Currency hedging is an important tool in Export and Import business to minimize risk associated with varying rate of currencies.
Let us try to understand - How to utilize currency hedging?
A good understanding of currency hedging gives advantage to exporters or importers to minimize their risk and even they can make some extra profit.
Forward Booking is a way through which exporter/importer can counter currency fluctuations.
Apropos of my previous blog for finding international buyers and suppliers for those who are in export and import or international trading, we can opt for online and offline methods. I have discussed about online method in my previous blog. In this section I will discuss about offline methods for finding prospective buyers in Export and Import business and all related aspects.
Offline method means to be directly be in contact with buyers face to face and this method is costly as one need to move from place to place in search of genuine and good buyers and supplier. We should prefer to attend seminars, trade fairs for our related product or industry.
Benefits of offline method :
1. We can get large number of buyers and suppliers of our products in one seminar of trade fairs.
2. In face to face meeting, we develop more trust and understand their requirements.
3. We can understand buyer's business pattern and their demand of products.
However, there are some drawbacks in offline buyers/suppliers search :
1. It is always costly to travel and attend seminars/trade fairs. As it is generally organized in different parts of the world.
2. It is time consuming, as we have to travel different countries.
3. It is also not sure that how much business we could get in such visits. Generally it takes time and business are finalized after negotiations.
It is advisable for any exporter or importer to utilize both ways for finding prospection customers/supplier for their products.
One of the major concern of an exporter to find a genuine and reliable buyer in other country or in international market and same is for an importer to find a genuine and reliable supplier as per their requirement.
In this topic I will try to cover various aspect of finding a buyer or supplier in international market which is important for an exporter and an importer.
Exporters are mainly wary about buyer's financial strength to pay exports bills on time and as per payment terms laid down in their contract and an importer is concerned about quality of product.
Let us discuss that how can we find a buyer in international market.
For simplification, I will divide it into two parts, one is online method and other is offline method.
First I will discuss about online method for finding an importer in other country for our product.
Benefits of online search for a buyer :
Firstly, it is very much time saving and Secondly, cost involve in very much low.
How can we find buyers of our product in other countries?
Let's discuss it point wise.
1. There are several agencies who provides complete data of overseas buyers and suppliers. This data includes various details which is useful to any exporter and importer to explore different buyers and suppliers. However, these agencies are charging amount for subscription of such services.
2. We can search buyers of our product online through google by scrolling several pages. Once we get buyers name, we can search that particular buyer in google to find out their websites and we can get their address, email, contact number.
3. We can request our embassy in the country where we are planning to export our products to provide details of buyers who are dealing in these commodities.
4. If we are registered with EPC (Export Promotion Council), we can approach them to provide details of overseas buyer who are dealing in products which we are planning to export. We need to provide them complete details of product with HSN Code.
5. There are chamber of commerces which help in providing such datas which could helpful to find out more buyers/suppliers.
I will add some more details in my next blogs.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
While doing export from India, one must should be aware of Shipping Bills and its various aspect.
What is Shipping bill ?
Shipping Bill is an export document issued by Custom Authorities at the port of loading or place where custom clearance is done like ICD (Inland Container Depot), CFS (Container Freight Station). This document is issued and finalized after custom clearance of the Cargo.
Based on information provided by Shipper or Exporter in Invoice and Packing list, Custom House Agent (CHA) prepares checklist for approval.
An exporter must be careful to understand details of checklist as it should mention the details of Export Incentives provided by the Government, if applicable.
Based on these details custom officials check cargo and allow for stuffing and finalize shipping bill.
Shipping Bill is the main document which confirms for export.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
For a beginner, who is planning to export goods from India must be conversant with the rules and regulations laid down by the Government of India.
An exporter must take care of various aspect related to export of goods/ commodity from India to anywhere in world. There are some basic procedures which should be followed by an exporter.
Let us try to understand Step-by- step.
1. First of all, there should be a firm through which you want to export. It may be a proprietorship firm, partnership firm, private limited, HUF etc. If you have an existing firm you can do export and import in that particular company and there is no need to form a new firm to do export or import business in India.
2. The firm/ entity through which you want to do export and import, you must get and Importer Exporter Code / License for that firm. This License can be done online through DGFT site by filling up required detail and uploading documents.
3. The firm should have a PAN and GST Number. Import Export Code (IEC) issued by DGFT will bear number as PAN.
4. You need to have a bank account in the name of your firm. You should prefer bank’s branch which is dealing Forex.
4. Registration with required EPC (Export Promotion Council) according with the product and commodity which is to be exported. You need to get a RCMC (Registration cum Membership Certificate) from that Export Promotion Council.
5. AD (Authorized Dealer) Code Registration. This can be done online or offline basis. You need to get a letter from you banker for this and with other relevant documents you will have to give it to your CHA (Custom House Agent) for registration with Customs EDI Portal.
6. Appointing CHA (Custom House Agent) and FF (Freight forwarder). CHA will take care of your custom related formalities, documentation etc and Freight forwarder will ensure containers and transportation of your cargo.
7. Negotiation with foreign buyer and preparing contracts with them covering different aspects and as per your business requirements.
8. Once all these above done, then there comes filing of documents with customs based on your invoice. You will have to handover your invoice and other documents which will declare your product, quantity, price etc to your CHA who will process these documents with customs and will ensure clearance from them.
9. Do all required inspection of cargo with independent surveyor as per your contract agreed with the buyer. Do fumigation if required.
10. Once cargo is stuffed in containers and loaded on vessel, then take originals bills of lading from your freight forwarded.
11. Prepare all set of documents as required in foreign buyer contract (Documents should be as per Importing Country Norm).
12. Send a scan copy of documents to your buyer but “Please note, do not send copy of express bl or seaway bl or airway bl” by email. Because you buyer can clear cargo only on the scan copy of these bills of lading. So if you have not received full amount, never share scan copy of these bills of lading.
13. As per your contractual terms, present documents in your bank who will send documents to buyer’s bank. Clearly state your payment terms which is agreed between you and your buyer in the contract.
You can not send documents to your buyer directly by courier. This can be done only in few cases like, if you have received full payment from your buyer or it is mentioned in the terms of letter of credit or your firm/ company is a status holder.
14. Your buyer’s bank will handover these documents to the buyer as per your instructions which is given in the bill of exchange and forwarding letter. It will be same as payment terms which you have agreed with your foreign buyer in the contract.
15. Once your buyer makes payment, their bank will transfer this amount to your bank and your bank will intimate you regarding receipt of fund.
16. Then you will have to submit all relevant documents and forms to your bank for realization of fund.
17. Once payment against your export of cargo is settled in Bank’s system, you can get a BRC copy (Bank Realization Certificate) from the DGFT portal.
This is a brief of export procedure and cycle of export shipment.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
Economy is directly related to providing employment opportunities. Does growing economy with fast pace of development provide as many employment opportunities as people imagine or politicians tell them? Today we will discuss that in what proportion the employment opportunity is generated with expansion and development of the economy mainly in Indian context.
We will try to understand complete scenario after India's independence because in true sense the ups and downs in our economy can be assessed only after independence. India has adopted mixed economy since independence. In this form of economy, foreign investors were restricted except in certain sectors. Even private investment was available in only few areas. The government made its own investment and structured public industries which could meet the needs of India and bring the economy back on track. Public undertaking has done excellent work in many fields and has become a source of permanent employment. All these public enterprises gradually became the backbone of the Indian economy. However, it can be a matter of debate about the role of Public Sectors which is being considered as burden of the Government.
Later on, Foreign investment was opened in India when this country was struggling with the lack of foreign currency and due to which to meet domestic demand for Crude and essential items, Indian gold reserves had to be mortgaged. One of the reasons for keeping foreign investors away India's long slavery and fear of getting foreign domination. The true expansion of the economy in India began in 1991 when Finance Minister Dr. Manmohan Singh and the then Prime Minister PV Narsimha Rao opened the Indian market to foreign investors. The advantage of this was the increase of Foreign Currency Reserve and creation of new jobs in many sectors. If we see from the year 1991 onwards, the economy continued to develop gradually and new employment opportunities were created. Per capita income increased and there was a lot of improvement in the purchasing power /spending power.
We have to note that due to this reform made a very substantial positive change in Indian Middle Class and Lower Middle Class. Continuation to this, government schemes like NREGA also contributed a lot which proved a boon to daily wage worker and improved their economic position. It can be very well underlined that demand from lower income group from villages & sub urban areas rose significantly and gave pace to economic growth.
But now one of the biggest questions is that when the government is making so much effort, yet new employment opportunities are not visible, and the level of unemployment is also increasing continuously. If we discuss the contemporary situation, then we have to pay attention to some points, which can be the main reasons for this situation .
Firstly, since Corona, almost all the countries of the world have faced economic problems. The closure of businesses due to the lockdown and loss of employment in the unorganized sector posed a new challenge to the economy, which was already facing and trying to come out of Demonetization in India.
Secondly, the war between Russia and Ukraine created logistic problems that affected demand and supply to a great extent. Delay in movement of cargo/commodities adversely impacted manufacturing and trading sectors. High price rise in international freight was also a major factor all around the world.
Thirdly, All pending vacancies in Government sector which directly employs a huge number of manpower are still vacant. There is almost new nil vacancies. The government should keep in mind that government employees are a huge percentage that generate demand in the economy. It would be advisable that Government of India on a very pro-active way should induce people on vacant posts and try to generate new job opportunities apart from private companies.
Fourthly, There is a misconception that boosting and assisting big private companies will create more job opportunities and improve economic growth by creating demand in market. The main reason behind this is the use of automation and robotics by private industries, promoting unmanned production to reduce input costs which is not creating jobs as it should have been. It is simply accruing their net worth. This challenge will become more serious in the coming days.
Fifthly, the government should encourage very small and medium industries, which the government is currently doing through Mudra loans. But the effect of its implementation is not visible. It should be studied in totality and the government should take feedback of every Mudra loan taker and decide how effectively they have used this loan. This will give further roadmap to the government which will help the government schemes in working the unemployment rate.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
If we want to understand Indian economy in a macroscopic perspective, we will have to overview it since Independence.
When India got freedom in the year 1947, Britishers left India in a state of complete shattered economy. Poverty was extreme with people dying due to drought, famine, hunger and different diseases. In such situation, the newly formed government had many challenges to address.
The world was divided into two types of economies, one United States of America and other European countries were advocating and following open type of economy. In which they were promoting Capitalism and encouraging cross border trade to have better economic development. On the other hand some countries like USSR (earlier Russia), China was following closed type of economy, in which they were focusing to make their country self-sufficient in all areas. They blocked trade and business co-operation with other countries.
Whereas India adopted policy of mixed economy, keeping maximum sectors under government control and allowing private players in some sectors. Main objective of the government was to focus on infrastructure and uplift people from huger and extreme poverty.
What was impact of Open, Closed and Mixed Economy?
Mainly the United States and European countries those who were pioneer of open & liberalized economy had a taste of development due to industrial revolution. They focused on capitalism to have sustained growth and development.
Besides, USSR and China mainly adopted policy of closed economy. They emphasized on to develop their country in all sectors without having dependence on other countries. This policy has long term impact on their economy, leading breakup of USSR due to acute economical crisis. Whereas China opened economy understanding the need of time
However, India was following mixed economy which gradually led India to have minimum foreign reserve which was only sufficient to feed this country for few days. At the time, Mr. Chandrashekar was the prime minister of India and India had to mortgage her gold reserves to have foreign currencies to meet import obligations of country.
Later on when Mr.P.V. Narsimharao became the Prime Minister and Mr. Manmohan Singh became Finance Minister of India , they took very audacious steps to liberalize Indian economy. Foreign investor were allowed in most of the sectors which was the turning point of Indian economy. India became a lucrative market for investors due to low labour cost and sizebale amount of population which was a huge market.
After this policy, India's development gradually started at a very good pace. Now, all the governments are following almost same economic policies for foreign investment in the country.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
India, the second largest producer of Rice in the world after China has announce ban and imposed a 20 per cent duty on export of all varieties of rice, except basmati and parboiled rice, with effect from 9 September 2022.
This move was expected by most of the exporters that government will impose ban on broken rice completely, but imposing duty of 20 per cent on other varieties of rice which include mainly Raw rice was a shocking move.
In international rice export market, India faces competition mainly from Pakistan, Vietnam and Thailand and duty on Raw rice will make it almost uncompetitive in market and buyer will look purchasing from other our rice rival countries.
If we bifurcate total export of Indian Rice for FY 2021-22, it is like
Total export of Rice is 21.21 Million Tons
Export of Basmati Rice 3.95 Million Tons
Export of Non Basmati Rice 17.26 Million Tons (Which includes 7.43 Million Tons Parboiled Rice + 3.89 Million Tons Broken Rice + 5.94 Millon tons Non- Parboiled Rice i.e. Raw Rice)
Now, impact will be on Broken Rice and Non-parboiled Rice where Broken Rice is completely banned and there is a duty of 20% will on Non- Parboiled Rice i.e. Raw Rice. In quantitative term there will around fifty percent affect on total rice export.
Difference between Raw Rice and Parboiled Rice
Rice is produced after milling of paddy grain. Paddy grain constitute of Husk and Bran. Husk is the cover of grain which is not edible is around 20% of the Paddy grain and Bran the outer of Kernel which is in brown color is around 10% of the kernel.
When paddy is milled and husk and bran is removed white raw rice is obtain.
When paddy is soaked in water, steamed and dried is called parboiling process. In milling husk is removed and the outcome is parboiled Rice
Destination of Indian Rice Export
Basmati Rice – India’s export to Basmati Rice is majorly consist of Arabian Countries, Iran, US, Canda, UK
Non- Basmati Rice – Major consumer of Indian Non-Basmati Rice is African Countries like Benin, Ivory Coast, Togo, Guinea, Madagascar, Djbouti, Somalia, Cameroon. Bangladesh and China are also importer of Indian Rice. Bangladesh and African countries are importer of Parboiled Rice where as China mainly imports broken rice from India. There are few African countries those who are importing broken and raw rice as well.
Various factors for placing restrictions
1. It is apprehended that rice production in India will go down sharply as the plantation for Kharif crop season is substantially less than previous year.
2. Broken rice is used for Ethanol production and cattle feed. There was a huge jump in export from India to China for broken rice year to year basis. Due to which a shortage of broken rice created in India. There was around 27 per cent rise in per kg broken rice from Jarnuary.
3. Blending of Petrol with ethanol is not sufficient with sugar based feedstock and substitute like maize and broken rice is required for this.
4. Increasing price of broken rice in Indian domestic market we putting impact on poultry and animal husbandry sectors.
Assuming above factors Government of India may have decided to put a total ban on broken rice and levying export duty 20 percent on Raw rice.
However, it is bound to impact domestic export companies which are mainly in export of Rice. Main concern of exporters are the good they have on Port and Warehouse. Such situation was seen in the time of wheat ban.
Disclaimer:
“The author assumes no responsibility or liability for any errors or omissions in the content of this site and for this blog. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness.”
To find prospective international buyers or suppliers, consider these steps: Online B2B Platforms: Explore popular online business-to-busin...