MBA_531_Export Import Documentation

MASTER OF BUSINESS ADMINISTRATION SEMESTER-III EXPORT IMPORT DOCUMENTATION MANAGEMENT MBA531

CHANDIGARH UNIVERSITY Institute of Distance and Online Learning Course Development Committee Prof. (Dr.) R.S.Bawa Pro Chancellor, Chandigarh University, Gharuan, Punjab Advisors Prof. (Dr.) Bharat Bhushan, Director – IGNOU Prof. (Dr.) Majulika Srivastava, Director – CIQA, IGNOU Programme Coordinators & Editing Team Master of Business Administration (MBA) Bachelor of Business Administration (BBA) Coordinator – Dr. Rupali Arora Coordinator – Dr. Simran Jewandah Master of Computer Applications (MCA) Bachelor of Computer Applications (BCA) Coordinator – Dr. Raju Kumar Coordinator – Dr. Manisha Malhotra Master of Commerce (M.Com.) Bachelor of Commerce (B.Com.) Coordinator – Dr. Aman Jindal Coordinator – Dr. Minakshi Garg Master of Arts (Psychology) Bachelor of Science (Travel &Tourism Management) Coordinator – Dr. Samerjeet Kaur Coordinator – Dr. Shikha Sharma Master of Arts (English) Bachelor of Arts (General) Coordinator – Dr. Ashita Chadha Coordinator – Ms. Neeraj Gohlan Academic and Administrative Management Prof. (Dr.) R. M. Bhagat Prof. (Dr.) S.S. Sehgal Executive Director – Sciences Registrar Prof. (Dr.) Manaswini Acharya Prof. (Dr.) Gurpreet Singh Executive Director – Liberal Arts Director – IDOL © No part of this publication should be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the authors and the publisher. SLM SPECIALLY PREPARED FOR CU IDOL STUDENTS Printed and Published by: TeamLease Edtech Limited www.teamleaseedtech.com CONTACT NO:01133002345 For: CHANDIGARH UNIVERSITY 2 Institute of Distance and Online Learning CU IDOL SELF LEARNING MATERIAL (SLM)

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INDEX UNIT-1: Preliminaries for Exports and Imports ..................... Error! Bookmark not defined. UNIT 2: Exports and Imports ................................................................................................. 19 UNIT 3: Exporting Methods.................................................. Error! Bookmark not defined.7 UNIT 4: Foreign Trade Policy ................................................................................................67 UNIT 5: Export Promotion Councils...................................................................................... 88 UNIT 6: Export Procedure & Documentation ..................... Error! Bookmark not defined.06 UNIT 7: Export Procedure & Documentation .................... Error! Bookmark not defined.23 UNIT 8: Export Procedure & Documentation ...................................................................... 145 UNIT 9: Import Procedure & Documentation .......................................................................170 UNIT 10:Import Procedure & Documentation ................... Error! Bookmark not defined.83 UNIT 11: Import Procedure & Documentation .................................................................... 199 UNIT 12: Import Procedure & Documentation .....................................................................214 UNIT 13: Trade policies ....................................................................................................... 230 UNIT 14: Trade policies ....................................................................................................... 242 4 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 1: PRELIMINARIES FOR EXPORTS AND IMPORTS Structure 1.0 Learning Objectives 1.1 Introduction 1.2 Meaning and Definition of Export and Import 1.3 Classification 1.4 Strategy and Preparation for Export Marketing 1.5 Summary 1.6 Keywords 1.7 Learning Activity 1.8 Unit End Questions 1.9 References 1.0 LEARNING OBJECTIVES After studying this unit, student will be able to:  Explain the concept of ‘Export’ and ‘Import’.  Distinguish between the different types of export and import.  Analyse the various strategies used for Export Marketing.  Explain the export-import in daily real-life situations like oil pricing. 1.1 INTRODUCTION The world has become a global village. Most of the economies world-wide have accepted the Liberalization, Globalization, and Privatization (LPG) Model to meet the emerging demands of respective nations. India accepted the Open-Door Policy by signing a General Tariff and Trade Agreement (GATT) in 1991. It paved the ways to ease the foreign restrictions enabling the Indian business to sell the products in various countries across the globe. Simultaneously, through the direct investment by foreign sources, new businesses and employment opportunities have been generated with the help of import-export policies. India could gain maximum through optimum export having more foreign currencies. The IT, BPO and other sectors have marked the significant growth in the three decades. After reading through this 5 CU IDOL SELF LEARNING MATERIAL (SLM)

unit, students should be able to understand the idea of ‘Export’, ‘Import’, the various kinds, their strategies, and the overall process to export or import goods which could include products or services or both. There are unlimited opportunities waiting to be tapped in the various international marketplaces. Exports are broadly referred to products (goods, services or both) that are produced in one nation and are purchased by residents of another nation. It doesn't matter what the product is. Neither does it matter how it being sent across. The product could be sent by a ship, or carried in personal baggage on an airplane, or be even emailed across If the product has been manufactured domestically and is being sold for consumption to someone from a foreign land, it is categorised as an ‘export’. While ‘exports’ are one side of the international trade, the other side is ‘imports’. ’Imports’ are thus goods or services that are bought by a country’s resident but have been manufactured in another foreign country. Together, they constitute the ‘trade balance’ for a country. When any country has more exports than its imports, it will have a ‘trade surplus’, and vice-versa, if it has more imports than exports, then it will have a ‘trade deficit’. In short, export is that part of a trade where the goods or services produced in a domestic country by its domestic producers are sent to a foreign country for further sale or trade. By selling such goods, services or both to other countries adds to the National Income of the country and helps in improving the Gross Domestic Product (GDP) of the country that is exporting. Imports are that part of international trade where the goods or services produced in a Foreign Country by foreign producers are sent to the Domestic Country for further sale in the Domestic Country. Consequently, the purchase of such products from a foreign country may increase the outflow of the Foreign Reserves from the Importer’s Country. Let us learn in detail. 1.2 MEANING AND DEFINITION OF EXPORT AND IMPORT Export : The term ‘export’ is referred to the goods ,services or both, that are sent to a different country for selling purposes. Thus, exports are referred to the products manufactured in one country that are acquired by the citizens of another country. Exports in this case can amount to anything. This could be accomplished by using different methods of shipping including and not limited to email or by personal luggage on a flight journey. If anything is manufactured in one nation and is traded in another nation, its termed as ‘export’. Exports play an important role in trade activities done internationally. At the other end, if products manufactured in another country is purchased by a domestic entity or a private citizen of the country, its termed as ‘import’. A country’s trade balance is termed as the total of imports and exports. When a country exports more than what it imports, its known as trade surplus. In case a country imports more items than it exports, it is then said to be in deficit, or otherwise known as trade deficit. 6 CU IDOL SELF LEARNING MATERIAL (SLM)

Import : The term ‘imports’ is referred to foreign products including goods or services or both, bought by either public or private entities in a county or by the government of the country itself. It is termed as an import irrespective of the method of transmission. If something is produced in another country and consumed/used domestically, then it qualifies as import. Imports make a nation dependent on a foreign country’s economic as well as political prowess. It is especially risky if a country is dependent on another for its food grains, fuel needs and materials required for industry to run. Definition of ‘Export’ & ‘Exporter’ under Foreign Trade Policy Export is defined under the Foreign Trade (Development & Regulation) Act or FT (D & R) Act, 1992, and is amended regularly. Note: The definition of export under the foreign trade policies is same as defined in FT (D & R) Act, 1992 which is given below FT (D&R) Act, 1992, section 5, which is also considered to be the mother act of foreign trade policy, empowers a Central Government to issue a Foreign Trade Policy. An ‘exporter’ is a person or an entity who either exports or intends to export goods and services. They possess an IEC number, unless specifically exempted otherwise. Under the Foreign Trade (Development & Regulation) Act, 1992, the term ‘export’ is defined as: i. With relation to goods: ‘Export of goods’ means to take any goods out of Indian territory by either land, sea or air. ii. With relation to services or technology: ‘Export of services or technology’ means a. Supplying services or technology from India into any other country or commonly known as ‘Cross Border Trade’ mode. Like, a user in Nepal may receive services (like consultancy or market research reports, distance training, tele-medical advice, architectural drawings and so forth) from India through its telecommunications or postal infrastructure. b. Supplying services or technology from India to the service consumer of other country or commonly known as ‘Consumption abroad’ mode. Like, Nepalese nationals have come to India as tourists, students or patients to consume the service within India. c. Supplying services or technology by an Indian supplier through their commercial presence in a foreign country or commonly known as ‘Commercial Presence’ mode. Like, the services provided within the Nepalese territory by a locally established affiliate, subsidiary or representative office of a company that is owned and controlled by an Indian company (bank, hotel group, construction company and likewise). d. Supplying services or technology by an Indian service provider, through the physical presence of Indian citizens in a foreign country or commonly known 7 CU IDOL SELF LEARNING MATERIAL (SLM)

as ‘Presence of natural persons’ mode. Like, an Indian supplier provides a service within the Nepalese territory as an independent supplier (a consultant, health worker), or as the employee of the Indian service provider (like a consultancy firm, hospital, construction company). It should be noted that the ‘export’ and ‘import’ of goods, services, or technology, from Special Economic Zones (SEZs) or between the Special Economic Zones of the respective countries, is in accordance with the Special Economies Zones Act, 2005. 1.3 CLASSIFICATION The export and import of products can be further classified into different categories. There can be some similarities and differences in such a classification. Every country has its own policy that is based on the availability of its resources, demand-supply pattern, requirements and so on. A few of the major classes of exports are explained as below:  Classification of Export Goods in India , Indian Trade Clarification based on Harmonized System, abbreviated as ITC-HS, is an international nomenclature for goods that was developed by the World Customs Organization in 1988. Out of the 190 countries that participated in the conference, India is one of the countries that has adopted this method of nomenclature to classify its products for international trade. As per the universal standard, HS codes must have 7-10 digits in them. The ITC-HS system has an 8-digit code. The two schedule tariffs of Indian trade, that is the Import Tariff, and the Export Tariff are specified in it. In India, these codes are published by the Directorate General of Foreign Trade (DGFT). As per these published codes, the products are then classified and arranged. The classification of products based on the ITC-HS nomenclature method is indispensable as a wrong classification can lead to a loss in the business and in some extreme cases, can also result in cancelling of the Import Export Code of the exporter. If goods are found to be classified in another category, it can result in the exporter having to pay higher duty or even lead to revocation of license if found out by the authorities. For this very reason, the knowledge about the type of the export goods is extremely important. Following are the various types of export goods: i. Prohibited Goods The goods that are NOT permitted by the government to be exported out of the country fall in this category. These goods, thus, are not given an export license and cannot be taken out of the geographical borders of the country by any means. Only under special circumstances can these items be exported, that is with special license and permission issued by the government. Some examples of such goods are exotic birds, wild animals, human skeleton, beef, seashells, aero models, narcotics drugs, and so on. ii. Restricted Goods 8 CU IDOL SELF LEARNING MATERIAL (SLM)

The goods that can be exported only with an additional legal license fall under this category. While general export conditions must be complied with, special conditions and processes for restricted export have also to be adhered to, to export these goods. Some examples of goods under this category are endangered plants & animal species, live birds & animals, sand/soil, sandalwood, firearms, medicines, and so on. iii. State Trading Enterprise The goods that can be traded and exported only by the Authorities of State. They do not need an export license as they are exported by State Trading Enterprises. State bodies manage such trades while safeguarding the overall national interests. These goods are however, required to comply with the EXIM policy of India. iv. Restricted Country Goods These are the goods whose export to some countries is restricted and can be traded only after meeting with the conditions set in the EXIM policy. A lot of countries are classified under the ‘restricted’ category for various reasons. For example, the export of products to country of Iraq is only possible after adhering to the conditions mentioned in India’s EXIM policy. All such conditions are listed out in the Indian Trade Clarification based on Harmonized System (ITC-HS), Classification of Export and Import Items. Figure 1.1: Classification of Exports Goods (Source: ExportersIndia.Com)  Classification of Export Services in India The services are intangible in nature. However, the total share of service industry has been increasing over a time. Currently, service sector contributes more than 50% of the GDP of India. Additionally, the global economy has also become a knowledge- based economy. The subsequent changes are reflected in several national economies 9 CU IDOL SELF LEARNING MATERIAL (SLM)

including that of India’s. The following sectors can export their services from the country of India to any country world-wide: Sr. No. Services 1 Art & Design 2 Business Services 3 Creative & Media 4 Digital Services 5 Education & Training 6 Events & Attractions 7 Films 8 Financial & Professional Services 9 Photography & Animation 10 Healthcare & Medical Services 11 Manufacturing 12 Leisure & Tourism 13 Music 14 Professional Services 15 Publishing 16 Information and Communication Technology (ICT) 17 TV & Radio 18 Wholesale & Retail Table 1.1: Export Services & Sectors in India  Exporting to India According to the CIA Factbook, “Despite pressing problems such as significant overpopulation, environmental degradation, extensive poverty, and widespread corruption, the economic growth following the launch of economic reforms in 1991 and a massive youthful population are driving India's emergence as a regional and global power,” Additionally, India’s diversified economy and increased role in the global economy makes it a good trade partner for consideration to interested U.S. exporters. In the year 2019, Indian GDP growth decreased to 4.8%, from more than 7% in the previous year. It was $8.98 trillion as measured by the Purchasing Power Parity (PPP) basis that adjusts for price differences. The data from U.S. Commercial Service’s 2020 India Country Commercial Guide showed that, despite a decline in the overall levels of trade volumes globally, in 2019, U.S. continued to remain India’s largest trading partner.. While the exports of U.S. products to India was around $59.6 billion, imports from India were around $87.3 billion. U.S. also continued to retain its position as India’s top export market, while India was the 12th biggest export market 10 CU IDOL SELF LEARNING MATERIAL (SLM)

for U.S. goods. According to the U.S. Trade Representative Office, the top U.S. export categories to India, in 2019, by two-digit HS numbers were: i. Mineral fuels at $8.2 billion ii. Precious metal and stone (diamonds) at$6.4 billion iii. Aircraft at $2.8 billion iv. Machinery at $2.4 billion v. Organic chemicals at $1.9 billion  India’s Foreign Trade: Overview in April 2020 India’s overall exports (products and services combined) in April 2020* is estimated to be at USD 27.96 billion, which would be a negative growth of (-) 36.65percent compared to the same period the year before. While the overall imports in April 2020* is estimated to be at USD 27.80 billion, which would be a negative growth of (- ) 47.36 percent compared to the same period the year before. Figure 1.2: Indian Exports (Goods & Services) in April 2020 (Source: PIB, Ministry of Commerce & Industry, May 2020)  The Overview of Indian Import in 2020 The imports in April 2020 were USD17.12 billion (Rs.1,30,525.08 crores), which was 58.65percent lower in Dollar terms and 54.59 percent lower in Rupee terms, over imports of USD41.40 billion (Rs2,87,432.93 crores) in April2019. Major commodity groups of import showing negative growth in April2020 over the corresponding month of last year are: 11 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 1.3: Indian Import in April 2020 (Source: PIB, Ministry of Commerce & Industry, May 2020) 1.4 STRATEGY AND PREPARATION FOR EXPORT MARKETING The word ‘Strategy’ has been derived from the Greek word ‘Strategos’ which means general ship. Simply put, strategy means the art or tactics of a general leading an army against the enemies. It is required that exporters adopt varying strategies to successfully market their products/services in different locations world-wide. Export strategy can be made keeping the following basis:  By selecting local products which are suitable for overseas buyers and to be improving its quality and design to meet requirements of foreign buyers.  By developing a product strategy in packaging. Packaging for export markets must be strong and protective and must fulfil three primary functional protection against water and moisture, breakage, and theft.  By considering the overseas markets as a heterogeneous one. As each country is different with respect to its climate, commercial laws or even buying patterns, it is advisable to adopt an intensive marketing strategy. This way it would be possible to concentrate on each one of the countries, one at a time.  By using the ‘4Ps’ of export marketing, that is Product, Price, Place and Promotion.  By formulating and implementing sound export marketing plan. The plan should consist of business objectives, international marketing research, market segmentation, pricing, distribution, promotion strategies and so on.  By selecting different and appropriate sales promotional schemes like participation in trade fairs, trade journal ads, web site advertising press advertising, and so on. 12 CU IDOL SELF LEARNING MATERIAL (SLM)

 By determining a product’s export potential by first assessing it’s success in the local domestic market. However, the exporter must also keep in mind the differences in climate, culture, and environment.  By giving maximum importance to product quality. The exporters should stress on the absolute quality of the products as even the slightest variation of the product may not be acceptable to the foreign buyers.  By making regular flow of information available, complying with delivery schedules and maintaining a prompt after-sales service.  By developing a worthy brand name, appointing an agent to manage quick sales, maintaining a competitive pricing and marketing eco-friendly products.  By developing personal relations with the foreign buyers as sometimes, these feelings may be far more important than the facts. Types of Strategies Used in Export Marketing Since export marketing is all about marketing the product(s) in foreign soil, it tends to be more challenging. Although strategies that are used in domestic marketing can be referred to, in export marketing, one has to pay heed to the differences in cultures, ideals and tastes. The prevalent laws and regulations of the foreign country may also be different. Export marketing may thus involve greater risk and efforts and may even require substantial financial input.  Pricing Strategies Pricing strategy is the changes in the product prices that business owners make, to try to persuade the consumers to purchase their products. Pricing strategies may however be useful for export advertising, only if there are not many competitors in the target country, or if one is new to that specific market. The different types of pricing strategy involve giving discounts, promotional schemes, offering membership special pricing and providing bundle pricing.  Online Marketing Online marketing has gained importance for both an export business and a national business in the current times. This is because people in most countries have some level of access to the Internet and its benefits, and online shopping continues to exhibit a growing trend. Online ads, websites and email marketing are all parts of online marketing. While Facebook and Google ads are popular online marketing strategies, the most common online ads are through use of ‘keywords’. That is the ad appears when a user uses words similar to those from the product’s ad in a search or navigates to similar sites.  Culture-Specific Marketing Plans The export marketing strategies that focus on the target country's cultural differences can help increase the sales. Research is absolutely necessary for such plans. First and foremost, surveys and investigations are carried out to find out how consumers in foreign countries view the product(s). In fact, some multi-national corporations have 13 CU IDOL SELF LEARNING MATERIAL (SLM)

been known to completely change their branding for every country they sell to. By specifying the promotions or simply by changing the product so as to reflect religious views, current trends or even different cultural viewpoints of the target country, can help to a large effect.  Traditional Marketing Traditional marketing strategies can also be equally effective in promoting the products in foreign countries as much as they are in the domestic country. Some of the common and popular methods of traditional marketing are using banners, pamphlets, business cards, billboards, , word-of-mouth, print advertising and likewise. and . However, the most important tactic while applying this type of marketing strategy in an export business, is to modify the message as per the target market. . The export marketing strategies will only be effective if they are pertinent to the target consumers' lives.  Effective Marketing Action Plan In export marketing, a calculated and aggressive marketing strategy is very important. It must be implemented in correct stages to generate maximum export sales growth. According to Export.gov, it is necessary for a company's international business plan to clearly state where the company stands in relation to the potential markets, as well as clearly lay out the objectives for it. A strategic action plan is made by focusing on marketing targets by collecting and analysing relevant information, accounting for different restrictions, and then laying out the steps for an action- approach. A company must, formulate not only an obtainable objective(s), but also a corresponding timetable to realise them, while maintaining the flexibility to account for change in conditions.  Preparing an Export Plan One can prepare an export marketing plan with the following outline as guidance. It covers the wider aspects which are more important from the point of strategic marketing management. The outline is given as below: Part I: Export Policy Commitment Statement    Part II: Situation or Background Analysis  Product/Service for Export  Export License (if needed)  Personal Export Organization  Products/Services to be Exported  Products that Qualify Under FTAs  Resources outside the Company  Industry Structure, Competition, Demand Operations  Export Control Compliance 14 CU IDOL SELF LEARNING MATERIAL (SLM)

 Product Classifications  Resources Inside the Company Part III: Marketing Component  Identifying, Evaluating, and Selecting Markets  Product Selection and Pricing  Distribution Methods                                             Internal Organization and Procedures  Sales Goals (Profit and Loss Forecasts)               Part IV:  Terms and Conditions  Pricing with Consideration of Duties, Taxes    Freight Costs, and Logistics Included  Tactics—Action Steps  Primary Target Countries  Indirect Marketing Efforts  Quarterly Accomplishments  Secondary Target Countries  Part V: Export Budget  Pro-forma Financial Statements      Marketing Materials  Travel        Website Enhancements  Trade Show Visits  Other Costs Part VI: Implementation Schedule  Follow-up  Periodic Operational and Management Review (Measuring Results against the Plan) Additional: Background Data on Target  Basic Market Statistics (Historical and Projected)  Background Facts  Competitive Environment Table 1.2: Outline of Export Plan (Source: Int’l Trade Administration, U.S.A.) 1.5 SUMMARY  The above discussion shows that the export-import policies have contributed greatly to stabilizing the economy, sustainable growth, foreign direct investments, attracting foreign 15 CU IDOL SELF LEARNING MATERIAL (SLM)

currencies, providing the international business opportunities to the domestic businesses players etc. Exports are termed as products, which could be goods or services or both, that are produced in one country and purchased by people or entities of another country irrespective of the nature of these products. The delivery medium could be electronic or personal courier or anything else. As long as a domestically produced commodity is sold in another country, it is termed as an export.  The other component of international trade is called an import. If products, which could be goods or services or both, are produced in a foreign country and bought domestically, then it qualifies as an import. Together, import and export, are termed as trade balance.  Ideally, greater focus should be laid on increasing the exports and decreasing the import. With the help of several export marketing organizations in India, it is possible to build the strong network of exporters within the country.  Multinational companies employ something called export marketing strategies. In this strategy, research is conducted where surveys are undertaken, and investigations conducted to gauge the consumer behaviour in the target country to study their products and strategy. After such an exercise, some companies rebrand their products while launching them in the foreign country.  The export and import of products can be classified into different categories. There are some points of similarity as well as differences in the classification of exports and imports. Every country has different set of policies based on availability of domestic resources, requirements demand and supply patterns, and so on.  An aggressive and a calculated marketing plan should be implemented correctly for a successful export marketing campaign. The campaign must trigger at the right stages to ensure export-based sales to grow. As per export.gov, an entity’s overseas business plan should define where it sees its own positioning in relation to the potential markets and place clear objectives in that direction.  A strategic plan emphasizes on marketing targets by curating and analysing relevant information while accounting for hinderances and drawing up the action plan. A company should put in place time bound objectives that are achievable and must plan for contingencies so that plans can evolve based on prevailing situation. 1.6 KEYWORDS  ITC-HS: Known as Indian Trade Clarification- Harmonized System. This system is the standard nomenclature of goods internationally.  Billboards: The typical hoardings presenting large advertisements displayed on the roadsides.  Marketing Component: Various key elements of marketing such as product, price, promotion etc. 16 CU IDOL SELF LEARNING MATERIAL (SLM)

 Website Enhancements: Making the website full competitive supportive different platforms, updating content regularly etc.  Product Classification: Categorization of product based on criteria like weight, price, features, target customers etc. 1.7 LEARNING ACTIVITY 1. Compare Pros and Cons of Social Media Marketing in Facebook and Youtube Facebook Ads Cons YouTube Ads Cons Pros Pros ___________________________________________________________________________ ___________________________________________________________________________ 2.List competitive advantages of export marketing taking two examples. ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 1.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define the term ‘international trade’ in short. 2. Differentiate between import and export with examples. 3. Illustrate the following: trade balance, trade surplus and trade deficit in short. 4. Discuss the traditional marketing strategies for agricultural exports. 5. Define ‘pricing strategy’ with examples. Long Questions 1. Explain the current import-export policy of India with reference to Service Sectors. 2. Analyse the pros and cons of Indian export policy as a knowledge economy @ 2021. 3. Compare the effectiveness of online and traditional marketing with reference to manufacturing products for export purposes. 4. State the differences between international marketing of goods and services? What strategies would be applicable for better results? 17 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Analyse the present condition of foreign trade for India citing various government reports and economic surveys published. Suggest areas of improvement. B. Multiple Choice Questions 1. According to the international standards, the HS codes must have ____________ digits. a) 7-10 b) 8-10 c) 5-7 d) All of these 2. _____________ types of goods do not have license unlike other goods. a) Restricted Goods b) Restricted Country Goods c) Prohibited Goods d) State Trading Enterprise 3. There are _____________ country members of ITC Harmonized System developed by the World Customs Organization in 1988. a) 175 b) 180 c) 190 d) 210 4. Goods are tangible while services are ________________ in nature a) Intangible b) Tangible c) All of these d) None of these. 5. The Open-Door Policy by signing a General Tariff and Trade Agreement (GATT) was done in _____________. a) 1991 b) 1990 c) 2000 d) 2005 Answers: 1-a; 2-c; 3- c; 4- b; 5-a. 18 CU IDOL SELF LEARNING MATERIAL (SLM)

1.9 REFERENCES Textbooks  Bakari, S. and Krit, M., 2017. The nexus between exports, imports and economic growth: Evidence from Mauritania, International Journal of Economics and Empirical Research, 5(1), pp. 10-17.  Das, Gurcharan (2002). India Unbound. Anchor Books, Noida.  Raghuramapatruni, R. and Surya Chaitanya, R.V. (2020). An appraisal of the impact of international trade on economic growth of India-through the ARDL approach.  Alamgir, Jalal (2008). India's Open-Economy Policy. Routledge. Reference Books  Asher, C.E.B. & Talbot, C. (2006). India Before Europe, Cambridge University Press.  Athukorala, P-C. (2009). Production Networks and Trade Patterns: East Asia in a Global Context, Kuala Lumpur, Malaysia.  Andrews, D.C. and Andrews, W.D, (1993), Business Communication, Macmillan Publication.  Bacon, T.R. (1999) Selling to Major Accounts: Tools, Techniques, and Practical Solutions for the Sales Management, New York.  Akyüz, Y. (2009). Exchange Rate Management, Growth and Stability: National and Regional Policy Options in Asia. UNDP, Colombo. Websites www.theigc.org  http://internationalecon.com/  www.fao.org 19 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 2: EXPORTS AND IMPORTS Structure 2.0 Learning Objectives 2.1 Introduction 2.2 Export Marketing Organizations 2.3 Registration Formalities-IEC-RCMC 2.4 Export Licensing 2.5 Selection of Export Product 2.6 Summary 2.7 Keywords 2.8 Learning Activity 2.9 Unit End Questions 2.10 References 2.0 LEARNING OBJECTIVES After studying this unit, student will be able to:  Illustrate the export marketing organizations.  Explain registration formalities.  Analyse the various strategies used for export marketing.  Explain the registration procedures at IEC & RCMC.  Examine licensing procedures of export. 2.1 INTRODUCTION Exporting and importing helps grow national economies and expands the global market. Every country is blessed with certain advantages in its resources and skills. Like, some countries are quite rich in natural resources, (fossil fuels, timber, fertile soil or precious metals and minerals), other countries may have less availability of several of these resources. Further, some countries have highly developed infrastructures in the form of their educational systems and capital markets, while many countries do not. These systems are helpful to the country to take part in various complex manufacturing and technological advancements. 20 CU IDOL SELF LEARNING MATERIAL (SLM)

All countries aim to be net exporters instead of net importers. While importing is not necessarily a negative thing because it can give access to important resources and products which are otherwise not available at all or not available at a cheaper cost, however, too much of importing can have bad consequences. When a country imports more than it exports, more money is leaving the country than coming in. Further, more a country exports, greater domestic economic activity in the form of increased production, jobs and revenue is occurring. A country’s Gross Domestic Product (GDP) is said to be the total value of the finished goods and services that it produces in each period. So, if a country is a net exporter, it is GDP increases, which is, the net exports increase results in increasing the wealth of the country. The composition of a country’s foreign trade is an important indicator of its trade pattern. The term ‘composition of trade’ means the structural analysis of the various trades of the country . It involves analysing the various types and the volume of various items of the country’s exports and imports. The composition of a country’s foreign trade reflects its diversification and specialization attained in its productive structure along with its rate of progress and structural changes. A country that exports more of its primary products, (like raw materials) and imports finished manufactured goods and capital goods, can thus be called as an ‘underdeveloped’ country. With time, a country attempts to change its trade pattern so that it can become a producer of finished manufactured products. 2.2 EXPORT MARKETING ORGANIZATIONS In India there are several organisations and agencies that provides different types of support to exporters from time- to -time. These organisations provide market research information in foreign trade, disseminate information arising from its activities relating to research and market studies. So, exporters should seek their necessary assistance. Few such organisations are listed below:  Export Promotion Councils (EPC)  Commodity Boards  Federation of Indian Export Organisations (FIEO)  Indian Institute of Foreign Trade (IIFT)  Indian Institution of Packaging (IIP)  Export Inspection Council (EIC)  Indian Council of Arbitration (ICA)  India Trade Promotion Organisation (ITPO)  Chamber of Commerce & Industry (CII)  Federation of Indian Chamber of Commerce & Industry (FICCI)  Bureau of Indian Standards (BIS)  Textile Committee Marine Products Export Development Authority (MPEDA) 21 CU IDOL SELF LEARNING MATERIAL (SLM)

 India Investment Centre (IIC)  Directorate General of Foreign Trade (DGFT)  Director General of Commercial Intelligence Statistics (DGCIS) Figure 2.1: Key Export Marketing Organizations in India Additionally, the following organisations give detailed information for specific sectors and industry. S.NO EXPORT MARKETING & PROMOTION ORGANISATIONS ABBREVIATION 1 Agricultural and Processed Food Products Export Development APEDA Authority 2 Apparel Export Promotion Council AEPC 3 Basic Chemicals, Cosmetics and Dyes Export Promotion CHEMEXCIL Council 4 Carpet Export Promotion Council CEPC 5 Cashew Export Promotion Council of India CEPCI 6 Chemicals and Allied Products Export Promotion Council CAPEXIL 7 Coffee Board - 8 Coir Board - 9 Council for Leather Exports CLE 10 EEPC India EEPC 11 Export Promotion Council for Handicrafts EPCH 22 CU IDOL SELF LEARNING MATERIAL (SLM)

12 Gem and Jewellery Export Promotion Council GJEPC 13 Handloom Export Promotion Council HEPC 14 Indian Oil Seeds and Produce Export Promotion Council IOPEPC 15 Indian Silk Export Promotion Council ISEPC 16 Jute Products Development & Export Promotion Council JPDEPC 17 Marine Products Export Development Authority MPEDA 18 Pharmaceutical Export Promotion Council PHARMEXCIL 19 Rubber Board - 20 Power loom Development & Export Promotion council PDEXCIL 21 Project Exports Promotion Council of India PEPC 22 Services Export Promotion Council SEPC Others Table 2.1: Export Marketing & Promotion Organisations (Source: Govt. of India, DGFT Dept.) The Roles & Functions of Export Marketing Organizations The various Export Marketing Organizations like Export Promotion Councils (EPC), Export Development Authorities, Commodity Boards, India Trade Promotion Organization (ITPO), Exim Bank and so likewise, can play a crucial role in promoting Indian products abroad. These organizations take-up export marketing communication through: Advertising, Sales Promotion and Public Relations. The communications by these export marketing organizations are not restricted to any particular firm. These organizations strive to promote overall Indian products in countries abroad. These organizations can thus be instrumental in: (i) Creating awareness about India’s export potentials. (ii) Impressing foreigners about India’s industrial advance and technical capability. (iii) Improving e India’s image. The role of such organisations assumes greater importance owing to the small sizes and limited resources of the Indian exporters. Apart from generating publicity for Indian products, they play an important role in sales promotion. The Export Promotion Councils, Trade Development Authorities and Commodity Boards sponsor several trade fairs. For example, the Marine Products Export Development Authority, in collaboration with the Seafood Exporters Association, organizes an Indian Seafood fair, every alternate year which attracts several potential buyers from different countries. Similarly, the Spices Board organizes Spice Fair and the Spice Congress which have considerably helped in promoting Indian spices. Likewise, the other organizations too sponsor international fairs of their respective products. These organizations also assist any Indian exporters if they wish to participate in the fairs held abroad. The export promotion organizations can also help the exporters in preparing their communication strategies. These organization play an important role in sponsoring several buyer- seller meets. For example, the Export-Import Bank t sponsors a ‘strategic market entry support scheme’ which helps Indian firms in identifying products with export potential and also help them in drawing up suitable promotion strategies. For example, the ‘Darjeeling’ logo which is promoted by the Tea Board and the marketing feature on the Darjeeling tea 23 CU IDOL SELF LEARNING MATERIAL (SLM)

which has been telecasted in some foreign countries, has helped boost the image and sale of the Darjeeling tea and to check the sale of similar bogus products. The functions of the ITO have been described in subsequent chapter on export promotion. To summarise, export promotion organizations are very important in promoting the Indian products in foreign countries. Trade Fairs and Exhibitions: Trade fairs and exhibitions are important as they bring potential buyers and suppliers in touch with each other. They also impart relevant global developments information and play a crucial role in international marketing. For certain cases, they assume a special significance too. For example, in Libya, media advertisement for products is not permitted. The annual ‘Tripoli International Trade Fair’ thus, is an important way to promote businesses. Some friendly countries are also allowed to organise single country / product exhibitions or trade fairs. As suggested by its name, a trade fair, is target directed. It is organised with the purpose of selling goods or for demonstrating new ideas and techniques. On the other hand, an exhibition is not specifically for the public and not limited to a specific trade. Trade fairs can be broadly categorised into two types namely: i. General fairs, or horizontal fairs; and ii. (ii) Specialized fairs, or vertical fairs or solo fairs. In a general fair, the products displayed can cover many different categories. On the other hand, a specialized fair, concentrates on the products of a particular industry or an industry group. However, within that industry or group, a large variety of products may be displayed. A general fair is visited by people of all ages, types and tastes and, therefore, can be a good place to show consumer goods or new products that need to be seen and accepted. In such fairs, often National pavilions are built. Within these pavilions, the respective country government organizes an exhibition that not only gives the visitors an idea about the country’s ways of life, industry, agriculture and tourist attractions but also the many different products it wishes to sell internationally. Simply put, such pavilions are to build up or improve upon the image of the country in the public’s mind. However, a specialized fair is probably a better choice, if the product that an actual or potential exporter wishes to display is one that would be of interest to a specific group of buyers and or is technical in nature, . A lot of exporters prefer specialized fairs because it is not open to general public. Such specialised fairs are open only at particular times and the visitors generally have an interest and some prior knowledge about the product. The Export Marketing Organizations also help the exporters (companies, traders, individuals, consultancies) in the following manner:  By providing information: They assist the exporters in understanding, interpreting and implementing the export policies and various export assistance schemes.  By aiding: They assist in various export promotional activities like participation in various fairs and exhibitions, promotion of exclusive exhibitions and trade fairs of specific products, other external publicity methods. 24 CU IDOL SELF LEARNING MATERIAL (SLM)

 By collecting data: They collect data on growth of exports, the problems faced by different exporters and the specific help sought by them. They then resent the information to the Government so that appropriate export policies can be formulated.  By acting as a liaison: They act as an effective liaison between the industry and trade so that the problems in export activities can be correctly identified and resolved.  By sending trade delegations: They plan for sending study teams and/or trade delegations to one or more foreign countries. This team, in turn, promote specific products, circulate reports on them and also diversify to new products.  By opening offices abroad: They open offices in foreign countries to help the exporters to consolidate their existing exports and diversify to new products.  By being a registering authority: They act as a registering authority under the import policy. They help the registered exporters to expand the overseas market for their products.  By motivating exporters: They organise seminars and discussions for different exporters. They motivate them for export promotions.  Through co-operation with the EIC: They co-operate with the Export Inspection Council (EIC) on issues like quality control and reshipment inspection of export goods.  By disposing applications: They aid it’s various members for the speedy disposal of export assistance applications.  By offering guidance: They offer their expert guidance to members on various matters like utilization of GSP, insurance of goods, export finance, and joint ventures abroad. The EPCs assist Indian exporters through these functions both directly and indirectly They provide valuable services to Indian exporting communities. Each EPC has a working committee which is elected by its members. 2.3 REGISTRATION FORMALITIES – IEC – RCMC  The Importer -Exporter Code (IEC) The Importer -Exporter Code (IEC) is a key business identification number which is mandatory for both, exports and imports. The DGFT grants an IEC Number without which no person or entity is allowed to make any import or export. However, for import or export of services or technology, the IEC number shall only be required if the exporter is wanting to take benefits under the Foreign Trade Policy or is dealing with specific services or technologies. Any type of firms, like a Proprietorship, Partnership, a Limited Liability Partnership, Limited Company, Trust, Hindu Undivided Family or Society, can obtain an IEC. Consequent to the introduction of GST, an IEC number can be considered to be the same as the PAN of the firm. However, the DGFT will be issuing the IEC separately. The Directorate General of Foreign Trade (DGFT), Ministry of Commerce & Industries, issues the IEC registration. It is mandatory for all Indian companies to obtain 25 CU IDOL SELF LEARNING MATERIAL (SLM)

an IEC registration if they want to expand their business overseas. The Import Export Code (IEC) is a ten-digit code which is issued by the DGFT, for the purpose of issuing an Import Export License Certificate. The purpose of an Import Export License Certificate to monitor and regulate the foreign trade activities in India. In order to carry out any import/export activity in India, obtaining an IEC registration is a must. Without obtaining a valid IEC license, no business can engage in any import/ export activity. Additionally, if any business wants to reap the benefits provided by the government, then getting an IEC registration is a must. Also, the Reserve Bank of India (RBI) has made it compulsory for all traders to provide their Import Export Code (IEC) for any payment transfer. In the current era of ever-increasing competition, in order to survive their substitutes that are available in the domestic market, businesses are forced to step out in the global market. With back-to-back innovations, the emergence of e- commerce, the generation of new business ideas, local businesses have to step abroad and operate globally. There are several ways to enter the international market like amalgamation with foreign brands, starting a subsidiary or branch office abroad, opening franchisees abroad, , or through import-export business. However, it must be kept in mind that doing business globally is not very easy. An Import Export Code (IEC), once obtained, can be utilized by the entity all through its existence as it doesn’t necessarily need any renewal. After the entity has gotten an IEC, from that point onwards, the entity can engage in import- export business with no issues. Here Are Few Benefits of an IEC Registration  Expansion of Business: With the help of an IEC, businesses can expand their reach in the international market. IEC gives the opportunity to a business to export its products outside the nation’s geographical territory and thus create a name for itself in the global market.  Availing Several Benefits: Businesses can enjoy several benefits on the basis of their IEC registration. Such benefits are given by organizations like DGFT, Export Promotion Councils (EPCs), , and Customs.  No Need of Return Filing: Once an IEC is allocated to a business, there is no need to follow any procedures to support its legitimacy. For any instance of export transactions, the DGFT doesn't order for filing any additional return.  Hassle-Free Processing: The process of acquiring an IEC from the DGFT is genuinely simple. It can be obtained within a period of 10-15 days from the date of presenting the application. In fact, no evidence of export or import even is required to getting an IEC  Free for Lifetime: Once an IEC is obtained, it’s validity lasts till eternity. That is, it is free for lifetime and there is no need for any renewal. Government Authorizes Proof : IEC is a government identity that is issued by the DGFT. For the purpose of shipment clearance, only showing this identification will be sufficient. 26 CU IDOL SELF LEARNING MATERIAL (SLM)

Documents Required for IEC Registration: Following documents are required to obtain an IEC registration: i. A scanned copy of proof of incorporation/establishment/ registration of the entity. This supporting document is mandatory for Registered Societies, HUF, Partnerships, Trusts, Others. ii. A scanned copy of Passport Size Photograph. iii. A scanned copy of the PAN of company/individual/ partnership firm/ LLP. iv. A scanned copy of the ID proof of individual - Aadhar card, voter id., passport. v. Mobile no. and email-id. vi. Details of Current or Savings account in a bank which contracts and transacts in Foreign Exchange. vii. A scanned copy of the rental/lease deed, sale deed, electricity/phone bill for address. viii. A scanned copy of the RBI approval letter if the applicant is a Non-Resident Indian (NRI) or there is any Non-Resident interest in the Company/firm. ix. A ‘Bankers Certificate’ in the prescribed format OR a scanned copy of a ‘Cancelled Cheque’. x. a ‘Debit/Credit card or a Net Banking account’ for payment of Rs. 500/- online as Government Fees of. xi. The details of the Proprietor, and all the Partners in case of a firm or a Director(s) in case of a company. xii. An active Aadhar or Digital Signature Certificates (DSC) of the firm’s members. Type of Required Requirements Applicant Class of DSC HUF & Individual Name should match Individual bases token for with that of individual Class 2 & 3 and organization Other Type Organization Name should match based tokens with that of Director/ for Class 2 and Partner/ Managing 3 partner/ Managing Director as in IEC application Table 2.2: Types of DSC permissible for IEC Application New Online Procedure of IEC Registration in India from July 2020 27 CU IDOL SELF LEARNING MATERIAL (SLM)

Any entity can now apply for an IEC number on the website www.dgft.gov.in. With effect from 1st July 2020, DGFT has introduced an updated a new way and procedure to apply for IEC online. In this process, it is mandatory to upload the DSC. The requirement of DSC has been introduced to reinforce the entire IEC issuance procedure and to check on frauds. Import export code (IEC) is issued by DGFT (Director General of Foreign Trade), Department of Commerce and the Government of India. It is a ten-digit identification number and possesses a lifetime validity. It is also referred to as “Importer and exporter code. It helps a business to carry out its import and export activities officially. Like importers cannot import goods without a valid IEC, similarly, exporters cannot avail the various export scheme benefits available from the DGFT without g a proper IEC Registration. The procedure for online IEC registration is as follows Step 1: Click on https://dgft.gov.in/CP After that, click on the “Apply for IEC” button. Figure 2.2: IEC Registration Portal Step 2: One has to then enter the Registration Details like the screenshot below: - 28 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 2.3: IEC Registration Form Step 3: Thereafter one has to file online the following details in the IEC registration form:  General Information  Details of the Proprietor/ Partner / Karta /Director/Managing Trustee of the entity/establishment.  Bank Information of the Entity  Concluding Submission. Salient Features of the IEC Registration  All businesses engaged in import or export activities must register at IEC.  The IEC registration is a proof of the firm’s involvement in international trade.  IEC registration is a one-time process and does not need any renewals.  Entities or individuals involved in international trade of commodities for own/personal or legislative use may not register themselves with IEC.  IEC is mandatory for conducting foreign bank transfers.  It is quite substantial for every part of importer’s or exporter’s business. Changes applicable under IEC for Goods and Services Tax After the application of taxes in GST system, GSTIN will be used for credit stream of applicable IGST paid during import of goods or services. Whatever maybe the case, while the PAN is an identifier at the substance level of the limit, GST registration number would be used as an indicator at the exchange for every import and export. The Unique Identification Number (UIN) or PAN will be acknowledged as IEC. All importers thus need to mention GSTIN in their solicitations with or without IEC. It is obvious that in the event that if anyone wants to maintain a business comprehensively, they should obtain the Import Export Code (IEC). In the absence of a valid IEC license, one cannot carry on any import or export activity 29 CU IDOL SELF LEARNING MATERIAL (SLM)

under any conditions. From the abovementioned facts, it can be deduced that acquiring an IEC certificate is not that difficult. In fact, acquiring one has several advantages, as there's no pain of filing any returns, the procedure itself being quite simple, no renewal being required, and so on and so forth. The Registration Cum Membership Certificate (RCMC) Registration Cum Membership Certificate or RCMC is a mandatory certificate which should be obtained by all entities who wish to apply for the Import Export Code (IEC) and avail concessions or benefits under the Foreign Trade Policy (like duty drawbacks and duty credit scripts). However, this certificate is not mandatory for the traders who are exempted from the Export Import Policy. The RCMC is also issued by a competent government authority. The validity of this license starts from 1st April of the licensing year (Issuing Year) till the next 5 years, ending 31st March of the licensing year unless specified otherwise. The RCMC application can be obtained by submitting the Aayat Niryat Form (ANF 2C)) to the Exports Promotion Council. An export trader can be registered under either of the two categories: ‘Merchant Exporter’ or ‘Manufacturing Exporter’. While applying for the RCMC, the main line of business has to be declared to the Exports Promotion Council (EPC). Presently, there are a 26 Export Promotion Councils and 9 commodity board across the country. The Central government has authorized these institutions to issue a RCMC to any exporter who applies for it. Competent Authorities for RCMC Registration  Exporters can obtain RCMC registration from the Federation of Indian Exporters Organizations (FIEO) or a relevant Export Promotion Council.  Status holders can obtain RCMC registration from FIEO.  RCMC registration can also be obtained if the export product is not covered under any Exports Promotion Council.  If the exporter deals with forest produce and value-added products, registration of RCMC has to be obtained from the Shellac and Forest Products Export Promotion Council (SHEFEXIL).  Exporters dealing with software have to get themselves registered with Electronic and Computer Software EPC (ESC).  Exporters dealing with the listed 14 services have to register with the Services EPC whereas exporters of any other services have to register with FIEO. The Federation of Indian Export Organizations (FIEO) and/or one of the various Export Promotion Councils (EPC) or Commodity Boards issues the RCMC. These organizations are authorized by the Government of India to primarily work towards the promotion and development of India’s various export businesses.. A RCMC is a membership certificate with a validity of five years and indicates that the holder of the certificate is registered with the FIEO/the concerned EPC or the Commodity Board. A few of the popular EPCs in India are 30 CU IDOL SELF LEARNING MATERIAL (SLM)

the APEDA, the GJEPC, the SEPC, , the EEPC, the TEA BOARD, , and the Spices Board. The RCMC applicant has to declare their primary business line while applying for it, and the possession of a valid RCMC allows an exporter to avail all the benefits and advantages of the respective parent organization. Documents Required for RCMC Firstly, the duly filled and signed form ANF 2C which is the RCMC application has to be submitted. Additionally, self-certified copies of the following documents have to be furnished: i. IEC Number issued against the applying export entity. ii. PAN Card. iii. Partnership Deed (for Partnership firms and LLPs), Articles and Memorandum of Association (for Corporate/Institutional/Private Limited/ Limited company), , or Trust Deed (for Trusts); In the case of a Company, the certificate issued by the Registrar of Companies regarding it’s registered office change is also needed. iv. GST registration certificate. 2.4 EXPORT LICENSING An ‘export license’ is a document that is issued by an appropriate licensing agency, after which an exporter is permitted to transport their products to an international market. A careful review of the facts surrounding the export transaction is done before issuing the license. Thus, the issuance of this particular license depends on the type of goods to be transported as well as the destination. So, for an exporter, it is necessary to understand whether the product to be exported actually requires an export license or not. While making this determination, following points must be considered:  Application for an Export License To determine whether a license is actually needed to export a particular product or service, an exporter must first attempt to classify the item by identifying it under the ITC (HS) classification system. Export licenses are only issued for the goods mentioned in schedule 2 of ITC (HS) classification system. . Thereafter, a proper application is to be submitted to the DGFT. Under the chairmanship of export commissioner, the export licensing committee considers such applications based on their merits for final issuance of export licenses.  Exports Free Unless Regulated The DGFT, from time to time, specifies through a public notice , which goods are not included in the ITC (HS) Classifications system. The goods listed in these notices and can be exported without a license. However, there may be terms and conditions like Minimum Export Price (MEP), quantitative ceilings, registration with specified authorities, and compliance with other laws, rules, regulations. 31 CU IDOL SELF LEARNING MATERIAL (SLM)

2.5 SELECTION OF EXPORT PRODUCT A business should choose the right set of products for export since selection of the right product for export is crucial for its success in export business. Various factors need to be considered while making this selection. A few of these factors are explained as below: Figure 2.4: Export Product Selection Criteria  Trends in Exports: A business that plans to enter into the export business can identify the products/or product categories that have potential in foreign markets, by analysing trends in exports – by country or by commodity– over a specified period of time. A study of these trends over five years is expected to generate very useful information. The Ministry of Commerce, based on the analysis of the above trends in exports, also prepares a matrix of fifteen countries and products.  Production Availability and Product Capacity: It is advisable that the exporter should select those products for whom there is an adequate manufacturing capacity in the country. Also, the product should be able to be sourced in the desired quantities. Hence, a steady supply base is required to ensure that the exporting entity is able to deliver the deliverables to a foreign buyer as per predefined delivery timelines.  Product Adaptability: A product can have a huge potential for export in one foreign market; yet the same product may fail in another market. Several factors like the physical conditions, functional requirements, cultural elements, taste, levels of skill, and levels of technical development may be the reason. Thus, the exporter must be able to make changes to the product offering in another market. For any product to be successful in overseas markets, it must be capable of suitable changes in its colour, design, , , taste, size, packaging and so on, A process as ‘product adaptation’. 32 CU IDOL SELF LEARNING MATERIAL (SLM)

 Demand in the Potential Export Markets: The quantum of demand for a product service in the target export market is also important. The potential of a product in the market can be judged by considering the impact of: i) The Physical Environment & Demography ii) The Political Environment iii) The Economic Environment iv) The Social and Cultural Environment.  Trade Restrictions: It is possible that a country may impose certain restrictions on the import of some products from foreign countries through licensing or similar quantitative restrictions. However, under the ‘Uruguay Round’, all members of the WTO have agreed to refrain from imposing quantitative restrictions on imports. There is, thus a commitment between all the participating WTO members, to follow liberal and open trade policies.  Incentives/Facilities Offered for Export: It is quite possible that the exporting country may offer various incentives or facilities to promote exports business. In India, exporters enjoy various facilities, both in general and for particular products. These incentives are in the form of duty drawback, facility of duty-free import of raw materials and other inputs required for the manufacture of the export products, import of capital goods for the promotion of exports at concession rates of import duties.  Shifting Spending Patterns: A basic determinant of how much a consumer buys of a product are the person’s preference and taste , as well as the price point of the product in relation to the price of similar products available in the market. Another major influencer is the consumer’s earning. If the consumer’s income grows, demand for most commodities will grow as well. However, the demand for items that are regarded as ‘necessities’, such as fuel, bread, meat or tobacco, tend to decline and exporters of these and similar products are not likely to benefit from growing consumer incomes in foreign countries. The demand for luxury items, such as cars or expensive food, however, increases more rapidly with rising income. Therefore, exporters should put more emphasis on items or products that consumers regard as “luxuries”, due to the changing spending patterns in response to rising incomes.  Quality and Niche Marketing: Several studies have indicated that firms that have emphasized on quality and concentrated on niches, have shown a sustained growth in their sales and resulting profits. 2.6 SUMMARY  The above discussion exhibits that the export-import policies contribute significantly to stabilizing the country’s economy, maintaining a sustainable growth, increasing foreign direct investments, attracting foreign currencies, providing international opportunities for 33 CU IDOL SELF LEARNING MATERIAL (SLM)

business to the domestic players and so on. Thus ideally, there should be higher focus on increasing the exports and decreasing the imports in a country.  It is equally important to prepare and bring forward a unique selection of product/s for export which would be affordable, competitive and innovative.  There are a large number of entities and agencies that provide various kinds of assistance to exporters from time-to- time. These export organisations provide market research in foreign trade and disseminate information from their activities related to market research and market studies.  Export Promotion Councils (EPCs) are registered as not for profit entities under the Indian Companies Act. Presently there are 11 Export Promotion Councils under the control of the Department of Commerce and 9 export promotion councils.  RCMC or Registration Cum Membership Certificate is a mandatory certificate which has to be obtained by all organisations who want to apply for the Import Export Code (IEC) and avail concessions/ benefits under the Foreign Trade Policy. However, this certificate is NOT required for traders exempted under the Export Import Policy. The RCMC registration is issued by a competent government authority.  Any business that plans to enter the export business can identify the Potential product or product lines in foreign markets by analysing the trends in exports – by country or by commodity – over a duration of time. A study of such trends over a period of 5 years should generate useful information.  The exporter should select only those products for which there is an adequate production capacity within the country and the finished goods can be procured as per the required quantities. Further a product may have huge demand in one foreign market; yet the exact product may not generate any result in a different market. 2.7 KEYWORDS  Dissemination: Diffusion, distribution of products/services etc.  NPOs: Non-Profit Organizations working for welfare of people like Charitable Trusts, NGOs etc.  Ancillary: Supplementary, Additional.  Instrumental: Proactive, significant contribution.  Commodity: The goods or services which are generally used in the production of other goods or services which are interchangeable in nature. 2.8 LEARNING ACTIVITY 1.Complete the table. Write down the different characteristics of Online and Offline Marketing. 34 CU IDOL SELF LEARNING MATERIAL (SLM)

---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Online Marketing Offline Marketing 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 2. Write the attributes of ‘Export Products’. _______ _______ _______ Export Product ________________________________________________________________________ ________________________________________________________________________ 2.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. How to select an Export Product? Explain with the key criteria to be applied. 2. Discuss the significance of Export Marketing Organization for Indian economy. 3. Explain the term ‘Export Licensing.’ 4. Describe CII in short. 5. What is ‘Niche Marketing’? Long Questions 1. Compare and contrast the registration formalities of IEC and RCMC. 2. Analyse the differences in selecting the Export Product for IT, FMCG and Agriculture sectors. 35 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Illustrate the role and significance of APEDA in agricultural exports of India with examples. 4. Discuss the Export Promotion and Marketing Organizations from Rubber, Mining and Service industries and their contribution to the Indian GDP. 5. State the different incentives schemes applicable to manufacturing industry as the key exporters of India with examples. B. Multiple Choice Questions 36 1. SEZ Act was passed in India in ______________. a) 2005 b) 2007 c) 1999 d) 2003 2. Which of the following is/are the component/s of international trade? a) Import b) Export c) All of these d) None of these 3. Export Promotion Councils are registered as non -profit organisations under _____________________ . a) The Indian Companies Act. b) Indian Export Act c) All of these d) None of these 4. FIEO was set up in the year ________________. a) 1965 b) 1956 c) 1977 d) 2000 5. __________________ provides arbitration facilities for all types of Indian and international commercial disputes. a) FIEO b) ITPO c) ICA d) CII CU IDOL SELF LEARNING MATERIAL (SLM)

Answers: 1-a; 2-c; 3a; 4-a; 5-c. 2.10 REFERENCES Textbooks  Hassan, K.G. (2020). Empirical Investigation on the Relationship between Exports and Economic Growth in Selected LDCs Country Groups (1988-2018).  Zang, W. and Baimbridge, M., (2012). Exports, Imports and Economic Growth in South Korea and Japan: A Tale of Two Economies. Applied Economics.  Ghauri, P.N. and Usunier, J.-C., (1996), International Business Negotiations, Oxford, Pergamonl/Elsevier. Reference Books  Gujarati, D. (1995). Basic Econometrics. New York, Tata McGraw-Hill.  IMF REOAP (Various Issues). Regional Economic Outlook: Asia and Pacific. Washington, D.C.  Kumar, Dharma (2005). The Cambridge Economic History of India, Volume II : c. 1757–2003. New Delhi: Orient Longman. Websites  http://rafael.glendale.edu  http://www.etcweb.net/  http://www.worldstopexports.com 37 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3: EXPORTING METHODS Structure 3.0 Learning Objectives 3.1 Introduction 3.2 Identification of Markets 3.3 Methods of Exporting 3.4 Pricing Quotations 3.5 Payment Terms 3.6 Letter of Credit 3.7 Summary 3.8 Keywords 3.9 Learning Activity 3.10 Unit End Questions 3.11 References 3.0 LEARNING OBJECTIVES After studying this unit, student will be able to: ● Explain export and its properties. ● Analyse various types of business as well as their policies. ● Evaluate as well as understand the steps to become an exporter. ● Explain worldwide trade and its related regulations. ● Describe export regulations. ● Describe methods of export. ● Describe the procedure of international trade. ● Illustrate and represent the documents used in Indian trade. ● Sum up the different payment methods and costs for all trade types. ● Exhibit export-aligned operations. 3.1 INTRODUCTION 'Target market identification' refers to the process of identifying customers or groups of customers who will be the focus of the organisation's marketing mix. This includes: ● Understanding the target market. ● Benefits of identifying a target market. ● strategies for successfully identifying the target market. 38 CU IDOL SELF LEARNING MATERIAL (SLM)

Market identification includes selecting either one or more than one market segment or group of customers that will focus on the business's marketing mix. The objective is to ensure profitability by providing tailor-made products that meet the unique needs and requirements of that particular market mix instead of mass marketing to every potential buyer in the overall market. Despite the organisation's perception or belief that they are providing a product or service that is broadly appealing, not everyone would want to purchase it. Hence, focusing the entire marketing efforts on an overall market (a client, a consumer, industry segment, or reseller market) might result in wastage of time and money. In order to enhance the product reach as well as the organisation's profit, it is important to use a targeted marketing approach. This approach will ensure that a smaller, targeted consumer audience is identified from the overall market, and thereby, all the organisation's marketing mix is focused on that smaller market. The steps to identify the Target market are: i. Identifying customer need for the product. ii. Market segmentation of the overall market depending on shared characteristics. iii. Selecting the most viable market segment (s) as the target market for profit realization. For example, for a local store that sells luxury men's formal wear, every man will not be a customer. Instead of the overall market, smaller segments can be created based on demography, geography, and psychographic characteristics. After creating the market segment, the store can focus on men of economic status belonging to the high-income group, who are in the age group of 25-50 years, and who reside within a 10-mile radius. The marketing mix can then be focused on that target market so that a better reach on customers who might actually want to purchase the products from the luxury men's formal store is achieved. If the market for the product/s is diverse or significant, it will be difficult for companies to satisfy every customer. Hence, companies need to identify a specific set of customers within a market and work towards satisfying them. This process of identifying target customers is known as market segmentation. Companies should also understand the details of how this particular market segment operates or behaves. The target marketing approach is gaining importance. A market segment that has similar requirements is identified, and thereafter companies focus on developing products and marketing these products to the identified market segment. Earlier, companies used to conduct business through mass marketing. In a mass marketing approach, companies produced a product(s) in large quantities and then offered this product to as many customers as possible. This approach was suitable since the markets were still developing and customers did not have many choices. Presently, with improved communication and advertising reach, product offerings have also undergone revolutionary changes. Hence, companies are now showing a focused marketing approach, targeting specific market segments, niches at both local and individual levels. 39 CU IDOL SELF LEARNING MATERIAL (SLM)

In the segment marketing process, organisations identify customers who have similar needs and requirements. For example, an airline company is working to provide ‘no frills connectivity’ between the metro cities on the US East Coast. Although this segment is a part of the airline industry, the customer needs are different. The target audience for this particular airline company should be low-budget air travellers. Also, the customers in this segment may also look for other features such as lunch or beverages being a part of the air travel. The companies can therefore think of providing this desired service at additional costs. Niche Marketing: This type of marketing targets a limited customer set. If customers are willing to pay a premium for a product, then niche marketing can be considered. The entry barriers for a niche market segment are high, but the market has the potential to grow. Local Marketing: Here, the target customers belong to the local neighbourhood, trading stores, etc. For example, many banks would prefer to do local marketing so that they get a better understanding of their customers and can then provide them with the right type of service. Individual Marketing: Here, companies focus on satisfying the needs and requirements of an individual customer. The Internet is greatly helping the process of individual marketing, where a customer can log in to the website and choose specific products from several available varieties. This process is, however, not suitable for high-technology products like automobiles. Many factors affect the market segmentation process of a business. One of such vital factors is demography. Demography consists of the industry type, the company size, and the geographical location of the company. Operational segmentation is formed on the technology class, consumption pattern of customers, and customer requirements. Purchasing methodology segmentation involves the purchase policy, purchase department structure, relationship with other companies, and market positioning of the companies. The Order Requirement methodology segmentation is based on the nature of the requirement and the size of the order. The Personality trait segmentation is based on the loyalty and risk profile of the customers. Market Identification Steps The below steps can be used to identify the target market: 1. Evaluate Product or Service Characteristics: Creating a list of all the features and benefits of the product or service. For example, a laundry detergent might promote a colour-safe stain-removal formula that provides the benefit of cleaner clothes that will retain the bright colours. 2. Identifying Customer Need for Product or Service: From the list of features and benefits, selecting the unique selling point that gives the customers a reason to purchase the said product or service. 3. Recognizing the Most Appropriate Dimensions of Segmentation: This involves identifying the most appropriate dimensions along which the market segment has to be created from the larger overall market. After listing out the major segmentation 40 CU IDOL SELF LEARNING MATERIAL (SLM)

factors, decisions should be made on the ones that are relevant to the majority of the potential customers. Major segmentation bases include: a. Geography (customers are to be segmented based on local, state-wide, regional, or national levels). b. Demography (customers segmentation is done based on their age, gender, race, income level, and education level, etc.). c. psychographic segmentation (selection based on attitudes, beliefs, emotions, lifestyle, and hobbies). d. Behaviour (selection based on different patterns of purchase such as occasion- based buying or based customer loyalty). Criteria-based Market Segmentation: Selecting one or more specific market segments that will form the target market. For example, a retailer who sells men's and women's shoes would segment the overall market based on the demographic characteristics of gender and the psychographic characteristic of hobbies. The shoe retailer may then choose to target men who enjoy running as a part of their performance running shoe campaign and women who are tennis players for their tennis shoe campaign. Selecting High Profitable Segments as A Part of The Target Market: Assessing the benefits of pursuing the market efforts towards each of the identified market segments is important. This can be done by comparing the company’s financial resources with the following factors: 1. The profitability of each segment. 2. A comparative study with the segments competitor serves 3. Comparing data with the segments competitors serve. 4. How established the company is in the market. 5. Should marketing be done in all identified segments? 6. Is it lucrative or not to market in all segments considering competition presence? In case a firm is venturing into a new market, they would want to target market to focus on one segment initially. Benefits of Identifying Target Market More Effective Marketing Mix: If the firm can identify its customers, they can provide customized products, prices and also focus the distribution channels on meeting the needs and requirements of the customer. The market identification process facilitates choosing the right marketing channels, which are focused on the target market. By doing so, the firm can promote its products or services to the customers irrespective of their location, either by campaigns on a given social media platform or by placing ads in an area often visited by the target market. The market identification process results in the efficient use of resources. Promoting the product to a specific target market instead of the entire market allows the firm to efficiently use their time and resources on the customers who are likely to need or want to purchase it. All of the above factors can improve the firm's marketing mix's appeal and reach, boost sales volume and ultimately improve the bottom line. 41 CU IDOL SELF LEARNING MATERIAL (SLM)

3.2 MARKET IDENTIFICATION Starting a business and entering the right market is one of the most critical aspects of building and maintaining a profitable brand. Even if a firm is selling the best product, the firm will never be successful if it is operating in the wrong market. If one is working on a new product or a service idea and not sure how to start identifying the market, here’s where to start: a. Look to The Customers First: Earlier, manufacturers could market a product that customers needed through advertising and messaging. The product just needed to solve an actual consumer problem. Any product that solves problems or provides value to customers beyond what competitors offer and is resilient to trends or seasonality changes proves that the product has viability. Suppose a firm pays attention to consumer feedback provided on social media, blogs, and other channels; in that case, it will have insights into the changing consumer needs. The insights will help the firms to innovate faster and more efficiently to retain customers. If the firm addresses the customer's pain point and exhibits their in-depth knowledge and value add provided in the firm's product through content or other unexpected ways, the consumer would be delighted. The firm will be able to increase consumer loyalty effectively. b. Pay Attention to The Competitors: An ideal market would have no competitors. However, that is not the case. A firm gains knowledge of the available market and customer need for the product if there is enough competition. Having competition can also speed up a firm’s learning curve. By observing competitors’ media buys, ads, messaging, product positioning, and product innovation pipeline, firms can eliminate many trial and error related to their market mix. However, if a market is saturated, it can be challenging to carve out a niche and reduce product value. Ideally, a firm should focus and position its product in a market in which there is a demonstrated need and at the same time does not have too many competitors. On the other hand, if a firm has a genuinely original idea that does not fit into the present market, it can still go ahead. They need to be aware that profit generation might take longer since they would have to educate the consumers first on their product or service before they are convinced to buy. c. Market Augments the Business A business has specific capabilities or “superpowers” that can maximize in the right industry. Thus, a firm should pay attention to its natural talents when considering where to take the company or product and make sure that they have the right talent and technology for the selected market. For example, in a fast-moving industry like technology, one needs to make sure that its organizational model is such that it makes it easy to launch iterations quickly. It is also necessary to ensure that the various departments like marketing, design, and development can come together quickly and 42 CU IDOL SELF LEARNING MATERIAL (SLM)

efficiently to be optimised with every new release. Thus, a firm must build its tools and teams for the specific market it is in or targets to be in. d. Decide if the Firm Is Obsessed with The Industry If a firm is not in an industry it naturally enjoys, then it’s not something that it will be willing to fight for in the long run. Elon Musk once said that being an entrepreneur is like chewing glass and staring into the abyss simultaneously. Leading a business takes grit, determination, relentless focus and requires a passion beyond a cursory interest. It needs to border on obsession. It will test a firm’s commitment relentlessly. It will have several setbacks before any success. Ultimately, the difference between those who achieve success and those who don’t is some luck, grace, and, most importantly, refusing to back down. The market segmentation task is scientific. 1. The first step is to group customers according to the products and services they need. 2. The second step is customer analysis by summarizing demographic, lifestyle, and usage patterns. Doing so helps to define the market segment. 3. The third step is the due diligence of the market for growth potential, competition, and other factors. 4. The fourth step is to estimate the profitability of the market segment. 5. The fifth step is to start the positioning activities for pricing and marketing programs. 6. The sixth step is to explore different positioning and marketing strategies to analyse the market to its full potential. Companies have to decide the target markets in which it wants to operate. The next step is to identify the segments based on the factors discussed above. Once the market segments are identified, an in-depth evaluation has to be done to conclude whether to target one or several market segments. Market Identification: In business it is not possible to meet the requirements of all customers. For example, a Toyota, will not appeal to every car buyer no matter how well it’s pricing or features are. Every consumer is different and has different preferences, price sensitivity, desire for luxury items and amount of expendable income. It is thus impossible to appeal to everyone. Instead, companies should concentrate their efforts on a limited population, called the “target market. Characteristics: Members of a target market share have similar needs and characteristics. These similarities are typically explained in terms of their demographic information and the specific requirement that the company hopes to fill. Common target market characteristics are age, gender, income, education, and location. For example, a local coffee shop's target market could be well-educated persons in the age group of 25 – 55 years, who have high-paid white- collar jobs and either stay or work within a three-block radius from the store. Importance: Identifying the target market is essential for a company. Doing so can customize its advertising, pricing, and promotions to appeal directly to the target audience. However, if a company does not define its target market, it could end up with products and 43 CU IDOL SELF LEARNING MATERIAL (SLM)

promotions that do not fully meet most customers’ needs. Further, when a company fails to establish a target audience, it does not compete directly with its competitors. For example, a laptop company that has entered the market offering a very low-cost laptop has not addressed any other specific requirements other than cost. In this case, cost becomes its only basis for competition, and that might lead to its eventual undoing. The Process of Identification: Companies determine who to target by looking at different population segments and comparing them based on their size and relative growth. For example, firms can decide market segments based on age groups or a combination of factors, such as single professional females. After that, the firms can look at the profitability of each segment. For example, there may be a large concentration of high school and college students for a neighbourhood coffee shop, but if that population is not likely to stick around, targeting them could be a mistake. Older people may not visit the coffee shop since it is more of a place where students hang out and may choose an alternate restaurant. When the students move away, the coffee shop would have to try to win back its older customers who already developed a strong preference for another coffee shop. Considerations for Market Identification: Finally, the company should also focus on its objectives, capabilities, and available resources expected profits by targeting a particular audience. Although the baby boomer generation is the largest segment of the population by age, compared to their younger counterparts, they are less likely to spend on luxury items. For a luxury retailer, this becomes an important distinction. They have to target the market segment that is likely to spend the most on its products. Suppose a company cannot compete based on low prices; instead, it should demonstrate its value or feature desirability. Let’s study how to analyse these factors in detail below: Eight ways to Identify Market Opportunities i. Consumer Segmentation To recognize the demand, one must identify the market segments that have common characteristics. These characteristics could be “hard” variables such as age, gender, residence, educational level, occupation, income level, or “soft” variables like lifestyle, attitude, values, purchasing decisions. ‘Hard’ variables provide an estimate of the expected number of potential customers for a business, while ‘Soft’ variables identify motives for purchase. For example, a nappies/diapers producer should know how many children under three years reside in the country and the birth rate. They should also know the ‘soft’ variables like price, prestige, convenience, durability, and design. ii. Purchase Situation Analysis Companies must look at Purchase situations to find possible expansion opportunities. By looking at distribution channels, payment methods, and all other circumstances involving a purchasing decision, one can learn how consumers buy and eventually position the product appropriately. Often by offering shopping alternatives, new customers can be lured in. For example, vending machines offering snacks like 44 CU IDOL SELF LEARNING MATERIAL (SLM)

yogurt and juices have been introduced in the hallways of the subway of Santiago de Chile to promote on-the-go consumption. Another aspect to consider is the acceptance of different payment methods. For example, Amazon recently introduced Amazon Cash in the US, which helps customers who do not have credit cards shop online by adding credit to their Amazon accounts. iii. Direct Competition Analysis In addition to analysing demand vs. purchase, it is also essential to analyse the supply side. Understanding competition in the market where one is going to position the product is critical for evaluating opportunities. Relevant questions that need to be answered are: a. What products and brands of a particular industry are growing more significantly and why? b. What is their value proposition? c. What competitive advantage does the firm offer over them? iv. Indirect Competition Analysis Opportunities can also be understood by analysing substitute industries. For example, airline industries can tap into consumer segments that are using alternate transport by lowering airfares. Before deciding to lower airfares, Air carrier companies should consider factors such as: ● How many people travel on long-distance buses or trains? ● Which routes are the most in-demand? ● How much do the travellers spend on their tickets? ● What are the occupation rates of long-distance buses and trains? ● How can a current bus or train passenger be persuaded to choose air travel? This type of analysis helps establish competitive advantages against indirect competitors and provides insight into additional growth opportunities. v. Analysis of Complementary Products and Services Companies should look at the performance of other companies’ products, which complement their own. For example, a packaging company should monitor the sales of products that it could potentially package. In contrast, a company producing coffee machines should gather insights on the evolution of different coffee sales types. While making investment decisions, trends in complementary markets should be considered. vi. Analysis of Other Industries Sometimes, a company's objective is not to continue operating within an industrial sector but to expand a particular business model or philosophy. In any case, to venture into a new market, it is essential to learn about the competition, their market size, their market share, their growth rates, unit prices, per capita sales, and brand positioning. vii. Foreign Markets Analysis 45 CU IDOL SELF LEARNING MATERIAL (SLM)

A company operating in an already mature or saturated market should look at the markets in other countries for better profitability. Markets in different countries exhibit different growth patterns due to reasons such as differences in the level of economic development and local habits. Understanding the evolution of per capita consumption of a given product in a given country can indicate the product's life cycle's maturity. Also, having information on the size of the market and competitors in other countries will help estimate the product's business potential. Along with product sales, one can investigate consumption habits and patterns in developed countries. viii. Environment Analysis The developments in the fields of science and technology provide new market opportunities. For example, the growth of the Internet and the extensive use of smartphones have given rise to new companies like Airbnb and Uber, which have new business models. According to statistics put out by Euromonitor International, the number of households possessing smartphones has grown from 17% in 2011 to 45% in 2016. Apart from mobile and the Internet, multiple business opportunities have been seen in artificial intelligence, robotization, biotechnology, and renewable energy sources. Changes in a country’s regulatory framework can also lead to opportunities. For example, since June 2016, Chile has made it mandatory for companies to label products high in calories, sodium, sugars, and saturated fats. Other changes in the environment, such as climate change, geopolitical movements, and changes in financial markets, also impact market opportunities. Thus, a business must consider using market research to gain insight into the local business environment and ensure that its strategy will flourish in a new or developing marketplace. 3.3 METHODS OF EXPORTING Direct and Indirect selling is the most common export method used by companies. In indirect selling, responsibilities such as finding overseas buyers, shipping the products, payment, etc., are taken care of by an export intermediary such as an EMC or an ETC. In direct selling, the producer of the goods deals directly with a foreign buyer. The most crucial factor for deciding whether to market indirectly or directly is the level of resources a firm is willing to invest in its international marketing efforts. Some of the factors that need to be considered before deciding on whether to market indirectly or directly are: ● The size of the firm. ● The nature of its products. ● Previous export experience and expertise. ● Business conditions in the selected overseas markets. ● Distribution considerations. Direct Exporting 46 CU IDOL SELF LEARNING MATERIAL (SLM)

The advantages of direct exporting include: ● Better control over the export process, ● Higher profits, ● A closer relationship with the overseas buyer and marketplace. Despite the advantages, direct exporting needs more time, resources, and personnel as an investment from the company than indirect exporting. When a company decides to ship directly to foreign markets, it has to make internal organizational changes to support these complex functions. A direct exporter has to choose the markets it wishes to explore, choose the best distribution channels for each market, and make specific foreign business connections that facilitate selling its product. The further chapters discuss the various aspects of direct exporting in more detail. Organizing for Exporting Generally, a company that has recently started exporting its products considers it similar to domestic sales and uses its existing personnel and organizational structures for both. However, if the international sales and inquiries increase, it has to have a separate management structure for international and domestic sales. The advantages of having two divisions include centralizing specialized skills required to deal with overseas markets and the benefits of a focused marketing effort that will increase export sales. One disadvantage of separating domestic and export sales divisions is the less efficient use of corporate resources due to segmentation. The separation of international and domestic businesses by a company may be at different levels in the organization. For example, whenever a company first starts exporting, it may create an export department with a full or part-time manager who reports to domestic sales and marketing. At later stages, the company may choose to increase the export department's autonomy to the extent of creating a separate international division that reports directly to the president. More prominent companies in advanced exporting stages may choose to retain the international division or further organize the product or geographic lines. Some companies with clear product lines may create an international department for each product division. The company with products that have similar end-users may organize geographically. For example, it may have a business division for Europe, another for the Far East, and so on. A small company may initially have a single export manager responsible for the full range of international activities. Irrespective of a company's export organisation structure, it should ensure that the marketer's job is facilitated. Excellent marketing skills can help a company overcome the difficulty of operating in a foreign market. Several experiences have shown that a company's success in foreign markets depends less on its products' unique characteristics and more on its marketing methods. Once a company has organized itself to handle exporting, the proper distribution channels need to be selected for each market. The channels would consist of sales representatives, distributors, agents, retailers, and end-users. Sales Representatives 47 CU IDOL SELF LEARNING MATERIAL (SLM)

A sales representative is a manufacturer's ambassador. The representative uses the company's product literature and samples to demonstrate the product to potential buyers. A representative generally handles many complementary lines that do not compete with each other. The sales representative usually works on a commission basis. The sales representative does not take responsibility for the risk and works under contract for a definite time, which may be renewed by mutual agreement. The contract will contain details about the territory, compensation methods, terms of sale, reasons, and process for terminating the contract. A sales representative can work either exclusively or non-exclusively for a firm. Agents An agent is a widely misunderstood term. Agent refers to a representative of the company who has the authority or power of attorney to decide on behalf of it. Firms in developed countries use the term representative instead of an agent. Any contract with the agent should indicate whether they have or do not have the legal authority to commit on behalf of the firm. Distributors A foreign distributor is a merchant who buys goods from an exporter at a discount and resells it for a profit. The foreign distributor generally provides support and service for the product, relieving these responsibilities' parent company. Besides, the distributor maintains an inventory of products and an adequate supply of spare parts, facilities, and servicing operations resources. The distributor may also carry a variety of non-competitive but complementary products. Consumers do not buy from a distributor directly and instead; they buy from either retailers or dealers. A contract establishes the payment terms and length of association between the parent company and the foreign distributor. Some companies begin with a short trial period and extend the contract if it proves beneficial to both parties. Foreign Retailers A company may also sell directly to a foreign retailer, although products are generally limited to consumer lines in such transactions. The growth of major retail chains in Canada and Japan has created new opportunities for direct sales. The direct sales method is dependent on traveling sales representatives who directly contact the foreign retailers. However, similar results may be achieved by mailing catalogues, brochures, or other literature. The direct mail approach benefits from eliminating commissions, reducing travel expenses, and reaching a larger audience. However, for best results, a firm should support it with other marketing activities to reach foreign retailers. Foreign manufacturers with a tie-up with major domestic retailers can use them to sell abroad. Many large retailers maintain overseas buying offices and conduct operations whenever required from these premises. Direct Sales to End Users A firm may sell its products or services directly to consumers in foreign countries. These buyers can be foreign governments, organisations like hospitals, banks, and schools, or even 48 CU IDOL SELF LEARNING MATERIAL (SLM)

other businesses. Potential buyers can be identified at trade shows, from international publications, or through government contact programs. The parent company should know whether a product is sold directly. The exporter is responsible for shipping, payment collection, and product servicing unless other arrangements have been made. However, one should keep in mind that unless the service cost is added to the export price, a company could end up with lesser profits than initially planned. Locating Foreign Representatives and Buyers A company can select its foreign representatives at overseas business trips or during domestic or international trade shows. There are other useful methods, too, that can be used without leaving the country. The exporter may have to travel abroad to evaluate, identify, and select overseas representatives. A few of the methods used to locate foreign representatives are government contact programs, banks, and similar service organizations, publications, etc. Contacting and Evaluating Foreign Representatives After a company has identified several potential representatives or distributors in the selected market, it should contact each of them directly. Just as the firm is seeking information on the foreign representative, the representative may also be interested in the firm's corporate and product information. The potential representative may require more information than what a company typically provides to a buyer. Hence, the company should give complete information about its history, available resources, personnel, product line, previous export activity, and other relevant matters. The firm should include a couple of photographs of its manufacturing facilities, products, product samples. If piracy is a danger, the exporter should guard against sending product samples that could be easily copied. A firm should evaluate potential representatives or distributors attentively before signing any agreement. The following points should be evaluated before selecting a distributor or representative: 1. Current status, history, and the background of the chief officers. 2. Personnel and resources such as salespeople, warehouse and service facilities, etc. 3. Sales territory. 4. Current sales volume. 5. Typical customer profiles. 6. Methods used for introducing new products into the sales territory. 7. Names and addresses of firms currently represented by the representatives . 8. Trade and bank references. 9. Information on if the firm's special requirements can be met. 10. Information about market potential of the firm's products in that country. This information is useful in gauging how much the representative knows about the exporter's industry and valuable market research in its own right. Negotiating an Agreement with a Foreign Representative A potential representative is interested in the profit potential and the company's pricing structure. Representatives are also interested in terms of payment, competitors, product regulations, their market shares, the support provided by the firm such as sales support, 49 CU IDOL SELF LEARNING MATERIAL (SLM)

promotional material, advertising, etc., training for sales and service staff, and the company's ability to maintain delivery schedule. The agreement may contain specific restrictive provisions as well. It may state that: 1. The foreign representative may not have business dealings with any competitive firms. 2. The foreign representative may not reveal any confidential information in a way that could prove detrimental, injurious, or competitive to the company. 3. The foreign representative may not enter into any agreements binding to the firm; and 4. The foreign representative may refer all inquiries from outside the designated sales territory to the company for further action. The agreement would involve clauses to ensure that the foreign representative puts in dedicated efforts and skill to sell the product to qualify for compensation named in the contract. The agreement may also include performance measures such as a minimum sales volume and an expected increase in sales. While drafting the contract agreement, special attention must be paid to safeguard the exporter's interests for cases where the representative is less than satisfactory. An 'escape' clause can also be part of the agreement, allowing the exporter to safely terminate the contract if the arrangement does not work out satisfactorily. Few contracts state that either party, exporter or the foreign representative, can terminate the agreement with 30/60/90 days advance written notice. The contract may also include what constitutes 'just cause' for terminating the agreement (such as failure to meet specific performance levels). Some contracts include a certain duration for the agreement, usually one year) and also include a clause for automatic annual renewal unless either party gives notice, in writing, of its intention to end the agreement. In such cases, escape clauses and provisions to protect the exporter may be limited by the country's laws in which the representative is located. Due to this, a firm should learn as much as possible about the legal requirements of the representative's country and take qualified legal counsel in preparing the contract. Following are some of the legal questions the company should consider: ● How much advance notice must the representative be given about the exporter's intention to end the agreement? While three months generally satisfy most countries' requirements, a verifiable means of conveying (like registered mail) may be required to establish when the notice was sent. ● What qualifies as a 'just cause' for terminating a representative? Mentioning the causes for ending the contract as a part of the agreement usually supports the exporter's position. ● Which country's laws or which international convention will be applicable to solve a dispute in the contract? Rules in the representative's country may prevent the representative from waiving its nation's legal jurisdiction. 50 CU IDOL SELF LEARNING MATERIAL (SLM)