Year: 2020

Exports are explained as the goods and services manufactured in one country and acquired by citizens of another country. The export of good or service can be anything. This trade can be done through shipping, e-mail, transmitted in private luggage on a plane. Basically, if the product is manufactured domestically and traded in a foreign country, it is known as an export.

In International trade, exports are one of the components. The other component is imported which means the goods and services purchased by a country’s citizens that are manufactured in a foreign country. Both the export and import combined contribute to the country’s trade balance. Whenever the country’s export is more than the import, it is called a trade surplus. However, when the import is more than the export, it is known as a trade deficit.

Exports are the goods and services produced in one country and purchased by residents of another country.1 It doesn’t matter what the good or service is. It doesn’t matter how it is sent. It can be shipped, sent by email, or carried in personal luggage on a plane. If it is produced domestically and sold to someone in a foreign country, it is an export.

Exports are one component of international trade. The other component is imports. They are the goods and services bought by a country’s residents that are produced in a foreign country. Combined, they make up a country’s trade balance. When the country exports more than it imports, it has a trade surplus. When it imports more than it exports, it has a trade deficit.

Objectives of Export Trade

1. Sale of Surplus Production

• A country may produce more than it requires.
• Then, in that case, the surplus may be sold to foreign countries.

2. Optimum Utilization of Domestic Resources

• Every country has some natural resources in plenty.
• These resources can be utilized to increase the production and sell to those countries where these are in shortage.

3. Employment Opportunities

International business helps the business enterprises to focus on more production which requires more manpower that means more employment opportunities.

4. Earning of Foreign Exchange

A country with surplus production may earn foreign exchange by selling goods and services to other countries.

5. Increase the National Income

• Earning of foreign exchange due to exports add to the national income of a country.
• This help in improving the standard of living of people.

Exports Affect on Economy

Most countries want to increase their exports. Their companies want to sell more. If they’ve sold all they can to their own country’s population, then they want to sell overseas as well. The more they export, the greater their competitive advantage. They gain expertise in producing the goods and services. They also gain knowledge about how to sell to foreign markets.

Governments encourage exports. Exports increase jobs, bring in higher wages, and raise the standard of living for residents.

As such, people become happier and more likely to support their national leaders.

Exports also increase the foreign exchange reserves held in the nation’s central bank. Foreigners pay for exports either in their own currency or the U.S. dollar. A country with large reserves can use it to manage their own currency’s value. They have enough foreign currency to flood the market with their own currency. That lowers the cost of their exports in other countries.

Countries also use currency reserves to manage liquidity. That means they can better control inflation, which is too much money chasing too few goods. To control inflation, they use the foreign currency to purchase their own currency. That decreases the money supply, making the local currency worth more.

Globalization and e-commerce have all contributed to a recent influx in international trade. What used to only be attainable by large-scale businesses is now accessible to small companies and those in the business of resale. Products and services are often performed internationally at greatly reduced costs, making international expansion and production outsourcing a suitable option for businesses. But many people still don’t understand the benefits of global business in their industry, and even for those who do, they struggle to find where to start.

Export marketing is the practice by which a company sells products or services to a foreign country. Products are produced or distributed from the company’s home country to buyers in international locations. But there is a difference between products that are available to foreign countries and products that are specifically marketed to foreign customers. This where the importance of an export marketing plan comes in.

Businesses today are often doubling or tripling products by expanding to product sales on an international level. But you can’t assume that foreign markets will be as interested in your product as local customers. Cultural differences, shipping costs and transit time, politics, and international trade policies all contribute to a marketing communication barrier between suppliers and foreign buyers.

So why do you need export marketing? Simply put: Google translate is not enough. You need to know the buying behaviors, interests, and needs of your foreign customers. All of this can be addressed in an export marketing plan. An export marketing plan is created to address a specific strategy that can be utilized to make product both available and enticing to international buyers.

The only difference between an export marketing plan and a regular marketing plan is the location in interest. The same type of market research performed for locating an optimal domestic market must be completed on an international scale. Here is how an export marketing plan should be built.

1. Foreign Country Selection

The first and most obvious step in building an export marketing plan is selection of a country. While this is the “simplest” step, it is also the most crucial. Start by focusing on continents. Although every country is different, many cultural differences and buying behaviors can be attributed to continents as a whole. After selecting a continent, do some research on the top 3 locations of your preference. This should give you more insight into what country you should sell to.

2. Natural Conditions Research (Optional)

The relevance of this factor will depend greatly on the product you are selling. Information such as the weather, land size, environment, ease of mobility (mountains, roads, etc.), and various other factors will all contribute to the success of your international expansion. For example, selling perishable goods to mountainous regions where transport is difficult may mean your products will expire before they are sold.

3. Socioeconomic Research

This should go without saying, but your products must fit the socioeconomic demographics of the region you plan on selling to. Fashion clothing may be too expensive for certain countries in Africa or Asia. The quality of materials you build your product with may have to change in an international market in order to accommodate the benchmark prices and quality of goods in the foreign location.

Define first what class of consumers you plan on selling to. Lower-class, middle-class, upper-class, and businesses will all have different price point and quality expectations, and these may not reflect those of U.S. standards.

4. Competitor Landscape

This is the one place in which competition is good. International business and trade has existed for hundreds of years – any profitable international business endeavor that has a promising return has already been done. Thus, you can use the density of competition in a foreign country to disseminate whether or not it is a profitable industry to be in.

Make sure that your competition density research comprises research on local companies in the foreign country as well as international businesses. Just because there is a market for, say, tires in China doesn’t mean that there is a profitable market for foreign tire manufacturers to sell there. See if any companies in your home country are selling the same type of product or service in the country of question.

Global trade and international expansion offer can offer great returns to businesses. However, it can also mean steep losses and costs. Keep in mind: there is a major difference between making your products available to international buyers and marketing to specific international markets. Addressing the latter is your only chance at success in international expansion. Export marketing can help to do this.

Development an Export Marketing Plan

Every successful marketing plan begins with thorough market research. Your first market research project is usually the toughest because it’s all unfamiliar terrain. But once you have collected the data you need to predict how a specific type of product will sell in a specific geographic location, you can use the information over and over again as a guideline for exports of similar products. As you build your personal information database on global markets and learn to keep yourself up-to-date on developments in international trade, it will become less of a chore to determine where to take your product.

You will find that market research is a powerful tool for exploring and taking control of your global territory.

Here is a good way to get started and organized: Keep the research summary to one page, and break it into four manageable parts. The purpose of this exercise is to establish a broad scope of your research market analysis but not so broad that you overwhelm yourself. Try to begin with the end in mind: Where do you want to go and how will you know that you have arrived?

1. Explore the Top Three Overseas Markets That Appear to Have the Best Potential for Your Product or Service Offering

You can conduct market research online, meet in person with an international trade, or you can test your product or service by exhibiting at a local (domestic) trade show. Trade shows provide potential customers from all over the world without you having to analyze a thing. For example, if you sell hardware tools and exhibit at a hardware show, you might get a lot of interest from attendees from a particular foreign market, such as Australia. Then you know there must be a market there, for why else would these attendees be asking for information? From there, you can address those inquiries, learn as you grow, and conduct further research.

2. Analyze the Market Factors and Conditions in Each of the Selected Countries

Delve into each country further by reviewing cultural attributes, geographical characteristics, political stability, demographic characteristics, market size, and growth rates. The goal here is to conduct a sound assessment of a foreign market.

What might the barriers be? What makes it a good market to enter? How will the local culture influence the sales of your product or service offering?

Such in-depth market research information is necessary for sound marketing decisions, and it must be done with each new market entry.

3. Determine the Pros and Cons of Conducting Business in Each Market

Look at potential language barriers, legal restrictions, logistical challenges, and payment problems that might get in the way of doing business in a particular market. Include all relevant variables in your assessment.

Analyze your strengths and weaknesses in a selected market. Will your product or servicing offering be in the low, middle or high-end pricing level? Is there a similar product or service offering currently available in the selected market? If so, who is making it? Where are they based? Can you compete? Why would you? How would you? The more pros you have for entering a new market, the better your chance of success. If you can draw on the perspective of a native (better yet, an actual prospective customer) of the country where you are keenly interested in doing business, then do so. Nothing beats an on-the-ground assessment.

4. Select One Market and Get Going

Now you are ready to interpret your findings in light of the stated objective: Where do you want to go and how will you know that you have arrived? At this juncture, you should have enough data and experience (e.g., the trade shows) to decide which market is best for you to begin. Hold the other two country options for future market entry, and don’t go there until after you have proven success with the first overseas market. If the first selected market doesn’t work right away, say after six months or a year, move on to the second market, and so on. Don’t muddy the waters. You don’t want to do too many things at once because you might end up not doing any one thing right.

5. Final Note

The most difficult aspect of developing an export plan is determining the demand for a product or service offering in a foreign country. It’s one thing to know a product can be sold in a market – after all, that’s why you selected a particular market. However, it is a different ballgame when it comes to forecasting how much you can sell and over what timeframe. Assume that demand for a product develops in direct proportion to economic development in each country. This might be a useful way to think about it, especially when data might be unknown.

The import trade is referred to goods and services purchased into one nation from another. The word “import” originates from the word “port” considering the fact that the products are frequently transported via ship to foreign countries. Similar to exports, imports are also the backbone of international trade. Here, if the expense of a country’s imports is more than the value of its exports than the country has a negative balance of trade (BOT), which is also known as a trade deficit.

Every country import goods and services that the domestic country cannot manufacture, maybe because the country cannot produce effectively or cheaply like another exporting country. Few countries sometimes also import commodities and raw materials which are not available on their premises. For instance, many nations import oil they cannot manufacture it locally or cannot provide sufficient to meet the demand.

Objectives of Import Trade

1. To Speed Up Industrialization

Developing countries import scarce raw materials, capital goods and advanced technology required for rapid industrial development.

2. To Meet Domestic Demand

The goods which are in demand but are not available in the country are imported.

3. To Overcome Natural Disasters

During drought, flood, earthquake and other natural calamities country import food grains and other essential commodities to prevent starvation.

4. To Improve Standard of Living

Imports enable consumers in the home country to enjoy a wide variety of products of high quality.

It helps in improving the standard of living of masses.

5. To Ensure National Defence

The importer must get the receipt of credit from his concerned bank and send it to the foreign supplier.

Important Steps Involved in a Typical Import Transaction

1. Trade Enquiry and Sending Quotations

• The domestic buyer who wishes to buy the goods from the other country sends an inquiry relating to price, desired quality, terms, and conditions for the export of goods.
• The exporter sends a reply to the inquiry in the form of ‘Quotation’.
• The quotation is also known as ‘Proforma Invoice’ which contains information about the selling price, quantity, quality, mode of delivery, etc.

2. Procurement of Import License

Goods can be imported only upon the license, the importer requires to obtain an import license.

3. Obtaining Foreign Exchange

• The overseas supplier asks payment in a foreign currency.
• Payment requires the exchange of Indian currency into foreign currency.
• In India, transaction related to foreign exchange are governed by Reserve Bank of India (RBI) under the Exchange Control Department.

4. Placing Order or Indent

After the receipt of the ‘Quotation’, if the prospective buyer finds the information suitable to him, he places the ‘Order/Indent’ for the import of goods.

5. Obtaining Letter of Credit

The importer must get the receipt of credit from his concerned bank and send it to the foreign supplier.

6. Arrangement of Finance

The importer makes the finance settlements in advance to remunerate to the exporter when the shipment arrives at the destination.

7. Receipt of Shipment Advice

• After storing the consignment on the ship, the foreign supplier sends the shipment advice to the importer.
• The shipment advice includes data about the shipment of products such as:
• Invoice number
• The landing or airways bill date and number
• Name of the ship with date
• Port or Destination of export
• Classification of goods and quantity
• Date of the sailing of the vessel.

8. Arrival of Goods

The overseas supplier dispatches the Goods as per the contract.

9. Customs Clearance and Release of Goods

• In India, all the imported goods have to have a clearance from customs after they pass the Indian borders.
• When the ship arrives at the port, the importer has to obtain a delivery order/endorsement for delivery on the back of the bill of lading from the concerned shipping company.

Import is a very important function of our economy. It is one of the most regulated sectors of our economy.

Import Procedure

1. The initial step engaged in importing a product is to accumulate information about the nations and firms which send out the item required by the exporter. It can be accumulated from trade directories, trade organizations, and associations. The exporter readies a quotation otherwise called Performa Invoice and sends it to the importer.
2. The Importer Consults the export-import (EXIM) Policy in power, all together to know whether the merchandise that he/she needs to import are subjected to import licensing or not.
3. In the situation of an import transaction, the provider resides in a foreign nation and subsequently requests the installment of foreign cash. This includes the trade of Indian Currency into foreign money. The Exchange Control Department of the Reserve Bank of India (RBI) manages foreign trade exchange in India. According to rules, each merchant needs to secure the sanction of foreign trade.
4. The importer puts in an import request or indents with the exporter for the supply of merchandise. The request contains information with respect to cost, quality, quantity, size and grade of goods instructions with respect to packaging, delivery shipping, a method of payment and so on.
5. At the point when the payment terms concur between the importer and the overseas provider, the importer gets the letter of credit from its banker and forwards it to the overseas provider.
6. The importer arranges for money in advance to pay the exporter on arrival of goods at the port this empowers the importer to avoid huge penalties on the imported goods lying uncleared at the port for the need of payment.
7. The overseas supplier after loading the merchandise on the ship dispatches the “Shipment Advice” to the importer. It gives information with respect to the shipment of goods like receipt number, bill of lading/airway bill, the name of the ship with date description of merchandise and amount and so forth.

Furthermore,

8. After dispatching the merchandise, the abroad exporter hands over the different documentation like an invoice, bill of lading, insurance certificate of origin to his banker for their forward transactions to the importer when he receives the bill of exchange drawn by the provider. The acknowledgment of a bill of exchange by the importer to get a confirmation of delivery is known as the retirement of import documents.
9. At the point when the sent merchandise comes in the importer’s nation, the individual accountable for the merchandise conveys the officer in control at the dock or the airport about it. The individual responsible for the ship or airway gives the report with respect to import.
10. Imported merchandise are subjected to customs which is an exceptionally extensive process and includes a considerable time to complete. The importer more often than not appoints a C&F operator for completing these customs.

Essentially, the merchant acquires a delivery order which is otherwise called an endorsement for delivery. This order allows the importer to take to take the delivery of merchandise subsequent to pay the cargo charges.

Importer likewise needs to pay dock dues for getting port trust dues receipts for which he submits two duplicates filled in the form is known as “application to import” to the Landing and “Delivering Dues Office”. Subsequent to paying dock dues the importer gets back one copy of the application as a receipt which is called as ‘port trust levy receipts’.

At long last, the importer fills in a frame known as ‘bill of entry’ for appraisal of customs import duty. An inspector inspects the merchandise and gives his report regarding the bill of entry. This bill is then introduced to the port administration which on getting the important charges, issues the discharge arrangements.

Documents Used in an Import Transaction

Common documents required for import customs clearance procedures and formalities in some of the importing countries.

1. Bill of Entry

Bill of entry is one of the major import document for import customs clearance. As explained previously, Bill of Entry is the legal document to be filed by CHA or Importer duly signed. Bill of Entry is one of the indicators of ‘total outward remittance of country’ regulated by Reserve Bank and Customs department. Bill of entry must be filed within thirty days of arrival of goods at a customs location.

Once after filing bill of entry along with necessary import customs clearance documents, assessment and examination of goods are carried out by concerned customs official. After completion of import customs formalities, a ‘pass out order’ is issued under such bill of entry. Once an importer or his authorized customs house agent obtains ‘pass out order’ from concerned customs official, the imported goods can be moved out of customs. After paying necessary import charges if any to carrier Documents required for import customs clearanceof goods and custodian of cargo, the goods can be taken out of customs area to importer’s place.

2. Bill of Lading / Airway bill

BL/AWB is one of the documents required for import customs clearance.

Bill of lading under sea shipment or Airway bill under air shipment is carrier’s document required to be submitted with customs for import customs clearance purpose. Bill of lading or Airway bill issued by carrier provides the details of cargo with terms of delivery. I have discussed in detail about Bill of Lading and Airway bill separately in this website. You can go through those articles to have a deep knowledge about documents required for import customs clearance.

3. Import License

As I have mentioned above, import license may be required as one of the documents for import customs clearance procedures and formalities under specific products. This license may be mandatory for importing specific goods as per guide lines provided by government. Import of such specific products may have been being regulated by government time to time. So government insist an import license as one of the documents required for import customs clearance to bring those materials from foreign countries.

4. Insurance certificate

Insurance certificate is one of the documents required for import customs clearance procedures. Insurance certificate is a supporting document against importer’s declaration on terms of delivery. Insurance certificate under import shipment helps customs authorities to verify, whether selling price includes insurance or not. This is required to find assessable value which determines import duty amount.

5. Purchase order/Letter of Credit

Purchase order is one of the documents required for import customs clearance. A purchase order reflects almost all terms and conditions of sale contract which enables the customs official to confirm on value assessment. If an import consignment is under letter of credit basis, the importer can submit a copy of Letter of Credit along with the documents for import clearance.

6. Technical write up, literature etc. for specific goods if any

Technical write up, literature of imported goods or any other similar documents may be required as one of the documents for import clearance under some specific goods. For example, if a machinery is imported, a technical write up or literature explaining it’s function can be attached along with importing documents. This document helps customs official to derive exact market value of such imported machinery in turn helps for value assessment.

7. Industrial License if any

An industrial license copy may be required under specific goods importing. If Importer claims any import benefit as per guidelines of government, such Industrial License can be produced to avail the benefit. In such case, Industrial license copy can be submitted with customs authorities as one of the import clearance documents.

8. RCMC (Registration cum Membership Certificate)

For the purpose of availing import duty exemption from government agencies under specific goods, production of RCMC with customs authorities is one of the requirements for import clearance. In such cases importer needs to submit Registration Cum Membership Certificate along with import customs clearance documents.

9. Test report if any

The customs officials may not be able to identify the quality of goods imported. In order to assess the value of such goods, customs official may draw sample of such imported goods and arranges to send for testing to government authorized laboratories. The concerned customs officer can complete appraisement of such goods only after obtaining such test report. So test report is one of the documents under import customs clearance and formalities under some of specific goods.

10. DEEC/DEPB /ECGC or any other documents for duty benefits

If importer avails any duty exemptions against imported goods under different schemes like DEEC/DEPB/ECGC etc., such license is produced along with other import clearance documents.

11. Central excise document if any

If importer avails any central excise benefit under imported goods, the documents pertaining to the same need to be produced along with other import customs clearance documents.

12. GATT/DGFT declaration

As per the guidelines of Government of India, every importer needs to file GATT declaration and DGFT declaration along with other import customs clearance documents with customs. GATT declaration has to be filed by Importer as per the terms of General Agreement on Tariff and Trade.

Read More: https://indiafreenotes.com/international-trade-procedures-and-documentation/

The Indian IT industry has grown very rapidly in the last few years. The IT services exports has grown from $1,100 mn in 1996-97 to $12,500 mn in 2003-04. Nasscom-McKinsey has projected IT services exports from India to be $57 bn in 2008. There are a whole lot of interesting issues resulting from this growth. One of them is the evolution of the multinationals and the Indian IT companies. What makes it interesting is the fact that both have undergone significant evolution over the years. While the MNCs are becoming more localized in the Indian market, the Indian companies are fast adopting a global outlook.

Multinationals companies are the ones that are headquartered somewhere else and have an operation in India. Some familiar names include IBM, HP, Accenture, EDS and CSC. On the other hand, some of the Indian companies include TCS, Infosys, Wipro, Satyam and HCL. Let us take a look at how the two are placed vis-Ã -vis each other with their respective strengths and weaknesses.

Till about 2001, the two used to live in different worlds. The Indian IT companies did some on site body shopping, small low-end projects and some project work, done remotely. On the other hand, the global MNCs, till 2001, had a good going. They had pretty much a monopoly on things like outsourcing, Intellectual Property in IT industry, consulting, etc. They did a lot of big projects and had long-term relationships with clients. There was limited price competition between them as each one had its own niche. So, for the big projects there was hardly any competition for them and the margins were also high.

But,

Today if one looks at where the two are, the situation has changed quite a bit. While the Indian companies are increasingly enhancing their global presence, the global MNCs are increasingly leveraging India in world sourcing.

If one looks at the headcount of the top 5 Indian IT companies-TCS, Wipro, Infosys, HCL and Satyam-it is somewhere around 40,000 for the first three tier one companies and immediately followed by tier two companies at about 20,000 employees. This compares very favourably with anybody in the world. CSC has around 90,000 people, of which about half are dedicated to doing government work. So, on the commercial side, which is where the Indian companies are competing, CSC’s total staff is only about 45,000 people. Looking at their size in terms of number of people, Indian companies are ramping up very fast and growing. The growth in terms of headcount for Tata has been almost 30% over the last 3 years. This is where the competition is going to be.

Even though revenue wise they are much smaller when compared with the multinationals, that is also is growing rapidly. In terms of profits: the profits for the top 5 Indian IT companies last year grew at somewhere around 20-30%.

Furthermore, the Indian companies are now listed on the New York Stock Exchange and most of them are on Nasdaq. By having a listing there they are not only getting visibility but also access to low cost capital, as the cost of capital in the US is very low as compared to India. They are having phenomenal Price Earning (PE) ratios. The top tier companies are commanding the kind of PE that Silicon Valley startups command. Even in terms of market capitalization, the top Indian companies compare very favourably with anybody.

The Indian companies are not serving some small shops, but the best including the Fortune 50 and Fortune 100. Maybe, the relationships are at a lower level today, but it can be leveraged to get more business from them… They are also fast establishing global presence in terms of operations. These companies have been showing positive signs on the acquisitions front as well. TCS, Wipro, and Infosys etc. have made a lot of acquisitions of foreign companies in the last two years. But, the sizes of their acquisitions are still small when compared with the size of acquisitions that an American company with similar kind of market cap.

The Indian companies are expanding their global outlook and reach and setting up centers globally in the US, China, Japan, Malaysia, Czech Republic, etc. For instance, Infosys plans to have around 25% local staff by 2012, TCS is asking every employee to learn a foreign language and Wipro CEO’s main office is in the US. So, in another couple of years, we’ll have MNCs which are of foreign origin and MNCs which are of Indian origin.

Some of the key strengths of the Indian companies vis-Ã -vis the foreign MNCs is that these companies can take a longer term perspective as they don’t have as much stock market pressure as the typical American companies. Furthermore, in the West, every successful company piles up a lot of debt and that is how they are able to leverage and do acquisitions. Indian companies are not doing as many acquisitions and as a by-product of that have very strong financials. Another factor working in favour of the Indian companies is their flexibility, as they are not wedded to an approach. They are also investing for the future-in training and process maturity. By contrast, the multinationals have a short-term orientation, quarter-to-quarter focus, lack of much India experience, higher cost structure in India and higher sales cost.

However, the multinationals score over the Indian companies in terms of their size, financial muscle, and visibility. Even their relationships are typically at the CEO level, whereas the Indian companies’ relationships with customers are largely at the CIO or lower level.

Multinationals are now enhancing their local presence. Most understand the change in environment and are building and leveraging their India resources, using India as the main offshore option, scaling up offshore strength, doing acquisitions in India, pursuing local markets, providing end-to-end services from offshore, involving offshore in client facing roles and pricing aggressively. Many of them are also using profit center and direct selling approaches. Companies like IBM, HP, Accenture, CSC and even other IT MNCs like Keane, Perot, Convergys are increasingly ramping up their Indian operations in terms of their head count and customer base. India is becoming an integral part of their global sourcing strategy, they are promoting India in the large deals and are investing including in acquisitions. While initially they were tentative, these companies now understand that India is the name of the game and the good results are further reinforcing their strategy.

The net result of this evolution is that the differences between the Indian companies and global MNCs are getting blurred in the short term but the gap will widen in the long term. One can even expect three and possibly five Indian companies in the top 10 IT services companies in terms of profitability by the end of the decade, possibly in terms of revenue also. But the MNCs will certainly gain and remain strong in the longer term with their sheer size and ability to grasp humongous opportunities globally.