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What is export: A guide for beginners

Export is the process where goods manufactured domestically are sold to customers globally. Learn more about its Importance, types and benefits in this blog.

Export and overall trade are key contributors to any economy. In India, exports have been growing steadily with the government and various organizations working towards simplifying trade to enable MSMEs to reach international markets. Whether it is through offline mode or the growing e-commerce phenomenon, exports is a significant opportunity for businesses.

What is export?

Export is the process where goods are manufactured domestically and are sold to customers globally. The trade balance of any country is based on imports and exports. If the trade balance is positive, it means that the country is exporting more goods than it is importing. If the trade balance is negative, it means that the country is importing more goods than it is exporting.

What is the importance of exports?

Growth in exports has a wide impact on the growth of a country. It provides an opportunity to earn foreign exchange, which can strengthen the domestic economy. At the same time, businesses can also benefit from the growth in exports leading to more sales and revenue. Exports can also emerge as a tool to build strong economic relations across the world.

What are the types of export?

Direct exports

As the name suggests, direct exports is the process where goods are bought and sold between importers and exporters directly. This is done without the involvement of any middlemen.

Indirect exports

Indirect exports essentially means that there is a middleman involved in buying and selling of goods. In this case, the middleman takes the responsibility of exporting the goods. The seller and importer are expected to engage with the middleman like commission agents, export agents, purchasing agents, and cooperative organizations.

Benefits of export

The benefits of exports can be broadly categorized into benefits for the country and benefits for businesses.

For country

Job opportunities

Exports can provide more job opportunities and strengthen the domestic economy.

Economic growth

The increase in employment opportunities can create more power for consumer spending. It can spur economic growth.

Increased foreign reserves

Importers will buy goods in a foreign currency. This will be deposited by the exporter to the bank. It will then reach the central bank. A country can also increase the reserves of foreign currency by opting for exports.

For businesses

New growth opportunities and revenue

Businesses can find new markets. They can also help identify new opportunities for making a profit by exporting goods.

Increased production

By expanding to other nations, a business can reduce the per-unit cost of production and achieve a larger production base.

Innovative solutions

At the same time, a business has the opportunity to interact with new cultures and communities in the international market. This experience can drive innovative solutions.

How does the export process work?

Starting an export business can now be done with ease, thanks to the growing internet penetration and technology adoption not just by MSMEs and exporters but also by international customers and importers. Depending on the origin and destination country, product category, mode of sale and shipping, the process of exporting might differ. However, there are a few key steps that are common for an MSME exporting from India. From obtaining documents to shipping and tax, here are a few key steps in the export procedure from India:

1. Decide what and where to export

The first step in export procedure is to understand international markets and the products in demand across the world. This will help you decide what is the right marketplace for your export business from India. As per the Export Import (EXIM) Policy, DGFT categorizes products into four categories²:

Free

Products under this category can be exported without requiring any additional permission from DGFT, if the product is booked under ITC (HS) and abides by the laws of the importing country as well. For instance, books, apparel and spices.

Restricted

Before exporting any restricted goods, exporters must obtain permission from the concerned authorities. There are a set of export procedures and conditions that must be followed to sell these products internationally. For instance, sandalwood, drugs and medicines.

Prohibited

The products under this category cannot be exported under any condition. For instance, animals and birds.

2. Register your business

To start an export business, set up a sole proprietary concern, partnership firm or a registered company, as per the standard export procedures. You can receive support from third-party experts – Service Provider Network (SPN).

3. Open bank account and PAN

A current account authorized to receive foreign payments must be opened with a bank. Along with this, apply for a PAN card (in the name of exporter/business) from the Income Tax Department.

4. Obtain IEC

According to the Foreign Trade Policy, it is mandatory to have an IEC (Import Export Code) to export from India. IEC is issued by DGFT via its official website.

5. Avail Registration Cum Membership Certificate (RCMC)

Depending on the product you are exporting, apply for RCMC from the respective Export Promotion Council to get benefits under FTP and avail assistance and guidance from the government.

6. Obtain licenses and documents

Depending on the destination country and product category, it is mandatory to obtain necessary licenses and documents.

7. Obtain shipping documents

Depending on the shipping mode, a few documents need to be filed. Commercial Invoice, Bill of Lading, Packing List and Shipper’s Letter of Instruction are some of the mandatory documents required.

Institutions that help accelerate exports

Some of the key institutions that help in export are as follows:
· World Trade Organization (WTO)
· India Trade Promotion Organisation (ITPO)
· Director General of Commercial Intelligence Statistics (DGCIS)
· Indian Institution of Packaging (IIP)
· Indian Institute of Foreign Trade (IIFT)
· Confederation of Indian Industry (CII)
· Federation of Indian Export Organisations (FIEO)
· Export Inspection Council (EIC) · Federation of Indian Chamber of Commerce and Industry (FICCI)
· Directorate General of Foreign Trade (DGFT)
· Export Promotion Councils
· Commodity Boards of India

Example of exports

India is the largest producer, exporter and consumer of spices. It marked a 17% growth in US$ value terms and a 30% growth in volume terms. India has established a strong base in the area of spices. The single largest spice exported from India in 2020-21 was chilli followed by spice oils and oleoresins, mint products, cumin, and turmeric. The country exports spice and spice products to over 180 destinations across the globe including USA, UK, Bangladesh, Thailand, Germany, UAE, Malaysia, and Indonesia. Exports can emerge as an attractive growth opportunity for any organization involved in manufacturing or distribution of spices³.

Easy e-commerce exports with Amazon
Global Selling

As an e-commerce exports program, Amazon Global Selling enables Indian sellers and MSMEs to take their products from India to international marketplaces across 200+ countries and territories in a seamless and easy manner. Without having to set up a physical store or warehouse abroad, Amazon’s simple registration process and hassle-free logistic support helps you reach global customers. Here’s the export procedure to sell via e-commerce:

Register your business

First, you must register your export business with Amazon Global Selling. You don’t have to be an existing Amazon India seller. The registration can be done online on Seller Central. All you’ll need are KYC documents and PAN.

List your products

Once you have successfully registered to sell globally on Amazon, you can list your products. Remember to follow tips on how to list your products include attractive pictures and descriptions that’s clear to international customers. You can also seek help from third party service providers.

Ship and receive payments

Once a customer places an order, you can choose to deliver by yourself or you can opt for Fulfillment by Amazon (FBA). Under FBA, Amazon takes care of shipping, delivery, returns and customer concerns.

Frequently Asked Questions

What is import?

Import is the process where importers in a particular country buy products from a foreign country. It is the opposite of exports.

What is an export cycle?

The movement of demand for products in a foreign country is known as the export cycle.

What is meant by export orders and import orders?

An export order is an order received for goods to be exported to a foreign country. Import Orders are orders sent to exporters in a foreign country to send the goods.

What is the meaning of export volume and export value?

Export volume is the total quantity of goods exported. Export value is the total worth of products exported.

How much investment is required to start an export business?

With e-commerce exports, an export business can be started with minimal investment. As you do not need to establish any office or appoint any distributor or any other representative, e-commerce exports are an inexpensive proposition.

Published on January 23, 2023.

Sources:
1. https://www.shopify.com/blog/what-is-exporting
2. https://www.investopedia.com/terms/e/export.asp
3. https://www.ibef.org/exports/spice-industry-indias
4. http://www.eximguru.com/exim/guides/how-to-export/ch_22_organisations_supporting_exporters.aspx
5. https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,31,24100,24119#:~:text=India%20is%20the%20largest%20exporter,%25%20to%20US%24%20330.46%20million.

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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.