Start an import-export business with easy steps
Starting an import-export business can be a rewarding venture for those looking to set up a small business. Here are the foundational steps to get started:
- Open a bank account: Open a dedicated business bank account to keep your business transactions separate from personal finances. This helps in managing cash flow efficiently and simplifies accounting and tax reporting.
- Get a Permanent Account Number (PAN): A PAN card is essential for all financial transactions and serves as a vital identity proof. It is required for tax purposes and to register your business with various trade and government bodies.
- Get an Importer-Exporter Code (IEC) Number: This unique code is mandatory for anyone looking to start an import-export business in India. Issued by the Directorate General of Foreign Trade (DGFT), it's crucial for clearing customs and shipments, and for sending/receiving payments to/from foreign entities.
- Registration cum membership certificate (RCMC): Registering with an export promotion council or commodity board gives you access to numerous benefits such as subsidies, tax exemptions, and support in participating in trade fairs globally. It also enhances credibility with potential business partners.
- Choose your product: Identify products that not only have a strong international demand but also ones that you can source reliably and efficiently. Consider factors like production costs, market competition, and local resource availability.
- Choose your market: Research potential international markets for your chosen products. Understand consumer behaviour, current trends, demand cycles, cultural nuances, and regulatory requirements to successfully enter and compete in those markets.
- Find buyers: Leverage international trade fairs, online B2B marketplaces, and industry contacts to network and connect with potential buyers. Building a strong online presence can also attract buyers from across the globe.
- Sampling: Offering product samples is crucial as it allows potential buyers to assess the quality and specifications before placing large orders. Ensure that the samples perfectly represent what you will deliver in bulk.
- Determine the price/cost: Price your products competitively while ensuring all costs are covered, including production, shipping, duties, and taxes, to maintain a healthy profit margin. Factor in market demand and pricing strategies of competitors.
These steps are fundamental in navigating the complexities of global trade and establishing a successful import-export business.
Check your pre-approved business loan offer to gain quick access to funds that can accelerate your business launch.
How to export from India
Exporting from India involves several key steps to ensure compliance and profitability:
- Confirm order: Secure and confirm the export order with your buyer.
- Procure goods and quality control: Source your product and conduct thorough quality checks.
- Finance: Arrange the necessary financing to support your export activities. Opting for a secured business loan can provide the working capital needed to manage procurement, production, and logistics efficiently.
- Labelling, packaging, packing, and marking: Ensure your products are properly labelled and packaged as per international standards and buyer requirements.
- Insurance: Obtain adequate insurance to cover the goods against loss or damage during transit.
- Delivery: Organise the logistics for delivering the goods to your buyer.
- Customs procedures: Comply with all Indian and destination country customs regulations.
- Documentation required: Prepare and verify all required export documentation, such as the commercial invoice, packing list, and certificate of origin.
- Submit documents to bank: Present all relevant documents to your bank for processing payments.
Following these steps meticulously can help smooth the export process and ensure compliance with international trade regulations.
Documents required to start an export business in India
Having the right documents in place ensures smooth customs clearance and timely payments. Below are the key documents one would need for an export business:
- Proforma invoice: A preliminary invoice sent to the buyer before shipment, listing product details, price, quantity, and terms of sale. It is mainly used to confirm the order.
- Commercial invoice: The final invoice raised for the buyer, including details such as invoice number, buyer and seller information, HS code, FOB/CIF value, and agreed payment terms.
- Packing list: A document that specifies the contents of each package or container, helping customs and logistics teams identify goods quickly.
- Bill of Lading or Airway Bill: Issued by the shipping line (for sea) or airline (for air), this serves as a receipt and proof that goods have been handed over for export.
- Certificate of origin: Provided by a Chamber of Commerce or export promotion council, this confirms that the goods were produced or processed in India. Some countries mandate it to provide duty concessions.
- Insurance certificate: Confirms that the goods are insured during transit. It includes the policy number, insured value, and coverage terms, enabling compensation claims in case of loss or damage.
- Export license: Required only for goods under India’s restricted export category, this license is issued by the DGFT to allow export of those specific items.
- FIRC/e-FIRC (Foreign Inward Remittance Certificate): Issued by banks as proof of receipt of foreign payments, helping establish payment authenticity for exporters.
Key challenges faced in export business in India
Here are some common challenges for new exporters and how to avoid them:
- Payment delays: International payments often get stuck due to banking checks and compliance requirements. To avoid this, work with trusted payment partners that offer faster, transparent settlements.
- Improper documentation: Errors or missing documents can lead to customs delays or even withheld payments. Always verify all paperwork and maintain digital copies as a backup.
- Customs issues: Import regulations differ across countries. Partner with experienced customs brokers and make sure your goods meet all standards of the destination country.
- High transaction charges: Traditional banking channels may involve high fees and limited support for exporters. Explore modern payment solutions that reduce costs and ensure compliance with RBI norms.
Conclusion
Starting and managing an import-export business involves careful planning, adherence to legal and regulatory requirements, and effective market and financial management. With the right approach and understanding of international trade dynamics, entrepreneurs can tap into global markets and drive significant growth. To support your business in these endeavours, consider exploring financial options such as a business loan, which can provide the necessary capital to cover startup costs, procure goods, or expand into new markets. It is also important to compare the business loan interest rate offered by different lenders to ensure you secure the most cost-effective financing option for your venture.
