Are you excited about doing business with the rest of the world? It is not a bad idea! But, if you are thinking of starting an import-export business, you must be clear that you need a lot of preparation to do so.
An import-export business is a potentially lucrative business. Its progress depends on your ability to configure the company correctly, staying within the laws of your country and the countries from which you plan to import or to export goods for a profit. Read on to know how to start an import and export company.
Exports in India are expected to be 32200.00 USD Million by the end of this quarter, according to Trading Economics global macro models and analyst’s expectations. In the long-term, India Exports is projected to trend around 34900.00 USD Million in 2021, according to our econometric models.
What is Import Export Business?
- Export: Sending goods from one country to another
- Import: Bringing goods from the other country.
Import-Export Business is the exchange of assets and services between the two countries, which are across global borders. In this business, goods are bought and sold in the international markets. Often, it is also called international trade.
In India, the Directorate General of Foreign Trade (DGFT) supervises and facilitates foreign trade. Before starting a business, you have to apply for registration and license, which is mentioned below.
Import & Export Business Registration
The person who wants to start Import Export Business has to register his business under the Directorate of Foreign Trade (DGFT). The following registrations are essential steps before starting this business:
- Registration under MSME: Currently, the Government of India has made compulsory registration for any business under MSME. Also, with the help of the industrial base, registration can be done. With the help of Udyog Aadhaar, your business can be registered online under the Government of India within just 5 minutes.
- Shop Act Registration: If you are doing business in your corporation-export business, you are also required to register your business under Shop Act registration.
- No Objection Certificate: If you do this business from a rural area, registration is mandatory. The trader needs to get the NOC from the gram panchayat.
- GST Registration: The Government of India has introduced the GST tax system keeping in mind the economy of the country. Under this, the import is also mandatory for export business. The assistance of any CA can also be taken for this registration.
- IEC code: IE code stands for import export code. This code is of 10 digits, which is issued by the Directorate General of Foreign Trade (DGFT). The Directorate General of Foreign Trade functions under the Ministry of Commerce and Industry, Government of India. Entrepreneurs can get IEC code efficiently and quickly by submitting documents based on the rules set by the Government of India.
With all the above registrations, you can start the import-export business.
You might also be interested in knowing about the best Startups Ideas in India to work on and start a company.
After completing your business registration, contact the right freight forwarder and customs clearing agent, which will help in the secure transportation of materials from one country to other countries.
Usually, starting this business requires between 5 to 6 lakh rupees, including tax.
Remember, it is only an idea given here; Total and accurate investment entirely depends on your business size and import or export products.
Government Assistance in The Export-Import Business
The Directorate General of Foreign Trade – under the Ministry of Commerce and Industry, the Government of India has launched an online certificate program for entrepreneurs wishing to do import-export business through the Indian Institute of Foreign Trade. You can read complete information about this business Directorate General of the Foreign Trade official website.
Also, see the documents required to accept donations online in India.
Hire a Custom Clearing Agent
Custom agents prevent goods from being shipped to different countries. The International Customs Authority certifies such agents. Those who run export-import businesses must deploy a custom clearing agent for their business. This agent will help the entrepreneur in his custom clearance to send his goods in and out. The merchant should keep a close watch on all expenses incurred at the port or airport. These include a handling charge, custom duty, and shipping charge.
Container Expenses in Import Export Business
This expense depends on the size of the container. For this, you have to hire a container of at least 20 feet to send it from one port to another. The fare of this container depends on the country- from which the goods are to be ordered.
Essential Steps to Start Import-Export Business
1. Select the Name of The Company And Create a Website And Blog
Without a website or blog, you cannot have an import-export business network. Create a platform that allows you to develop an online presence and grow your business. The objective is to balance the flow of communications, the sale of products, and build their customer base to boost the profits of their international trades.
2. Choose a Product to Import or Export
When it comes to import and export, the chosen product may not be for all customers. You must decide something and hold on to it. If you saw something in another part of the world that you would like to sell to your market, you must first conduct a market study to find out if there is a good buyer market.
3. Search For The Right Market
If you have already picked a product, now you have to find somewhere to sell it. You will improve your chances of choosing a good market if you cultivate a unique ability to track current or potential trends.
4. Get a Provider
The easiest access to reputable suppliers can be Alibaba, Global Sources, and Indiamart. There are other sites moreover, on Google, through forums; even on social networks, you can research for suppliers, manufacturers, exporters, importers, buyers, wholesalers, and potential customers of the trade.
5. Set Your Prices
You should set the cost of your items according to your consumers, as it can be a significant factor to establish your company. You should not put a bad and unexpected cost, and you should show more leniency with customers. To determine the right price, you must examine labour, materials, expenses, and profit- when trading the goods.
6. Identify Your Target Customers
When you get information and essential tools for this business, you need to attract your target customers. You should identify a group of people who need your service. For this, you need to have good knowledge. And to reach that group of people, you have to research your market. You should put your direct marketing efforts in the right place.
7. Transfer Your Products
The next step is to concentrate on product transport logistics. At this point, you have already located a customer who loves your product, consolidated terms of sale, and prices. Now you have to transfer your product.
You can find various transport options, such as companies specializing in medium or heavy cargo shipments (depending on product size). There are specialized services in global export-import loads. What you should consider apart from the price is the guarantee you offer.
8. Provide Excellent Customer Service Worldwide
When a sale is made or completed, the relationship between you and your customer should not end. Think about your after-sales service, which should consist of monitoring. The first step is to give thanks, either person to person, by email or by phone.
Some Major Problems in Import-export business
Since we have already told about the necessary steps that an entrepreneur may have to take to start his import-export business, next, we will know about some of the major problems faced in this business.
- Disruptions can occur in the transport system due to nature, such as bad weather, rain, flood, or vehicle breakdown. Due to which there may be a delay in reaching or receiving the goods.
- In the import-export business, if there is a minor mistake due to some reason such as typing mistake, then the custom clearance may be interrupted.
- Due to the non-availability of some perishable goods on time, there is no value in the international market.
- Government policies change due to economic-political reasons, which have a direct impact on international trade. However, this change can benefit and also harm the entrepreneur.
- The value of currency varies every day, so the financial plan that the entrepreneur has done for his import-export business today, maybe ineffective tomorrow.
Let us read some important shipping terms now.
- Freight Forwarder: This person completes the necessary stages of shipping and merchandise for you. Quoting shipping rates, providing routine information, and booking cargo space are also their duties. They create information on freight forwarder documents, contract shipping insurance, and route cargo with the lowest custom charge.
- FOS: Free Along Side. In this, the selling party bears the responsibility of transporting the assets to the ship. It is also responsible for keeping the cargo safe until it is loaded on the ship. From there, the responsibility of boarding the assets and carrying it forward is to the buying party.
- C & F: Cost and Freight. In this, the selling party pays the freight and, the Buyer insures it. After this, the Buyer takes full responsibility for the goods.
Some More Important Things
- Letter of Credit: This is an essential document that ensures the distributor has sufficient funds available to meet the expenses- you have quoted. This letter of credit is irrevocable, and it means it cannot be cancelled. This also determines that the distributor cannot cancel your order at any time. When your bank confirms this letter of credit, delivery to the distributor is assured. With this confirmation, the currency exchange also gets confirmed, after which you do not have to worry about fluctuations in the value of the rupee against the dollar.
- Credit Insurance: This is an important instrument, which protects you from the risk arising out of default or insolvency of the buyer. This insurance offers three types of services: risk aversion, debt recovery, and claims payment.
- ECGC: Export Credit Guarantee Corporation of India, or ECGC, was formed by the Government of India in 1957 to eliminate the credit risk of exporters and encourage them. This organization provides many services to exporters, such as
- Providing credit risk insurance in case of loss in export of goods and services.
- Provide a guarantee to banks and financial institutions so that they can provide better services to exporters.
- To provide overseas investment insurance to Indian companies making joint ventures as loan partners abroad.
Every coin has two faces, similarly in this business even, if you face some challenges, you have to overcome all obstacles with your determination and positive behaviour. The business of import-export is very beneficial, and you can earn a lot in it. If you pick the right goods to import and export, you will earn a lot. Initially, start with small ideas. After that, when you have made your inroads in this business, then gradually expand your business.