Question

What is export trade? Explain its procedure in detail.

Answer 1

Trade between two countries is called International Trade. It can be import or export trade. Export trade refers to the selling of goods and services to other countries or foreign countries Export procedure is as follows:
There are four stages that help simplify the export procedure.

[A] Preliminary Stage: This is the first stage which includes the following steps.

1. Registration: The exporter gets himself registered with various authorities in order to conduct export trade like
   (I) Director General of Foreign Trade 1n order to obtain Import Export Certificate Number
   (II) Income Tax Authority to obtain Permanent Account Number.
   (III) Export Promotion Council (EPC) and GST authority.
2. Appointment of Agent: The exporters are supposed to appoint an agent in the foreign country who will look after the order or book an order for the exporter.
   

[B] Pre-shipment Stage:

1. Receipt of Order: When the exporter receives an order he has to check the details of the order. He also checks the restriction of imports in the importer’s country.
2. Letter of Credit: The exporter has to obtain a letter of credit from the importer, which is used to clear the foreign exchanges and other restrictions.
3. Pre-shipment Finance: The exporter has to meet his working capital needs and for that, he has to obtain the pre-shipment finance from his bankers.
4. Production of goods: If the exporter is a manufacturer, then he has to produce the goods according to the order placed by the importer, otherwise he has to get the necessary goods arranged from his suppliers.
5. Packaging: Packaging plays a very important role in the export business. Goods have to be packed as per the requirement of the importer and it should protect the goods in transit, preserve the quality of goods and carry out the promotion of goods.
6. ECGC Cover (Export Credit and Guarantee Corporation): In order to protect the goods and cover the credit risks, the exporter must obtain a cover of ECGC. The ECGC covers the risk up to 90% if the importer fails to make the payment.
7. GST formalities (Goods and Service Tax): All formalities regarding GST must be complied With by the exporter.
8. Marine Insurance: For exporting the goods, it is mandatory for the exporter to take a marine insurance policy for the goods exported. This insurance is under CIF (Cost, Insurance, and freight) contract.
9. Clearing and Forwarding Agents (C & F agents): The exporter has to appoint a clearing and forwarding agent to carry out the necessary formalities of customs. They are also called custom house agents.
   

[C] Shipment Stage:

1. Processing of Document: The exporter prepares the shipping bill and gets all the documents Processed at the customs house as required for the export of goods.
2. Examination of Goods: The clearing and forwarding agents obtain a document called carting order from the Port Trust Authorities, which allows the exporter to take the goods inside the dock area
3. Loading of Goods: On examination of the goods, the ‘Customs Examiner’ issues order called Let Export order. This is given to the clearing and forwarding agent by the ‘Customers Preventative Officer (CPO). The goods are then loaded on the ship and the captain of the ship issue a receipt called the ‘Mates Receipt’. Then the C & F agent obtain the Bill of Lading.
   

[D] Post-shipment Stage:

1. Shipment Advice: On the dispatch of the goods, the exporter sends shipment advice to the importer Along with it, he also sends the packaging list, commercial invoice, and non-negotiable copy of loading.
2. Presentation of Documents: The necessary documents are presented to the bank for negotiation and realization of export proceeds.
3. Realization of Export incentive: Various incentive like duty drawbacks refunds of GST if paid etc. is given to the exporter by the concerned authorities.
4. Follow up: Exporter has to follow up and find out the buyers reaction on the goods he receives This concludes the export procedure.