Frequently Asked Questions (Why, What & How)

Q. Why should I export ?
A. There are both 'pull' reasons as well as 'push' reasons for a company to decide to enter into exports. Pull reasons could be that the foreign Markets are more profitable for a given product and have greater demand than the domestic market. Push reasons could be that the domestic market for a given products is stagnant, profitability is low and competition is more. Companies also enter into exports to escape excessive Regulatory Environment in the domestic market specially while distributing and marketing the products in domestic markets. Further, many companies prefer exports than domestic sales to take advantage of lucrative export promotional schemes.

However, participation in international trade helps expanding the horizon of the entrepreneur. With increasing interdependence among Nations, a company that is in international trade becomes more nimble and geared up to face competition than the one which is totally relying on domestic business because it gets to know the signals of change as well as of opportunity, early.

Caution: Exports may not be desirable for each and every product. The feasibility needs to be explored further.

Q. How different Export Sales is from Domestic Sales?
A. Fundamentally, there is not much difference. You would be doing more or less the same things. However, difference is qualitative because of the following factors:
q Buyers and Sellers live in different countries usually governed by different set of rules
q Different countries usually have different currencies and different languages
q Problems of trusting business partners separated by boundaries of two nations
q Necessity to depend on third parties as Shipping Companies, Customs, Foreign Banks, Inspection Agencies etc. to complete the business transactions, on whom there is little control of seller or buyer

It makes the exports business more formal. Therefore, orders are required to be in a set format, documentation be as per laws and regulations, payment is through formal channels of Banks usually through a letter of credit, pre-export inspection is done by third parties and so on.

How should I start ?
A. Researching the markets for your products is of course the first step.

1. You could begin by checking whether your kind of product is being already exported from India. If yes, to which countries it is being exported. You could get this information from your trade circle or through the Export Promotion Council/ Commodity Boards also.

2. You can also have specific information about what is being exported, where , in what quantity, by whom, to whom and at what prices. The reliable sources for such information are a. DGCIS, Calcutta ( see Ministry of Commerce and Industry) which is responsible for compiling Export-Import data. There are several private agencies also e.g. World Trade Center, Mumbai that provide data at price.

Caution : The data is more reliable for researching the trend like what is being exported and where than the prices of particular product, name of buyer etc than identifying the buyers. International Trade is much too complex; just copying the buyer's name would not take you far. In most of the cases, the name you would know from such data might not reveal the actual agency that decides about an order.

3. Once you have seen that the exports are indeed taking place of your product and you know the direction of exports (countries), it could be concluded that the product (from India) is competitive enough and is acceptable in a particular market. You could start chalking out plans to penetrate the market.

4. However, if your product is not being exported till now, chances of which would be extremely low, the reasons need to be identified. The reasons could be :
- The product is such that its transportation cost is prohibitive. For example RCC pipes or bricks. Or, the product is such that its shelf life is very short as cottage cheese or fresh curd.
- Its export could be banned. Check from the EXIM Policy.
- It could be that your product is not competitive enough in the world market and you could have survived in India under higher import duty protection. It is a warning signal. Check and cross check international prices for your kind of product. If you find it true, you could consider change of business because surviving just on of Import Duty protection is highly risky.
- It could be because the Quality Standards adopted in India are different than the rest of the world. ( It could be true for certain markets e.g. electrical standards are different in US and India; but somewhat unlikely in the context of whole world). You could consider it an opportunity as you could develop products as per foreign standards and start exporting.
- It could be that your product is novel.! Nobody thought of it as yet!! Good luck.

Q. How to get the required registrations for Exports/ Imports?
A. For Import and Export, you are required to the following:
i. Form a business entity/ company
ii. Open a Bank Account
iii. Apply for Import Export Code no.
iv. Join the respective export promotion council (see list for export promotion councils and choose the one which covers your product category)
v. Rest is your job - manufacturing, marketing, operational documentation etc.

Q. Which organization/ institutions should I get to know for exporting?
A. The most important Ministry to know is Union Ministry of Commerce and Industry. It is the nodal Ministry for International Trade issues. It has under its administrative control the Office of Director General of Foreign Trade (DGFT) which publishes Export Import Policy, the Bible for International Trade executives.

Q. What incentives are there on exports?
A. Don't believe people who orchestrate that there are a lot of incentives for exports. You should decide about exports only on the basis of profitability of your product not on the basis of schemes. There is nothing except the Income Tax Benefit - 80HSC under which income generated through export business is exempt from Income Tax. The benefit is being successively withdrawn as it is a prohibitive subsidy under WTO. (see more on the issue in WTO section)

There are support and promotional schemes, however. They could be divided into categories:
a. Duty reimbursement Schemes: Under these schemes various kind of levies and duties on the raw material of an export product as Central Excise, Customs and Sales Tax are reimbursed. E.g. Duty Draw Back scheme, DEPB, Advance Licence etc.
b. Promotional Measures include initiatives as Market Development Assistance (MDA), EXIM Bank initiatives, facilitating Export finance etc. There is a provision of special MDA assistance to SSIs by Ministry of SSI also. MDA is provided for participation in Trade Fairs and for conducting Market Study Tour

(Caution: In a few states, special export promotional schemes have been announced in recent past. Most of other schemes of Center as well as in States are of little significance for SMEs.)

Q. What is advisable strategy for SMEs for entering in International Trade?
A. Keeping in view of the limited resources, the advisable steps could include:
1. Research your product ( make use of SMEnetwork's resources in section of Marketing - International )
2. Select your market ( choose a country/ countries)
3. Prepare your company for exports (you may seek external guidance also- professional or from the your friend circle). Prepare brochures, web site other export registration. Prepare product price list on FOB and C&F basis for the chosen markets)
4. Identify importers/ buyers in the market ( make use of SMEnetwork's resources in section of Marketing - International )
5. Make use of Trade lead section- offer your product in these markets (use SMEnetwork)
6. Communicate with them and upgrade your product, the prices accordingly
7. Plan participation in relevant trade fairs in India or in the chosen markets
8. Or meet the interested buyers and also visit the fairs organized in the chosen markets
9. Upgrade the product as per the feedback, establish the systems needed to manufacture.
10. Don't commit too much-too fast, think long term, and export.

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