Guide: How to start your export business now!
In the last few years, India has become the hotbed for sourcing and manufacturing for the world. The economic liberalisation in India that started in 1991 gave a thrust to this movement by making processes easier. This export business wave has found a new rigour and it can be attributed to the government bolstering the ‘Make in India’ movement that started in September, 2014.
The Make in India initiative was launched to transform India into a global manufacturing hub. Today, companies are increasingly striving to align their ambitions with this, and proudly print “Made in India” on their products and display it on their websites.
India falls in the top 20 nations of the world under the list of exporting countries. Petroleum products, gems & jewellery, organic & inorganic chemicals, drugs & pharmaceuticals were among the leading export items. India's trade showed strong growth, with overall exports (including merchandise and services) totaling USD 58.22 billion in November 2022, an increase of 10.97% compared to the same period in the previous year.
But we can be so much more…
If you’re an MSME or SME with an entrepreneurial bone in your body, the time to start export business is now. The main reason for starting an export business is to earn foreign exchange, which brings profits for the exporter and improves the country's economy. Operating solely in a domestic market can limit business progress, but exploring global markets offers unlimited opportunities and potential for growth. Even if the domestic market becomes saturated, foreign markets can provide additional revenue sources. Expanding globally increases market share, attracts investment opportunities, and enhances a company's reputation. Operating internationally also makes the company more attractive to employees. Global trading can inspire new solutions and make the company more reliable. Finally, international trade helps a business stay competitive and less vulnerable to market changes.
We’ve made this guide for you to get together necessary documents and make arrangements to get started.
Before the big game abroad, you must know how to set up the export business in India.
To ensure safe and legal export of goods, these are the government guidelines you have to follow to start export business.
Step 1: You need a valid business enterprise.
To begin your export business, you must establish a sole proprietorship/partnership firm/company, by following all the processes laid out, along with a registered name and logo.
Next, as mandated by the government, you must open a current bank account in any bank authorised to deal in foreign exchange, in India.
Step 2: Get a Permanent Account Number (PAN)
Every exporter and importer who wants to start export business must have a PAN card issued by the internal revenue service. Businesses and bank account holders have it already, chances are you have one too.
Step 3: Get an IEC (Importer-Exporter Code) Number
According to the Foreign Trade Policy, it is mandatory to obtain an IEC for export/import from India.
According to ANF 2A, you can file an application for IEC at DFGT. You have to pay an application fee of Rs 500/- using net banking or credit/debit card, and submit all the listed documents in the application form.
Step 4: Obtain Registration and membership certificate (RCMC)
You must obtain an RCMC from the Export Promotion Council to get authorization for export business. You can also look for any other benefit or concession under FTP 2015-20 and receive services/guidance.
You’re almost ready with the fundamentals to start export business. Now you must look to:
Step 5: Set Price and Product Quality through Samples
You can make samples for your foreign buyers, to understand their needs. Samples can be altered as per the buyer's requirements and their country’s regulations. This will help you acquire export business orders easily. Exports of bonafide trade and technical representatives of freely exportable items are allowed without restriction under the FTP 2015-2020.
The price should be calculated based on the terms of sale, such as Free on Board (FOB), Cost, Insurance, and Freight (CIF), Cost and Freight (C&F), and so on. You must take into account all expenses from sampling to fulfilment of export. Fix your export cost at a competitive price with a good profit margin. Make a costing sheet for each export product.
Step 6: Preempt your payment risks
International trade will continue to face payment risks due to geographical challenges and buyer/country insolvency. To mitigate these risks, obtaining an Export Credit Guarantee Corporation Ltd (ECGC) policy is a reliable option. Before accepting a buyer's order without upfront payment or a letter of credit, it's advisable to secure a credit limit from the ECGC for the foreign buyer.
These steps are crucial to ensure all your licences, permissions, and security measures are in place. Make sure you complete them to move forward in this journey.
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Now, let’s move to phase 2 of your journey to start export business.
Step 1:
Upon receipt of an export order, carefully review the requirements to ensure all the details are noted properly and correctly.
Step 2:
Once the requirements are noted, verify and secure additional information related to the item's specifications, payment terms, and delivery date to avoid any potential rejection of the consignment. To reduce this risk, the exporter can establish a formal agreement with the foreign buyer.
Step 3:
Label, package, pack, and mark your products that are ready for export.
Step 4:
Always purchase a marine insurance policy or Export Goods Shipment Insurance to protect your export goods.
Step 5:
Timely delivery is crucial as a late delivery can render all other efforts ineffective. Therefore, setting a dispatch date and ensuring that the export order reaches the buyer's port on time is of utmost importance. Upon receiving the order, reach out to the CHA to determine the number of days required for shipment to reach the destination port and plan accordingly to prepare the shipment for delivery.
Step 6:
The exporter must reach out to the shipping company well ahead of time to secure the necessary vessel space for shipment. Organising internal transportation from the factory/warehouse to the shipping portals is also important to prevent loss or damage during transit. Typically, exporters insure CIF agreements, while importers usually insure C&F and FOB agreements.
Step 7:
The following mandatory documents for import and export are outlined in the Documentation of Export Goods FTP 2015-2020.
Commercial invoice cum packing invoice shipping bill/ invoice of export/ invoice of entry Bill of Lading/ Airway Bill Commercial invoice cum packing invoice shipping bill/ invoice of export/ invoice of access (for imports).
Note: Other documents, such as a certificate of origin or an inspection certificate, may be required depending on the circumstances.
Important!
Following shipment, the documents must be presented to the bank within 21 days for forwarding to the foreign bank for payment arrangements.
The above guide gives you a comprehensive understanding of how to start your export business from India. One of the key factors for success in starting an export business is having a clear understanding and comprehensive knowledge of the products to be exported. With the advent of accessible platforms, the complex export process has become easier, allowing businesses to expand their reach to international customers.
Once you’ve set up your fundamentals and started your export business, you can use Bizongo’s platform to obtain business finance to pay your vendors early. This frees your working capital and allows you to channelize funds towards growth-oriented strategies. The best part about Bizongo's platform-led finance is that it requires minimal paperwork, and processes disbursals quickly. And, of course, digital processes make the entire operation seamless and more efficient. Give your export business the momentum it requires to achieve your goals.
