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How To Export

 
How to Start Export
 
Introduction:

Export/Import Trade is regulated by Directorate General of Foreign Trade (DGFT) and its regional offices. However, In the export/import trade, transaction in foreign exchange is involved. Such transactions are governed by Foreign Exchange Management Act, 1999 under which Foreign Exchange Management (Export of goods and services) Regulations, 2000 were framed. These Regulations have been notified vide Notification No. FEMA 23/2000-RB dated May 3, 2000 as amended from time to time.

Reserve Bank of India issues Master Circular on Exports/Import of Goods and Services every year on 1st July which consolidates the existing instructions on the subject of “Export of Goods and Services from India” and “import of Goods and Services “respectively at one place.
Other facets having bearing on credit such as facilitation of exports through   Establishment of Branch Office/Liaison office, Formation of Joint Venture, Wholly owned Subsidiary, Exports to Warehouse, Merchanting Trade, Cross Border online transactions are also regulated by the RBI

This publication  highlights  the existing provisions ,as on 30th September 2015 , brought out by the Reserve Bank of India (RBI) governing Export/Import  of Goods and Services which are subject to the  Foreign Trade Policy and  Handbook of  Procedure(Vol1).

Starting Exports

Export in itself is a very wide concept and lot of preparations is required by an exporter before starting an export business.  To start export business, the following steps may be undertaken:    
 
1) Establishing an Organization

To start the export business, first a sole Proprietary concern or a Partnership firm or Limited Liability Partnership (LLP) or a Company has to be set up. While a sole Proprietary business or a Partnership  firm or a LLP can be set up easily without much expenses and much legal formalities, a  Private Limited Company or a Public Limited Company are required to have the  minimum prescribed members as share holders and such Companies are required  to be registered with the Registrar of Companies. 

2) Name & Style of the Business

After finalizing the business organization (Proprietorship, Partnership, etc.), it is essential to give a name to the business. A simple and attractive name with a good logo is advisable.

3) Opening a Bank Account

A current account with a Bank which is authorized to deal in Foreign Exchange should be opened. 

4) Obtaining Permanent Account Number (PAN)

It is necessary for every exporter and importer to obtain a PAN from the Income Tax Department.

5) Obtaining Importer-Exporter Code (IEC) Number

No export or import is allowed to any person without an IEC number. After finalizing the kind of business organization, name and style and opening current account in the Bank, an application in the prescribed ANF2AForm for obtaining IEC Code Number may be made to the concerned Regional Licensing Authority along with the prescribed fee of Rs. 500/-, and the prescribed documents viz. Bank Certificate, PAN, Two photographs, self addressed envelope with stamp of Rs. 30/- etc. Applicant has to declare in the application whether there is NRI interest in the firm / company or not while applying for IEC number. In case there in NRI interest / investment with repatriation benefits, RBI’s  approval number with date should be attached with the application. A firm / company can obtain only one IEC for the firm /company against its PAN number. The firm / company should make a declaration that the firm / company has not applied for an IEC number in the name of its Regd. / Head office or any other branches / units / divisions to any other licencing authority .

6) Registration Cum Membership Certificate

Export Promotion Councils (EPCs) are responsible for promotion of a particular group of products/ projects/services and are also eligible to function as Registering Authorities to issue Registration-cum-Membership Certificate (RCMC) to its members.

In case an export product is not covered by any Export Promotion Council/Commodity Board etc., RCMC in respect thereof is to be obtained from FIEO. Further, in case of multi product exporters, not registered with any EPC, where main line of business is yet to be settled, the exporter has an option to obtain RCMC from Federation of Indian Exporters Organization (FIEO).

Membership fee should be paid in the form of cheque or draft after ascertaining the amount from the concerned EPC/Commodity Board. The RCMC certificate is valid from 1st April of the licensing year in which it was issued and shall be valid for five years ending 31st March of the licensing year, unless otherwise specified.
 
Goods exported out of the country are eligible for exemption from both Value Added Tax and Central Sales Tax.  To get the benefit of tax exemption, it is important for an exporter to get registered with the concerned Tax Authorities.

 
Exportability of product:

Exports and Imports shall be free, except in cases where they are regulated by the provisions of this Policy or any other law for the time being in force. The item wise export and import policy shall be, as specified in ITC (HS) published and notified by Director General of Foreign Trade, as amended from time to time.

All goods may be exported without any restriction except to the extent such exports are regulated by ITC (HS) or any other provision of this Policy or any other law for the time being in force.

The Director General of Foreign Trade may, however, specify through a public notice such terms and conditions according to which any goods, not included in the ITC (HS), may be exported without a licence/ certificate/ permission.

Schedule 1 of ITC (HS) gives the Import Policy Regime and Schedule 2 of ITC (HS) gives the Export Policy Regime. Schedule 2 categorizes products as:-
 
(1) Free         
(2) Restricted           
(3) Prohibited           
(4) State Trading Enterprises (STE)

Free: Products categorized as free can be exported without any permission from DGFT subject to condition, if any, mentioned against the product in the ITC(HS) Book  and any other law of the country governing their exports .

Restricted Goods: Before exporting any restricted goods, the exporter must first obtain an authorization explicitly permitting the exporter to do so. The restricted goods must be exported through a set of procedures/conditions, which are detailed in the license.

Prohibited Goods: These are the items which cannot be exported at all. The majority of these include wild animals, and animal articles or those prohibited for trading though an International Convention.

State Trading Enterprise (STE): Certain items can be exported only through designated STEs. The export of such items is subject to the conditions specified in the ITC (HS) Book.

 
Restriction on exports/imports to certain countries

While exports /imports is permitted on Most Favoured Nation (MFN) basis in India, imports/ exports of certain s goods are prohibited on account of UN Sanctions or International convention.

Iraq: Despite the policy for ‘Arms and related material’ as is given in Chapter 93 of ITC HS), the import / export of arms and related material from / to Iraq shall be ‘Prohibited.

Iran: Direct or indirect export and import of all items, materials, equipment, goods and technology which could contribute to Iran’s enrichment-related, reprocessing or heavy water related activities, or to development of nuclear weapon delivery systems, as mentioned below, whether or not originating in Iran, to / from Iran is ‘Prohibited’:

(i)         Items listed in INFCIRC/254/Rev.9/Part 1 and INFCIRC/254/Rev.7/Part 2 (IAEA Documents)
(ii)        Items listed in S/2006/263 (UN Security Council Document)
 
North Korea: Direct or indirect export and import of following items, whether or not originating in Democratic People’s Republic of Korea (DPRK), to / from, DPRK is ‘Prohibited’:

All items, materials equipment, goods and technology including as set out in lists in documents S/2006/814, S/2006/815 (including S/2009/205), S/2009/364 and S/2006/853 (United Nations Security Council Documents)

INFCIRC/254/Rev.9/Part1a and INFCIRC/254/Rev.7/Part 2a (IAEA documents) which could contribute to DPRK’s nuclear-related, ballistic missile-related or other weapons of mass destruction-related programmes.

Prohibition on Import of Charcoal from Somalia
 
Direct or indirect import of charcoal is prohibited from Somalia, irrespective of whether or not such charcoal has originated in Somalia [United Nations Security Council Resolution 2036 (2012)]. Importers of charcoal shall submit a declaration to Customs that the consignment has not originated in Somalia.
 
Trade and Technical Samples: Exports of bonafide trade and technical samples of freely exportable item shall be allowed without any limit.
 
Exports of Gifts: Goods, including edible items, of value not exceeding Rs.5,00,000/- in a licensing year, may be exported as a gift. However, items mentioned as restricted for exports in ITC (HS) shall not be exported as a gift, without an Authorisation.
 
Warranty Spares: Warranty spares (whether indigenous or imported) of plant, equipment, machinery, automobiles or any other goods, (except those restricted under ITC (HS)) may be exported along with main equipment or subsequently but within contracted warranty period of such goods subject to approval of RBI.

 
Denomination of Exports Contracts:

All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but the export proceeds shall be realised in freely convertible currency.

However export proceeds against specific exports may also be realized in rupees provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of ACU or Nepal or Bhutan. Additionally, the rupee payment through the Vostro account must be against payment in free foreign currency by the buyer in his nonresident bank account. The free foreign exchange remitted by the buyer to his non- resident bank (after deducting the bank service charges) on account of this transaction would be taken as the export realization under the export promotion schemes of this Policy.

Contracts for which payments are received through the Asian Clearing Union (ACU) shall be denominated in ACU Dollar. The Central Government may relax the provisions of this paragraph in appropriate cases. Export contracts and Invoices can be denominated in Indian rupees against EXIM Bank/ Government of India line of credit.

 
Declaration as regards export of goods and services on EDF/shipping bill:

Declaration of export of goods in the prescribed form {EDF (For non EDI ports)/ shipping bill (For EDI PORTS)} is required to be made to the bank. However, declaration in case of trade samples of goods and publicity material, goods or software accompanied by a declaration that they are not more than twenty five thousand rupees in value; goods imported free of cost on re-export basis; goods not exceeding USD 1000 or its equivalent in value per transaction exported to Myanmar under the Barter Trade Agreement; replacement goods exported free of charge in accordance with the provision of Exim Policy are exempted from aforesaid declaration.
 
 
Prescribed declaration on the Shipping Bill in case of exports through EDI ports:
 
"I/We undertake to abide by provisions of Foreign Exchange Management Act, 1999, as amended from time to time, including realization / repatriation of foreign exchange to / from India."

 
Grant of EDF Waiver:

Banks may consider requests for grant of EDF waiver from exporters for export of goods free of cost, for export promotion up to 2 per cent of the average annual exports of the applicant during the preceding three financial years subject to a ceiling of Rs.5 lakhs. For status holder exporters, the limit as per the present Foreign Trade Policy is Rs.10 lakhs or 2 per cent of the average annual export realization during the preceding three licensing years (April-March), whichever is higher.*
 
 
Amendment in Para 3.24 (j) of Chapter 3 of FTP 2015-2020

Amended Para 3.24 (j) of Chapter-3 of FTP 2015-2020 shall read as under:
 
 
3.24 Privileges of Status Holders :

(j) “Status holders* shall be entitled to export freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs. 10 lakh or 2% of average annual export realisation during preceding three licensing years, whichever is lower -
 
(Notification No: 9 /2015-2020, 4th June 2015)

 
Mode of Payment of exports:

The amount representing the full export value of the goods exported shall be received through a Bank in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2000 in the following manner:

a. Bank draft, pay order, banker’s or personal cheques.
b. Foreign currency notes/foreign currency travellers’ cheques from the buyer during his visit to India.
c. Payment out of funds held in the FCNR/NRE account maintained by the buyer
d International Credit Cards of the buyer.

Note: When payment for goods sold to overseas buyers during their visits is received in this manner, EDF/SDF (duplicate) should be released by the banks only on receipt of funds in their Nostro account or if the bank concerned is not the Credit Card servicing bank, on production of a certificate by the exporter from the Credit Card servicing bank in India to the effect that it has received the equivalent amount in foreign exchange, banks may also receive payment for exports made out of India by debit to the credit card of an importer where the reimbursement from the card issuing bank/ organization will be received in foreign exchange.

 
Submission of Export Documents to Bank:
Within 21 days from the date of export, exporter should lodge the copy of EDF/SDF together with relative shipping documents and an extra copy of the invoice with the banks. In cases where exporters present documents pertaining to exports after the prescribed period of 21 days from date of export, banks may handle them without prior approval of the Reserve Bank, provided they are satisfied with the reasons for the delay.

 

 
 
How To Export