FOREIGN TRADE

Introduction
1. Foreign trade is completely different with domestic trade.
2. Education, Finance, Age, Family Background are not barrier for doing foreign trade.
Working with speed is first eligibility and working hard is next eligilibility.
3. In domestic trade, volume of business is compared with no of customers or end-users, but in
foreign trade, there is no end-users and if so, it is called mail order business, no of customers
will be less in foreign trade. No sales tax for exporting products.
4. The following are basic steps of foreign trade:
Product Identification,
Deciding a Product,
Sourcing the product,
Deciding the right country to export,
Identification of Importers
Deciding the importers
Obtaining order etc
5. To execute our foreign trade, Banker and Custom House Agent will act as our team member
to complete the export business.
6. Having Bank account is essential for foreign trade. Opening of Bank account is to be done
before applying license.
7. Steps involved to start a foreign trade business:
Create a Bank Account
Apply for IEC License (Importer Exporter Code)
Register your License with Port's Customs Office
Create membership with Business Portals
8. Process involved in Exporting
Product Suppliers Helping Organisations

Banker Exporter Custom House Agent

Importers
9. FERA Foreign Exchange Regulation Act, up to Year 1999. after, it is splitted into 2 acts as
 follows:
FEMA Foreign Exchange Management Act
PMCA Prevention of Money Laundering Act
10. Exchange Earners Foreign Currency Account (EEFC A/C), in this account, foreign currency
account can be maintained.
11. Involve more than one banker in your business to avoid dependency with bank.
12. Packing Credit After successful bagging of order, bank can offer loan to exporters based
on order value to execute the work. It is also called as Pre-Shipment Finance. Similarly
Post-Shipment Finance is also provided by bank to meet expenditure after shipment. Based
on the LC document, money can be borrowed from bank.
13. Custom House Agent (CHA) Agent does all logistics work of exports. Transportation of
goods from exporters to importers as per legal norms. CHA possess license with them which
they obtained / registered with custom office. Be careful with CHA for their charges.
We should identify CHA who is ethical, experienced and knowledged. CHA can help us in getting
benefits using ITC-HS-Codes for the exporting products. It is good to have CHA as many as
possible for foreign trade to do it without any dependency with CHA. CHA are available in ports.
Chennai port www.cchaa.in Cochin port www.cchaa.com
Tuticorin port www.tchaa.in
14. Exporters Time schedule, quality and price is important in exporting business. There are of
2 types of exporters:
Manufacturer Exporters Merchandiser Exporters
15. Helping Organisations Handbook of information for international traders (booklet will be
provided), subscribe for free magazine in www.tradeforum.org and also visit
www.dgciskol.nic.in
16. Importers List of importers will be provided.
17. Product Suppliers:
Identification of right product supplier is essential, otherwise they can engulf the
maximum profit and leave peanut to us. So PIKE (Product Information, Product
Knowledge, Product Experience) is essential for exporter to do the foreign trade and it is
a continuous process throughout his career.
Awareness in the Cost of manufacturing process of the product is essential. Otherwise,
Product suppliers can cheat in price and even we cannot bag order due to high price
quoted by product supplier.
In general, bankers will not cheat, but there will be slight variation in bank charges and
that too can be negotiated with banker to concession.
18. Product Identification:
There are about 11,000 items can be exported from india.
In domestic trade (under the control of state government), there are 2 types of products,
they are taxable and non-taxable products. All taxes are governed by state government
only. Tax percentage differ with products. List of taxable products with its tax
percentage is prepared by state government, so rest of the products are non-taxable.
Central government controls the Foreign trade,
In Foreign trade, there are 4 category of products:
Free items (any exporter can export any quantity to any importers in the world for
any price to any country), 99% of the 11,000 products are listed under free items and
only IEC is enough to do trade.
Restricted Items To do trade on these items, special permit, special authorization,
special license required along with IEC.
Canalised Items
Prohibited Items live stocks, monuments, Items with heritage values, sandal woods
etc.
Restricted items, canalised items and prohibited items are tabulated under Negative list
which is only less than 1% of the 11,000 items listed for exports.
The role of R & D department is to analyse domestic market situation for their company
to increase their business. But the companies involved in foreign trade does not have
R&D department since the commerce department of central government is analysing the
world market and introduce various market schemes for foreign traders.
19. Deciding Export Products
Identify using FPS list (Focused Product Scheme) to select a product.
Use Page 30 & 31 of Booklet 2 (agilam booklet)
Browsing business portals (for/to connect exporters & importers) and in that search
importers of fasteners
www.indiatradezone.com www.ecplaza.net
www.globalbuyersonline.com www.indiamart.com
www.trade-india.com www.tradeboss.com
www.exportersindia.com
20. Information for Beginners:
Identify 1 product using above point 19.
Identify the product which is available in your city (nearest to your company & for easy
approach)
 Don't select perishable product to begin with.
Basic difference between air freight and sea freight
Air Freight Sea Freight
Goods reach first before papers Papers reach first before goods
Indemnity bond is collected by Indemnity bond is not required
airport and goods are delivered from
airport
6 times higher than sea freight fare Economical than air freight
Freight fare is based on weight along Freight fare is based on volume along
with volume with weight

Some common terms and abbreviations used in freight:

CFS Container Freight Station There are about 30 stations at chennai and goods
are loaded in container under customs office, located near to port.
ACC Air Cargo Complex Place where in the airport, goods are collected for
immediate freight but there is no warehouse to store the goods
ICD Inland Container Depot Similar to Container Freight Station but located in
the land and not on or near to the port
FCL Full Container Load Goods loaded fully in the container by a party, so
transportation starts immediate.
LCL Less Container Load Goods of various kind in the container by different
parties. Your goods are partially loaded in the container. Party has to wait to get
container fully loaded for his goods transported.
Container types are 20 feet, 40 feet, HQ container, top open container, refrigerated
container.
Charter Vessel Travel one main port to another main port and no intermediate
stoppage, i.e. Direct delivery and freight rates are high usually.
Conference Vessel Travel many ports and then reach destination, take long time to
deliver goods and freight rates are low usually.
Feeder Vessel Small ship which can take maximum of 500 containers
Mother Vessel Large ship which can take minimum of 2000 containers
ITC-HS-CODE (International Trade Classification Harmonized System Code)
it is 8 digit number used internationally to identify an item in numerical form rather
than name, language, chemical formula etc. Since an item has different name in
different languages, in order to avoid confusion, 8 digit code is used.
 Trans-shipment of Goods Transfer of goods from feeder vessel to Mother Vessel.
Multi-Modal Transportation Transportation of goods via sea and then rail, land or
both
As an Exporter, we should know the goods weight, goods exporting benefits and duty
drawback (DDB) for the exporting goods. For example, Agarbatis 12%, Engineering
products 7%, garments - 9%
Duty Draw Back (DDB) In India, a good is manufactured and exported, the exported
can drawback all kinds of duty that goods incurred during manufacturing and export.
Raw material or components for manufacturing incur central excise duty or customs
duty or both. The draw back of all duty will be done during export.
Cotton Thread Cloth Shirt Export
In each step in the process, Excise Duty incurred.
21. Sourcing of Product selected:
Identifying location
Selection using 37 Export Promotion Council
Internet
Traders association / Industrial association and its related websites
Chamber of Commerce
Yellow Pages / News Ads
District Industry Centre
Local Enquiry
22. Deciding Country of Exports
Selection using Export Promotion Council
Avoid restricted cover countries there are 37 countries are under restricted cover
countries, vist www.ecgc.in and can download the list. ECGC Export Credit Guarantee
Corporation
GSP Generalized System of Preference This scheme in many countries give benefits
to some countries for imports. So, choose a country where India is listed in the scheme
for import. So, importers can benefit by importing from us.