avoid any last-minute hassles.

Building Relationships with Suppliers

1. Enhancing Product Knowledge Immerse in acquiring extensive product knowledge. The insights offered by suppliers are invaluable in understanding the nuances of products and the international market demands.

2. Cultivating Buyer Relationships Building robust relationships with buyers is integral. The symbiotic association ensures the business’s growth and expansion.

Deciphering the Payment Conundrums

Navigating through international payment protocols requires adeptness in understanding varied terms and conditions.

1. Advance Payments and NOC In cases involving unique products, advance payments against purchase orders are commonplace. Obtaining NOC (No Objection Certificate) with purchase order ensures a smooth transaction.

2. Letters of Credit Understanding the dynamics of Irrevocable LC and integrating them into business transactions ensures financial safety and credibility.

3. Document Against Payment and Acceptance Grasping the nuances of DP and DA terms, ECGC cover, and DNB report are instrumental in securing financial transactions and mitigating risks.