A STUDY OF EXPORT DEVELOPMENT FINANCE SCHEME OF NSIC Ltd.

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ABSTRACT
People around the globe are more connected to each other than ever before. Information and money flow more quickly than ever. Goods and services provided in one part of the world are increasingly available in all parts of the world. Internationally travel is more frequent. International communication is commonplace. This phenomenon has been titled “GLOBALIZATION”. “The era of globalization” is fast becoming the preferred term for describing the current times. Just as the depression, the cold war era, the space age, and the rearing 20’s are used to describe particular periods of history, globalization describes the political, economic & cultural atmosphere of today. While some people think of globalization as primarily a synonym for global business, it is much more than that. The same forces that allow business to operate as if national borders did not exit also allow social activists, labor organizers, journalists, academics, and many others to work on a global stage. Due to this globalization, numbers of large industries were established in this country. So, it creates competition to the small-scale industries. The small scale industries faces problems due to some of the following reasons: Lack of brand name. Lack of managerial skills. Lack of communication. Lack of financial support. Lack of advertisement.

For this reasons, the small scale industries not running successfully. So, government established some service organizations like NSIC, KVIC, SIDO etc; to develop the

small scale industries. This organizations give their financial assistance, marketing assistance etc; to the small scale industries. The main aim of this study is to investigate the pros and cons of the Export Development finance scheme of NSIC for SSI units for the export of their products in the present economic scenario under globalization. 1.To study about the SSI and NSIC finance scheme. 2.To study about the export of SSI Products. 3.To study about the Export development finance to SSI units by NSIC. 4.To forward certain suggestions and recommendations based on the observations.

Chapter-1
1. Introduction In the context of financial reforms, which are in progress in India and at this juncture of globalization the priority has been for export business, hence more and more entrepreneurs are venturing in to exports. Hence it was felt the needed of the hour and acquired a lot of importance for the study of Export development finance schemes supported and helped by different financial institutions in general and NSIC in particular.

In this context it was observed that NSIC is providing support to the SMEs with different schemes in finance and marketing .

2. Need&importance of study (why you selected that company) The small scale industry sector output contributes almost 40% of the gross Industrial value-added 45% of the total exports from India (direct as well as indirect exports) and is the second largest employer of human resources after agriculture. The development of Small Scale Sector has therefore been assigned an important role in India's national plans. In order to protect, support and promote small enterprises as also to help them become self-supporting, a number of protective and promotional measures have been undertaken by the Government. The promotional measures cover - industrial extension services - institutional support in respect of credit facilities, - provision of developed sites for construction of sheds, - provision of training facilities, - supply of machinery on hire-purchase terms, - assistance for domestic marketing as well as exports, - special incentive for setting up enterprises in backward areas etc. - technical consultancy & financial assistance for technological upgradation. While most of the institutional support services and some incentives are provided by the Central Government, others are offered by the state governments in varying degrees to attract investments and promote small industries in varying degrees to attract investments and promote small industries with a view to enhance industrial production and to generate employment in their respective States.

2 Service sub-sector is a fast growing area and there is need to provide support to it in view of its recognised potential for generating employment. Such limits in respect of "TINY" ENTERPRISES would now be increased from the present Rs 200 thousand to Rs. and Rs 200 thousand respectively. The sector has been substantially delicensed.4 While the small scale sector (other than ‘Tiny Enterprises’) would be mainly entitled to onetime benefits (like preference in land allocation/power connection.2 The primary objective of the Small Scale Industrial Policy during the nineties would be to impart more vitality and growth-impetus to the sector to enable it to contribute its mite fully to the economy.1. Limit in plant and machinery for determining the status of SSI/Ancillary units as on date is Rs 10 million. it accounted for nearly 35 percent of the gross value of output in the manufacturing sector and over 40 percent of the total exports from the country. to ensure that their operations do not militate against the interests of the small and village enterprises.3 A separate package for the promotion of Tiny Enterprises is now being introduced. irrespective of location of the unit. recognised as small scale industries and their investment ceilings would correspond to those of Tiny enterprises. including easier access to institutional finance. 2.5 million. 2. Rs 7. ancillary units and export – oriented units to Rs 6 million. employment and exports.3 All statutes. 2. For tiny it is Rs 2. Composite loans under Single Window Scheme. 500 thousand. 2. reposing greater faith in small and young entrepreneurs. Further efforts would be made to deregulate and debureaucratise the sector with a view to remove all fetters on its growth potential.1 The Small Scale Industrial Sector has emerged as a dynamic and vibrant sector of the economy during the eighties. wherever necessary. 1. It also provided employment opportunities to around 12 million people. 1. priority in the Government Purchase Programme and relaxation from certain provisions of labour laws. the ‘Tiny’ enterprises would also be eligible for additional support on a continuing basis. 1 million for equity support (upto 15 per cent). Hence all Industry-related service and business enterprises. This constitutes the main thrust of Government’s new policy. now available only through State Financial Corporations (SFCs) and twin function State Small Industries Development Corporation . At the end of the Seventh Plan period.5 It has also been decided to widen the scope of the National Equity Fund Scheme to cover projects upto Rs.1 Government have already announced increase in the investment limits in plant and machinery of small scale industries.0 TINY ENTERPRISES 2. access to facilities for skill/technology upgradation).5 million and for SSSBE Rs 500 thousand. 2. regulations and procedures would be reviewed and modified. particularly in terms of growth of output. Single Window Loan Scheme has also been enlarged to cover projects upto Rs 2 million with working capital margin upto Rs 1 million.

1 Inadequate access to credit – both short term and long term – remains a perennial problem facing the small scale sector. particularly the tiny sub-sector. This would facilitate access to a larger number of entrepreneurs. Process-cum-Product Development Centres (PPDCs).0 FINANCIAL SUPPORT MEASURES 3. 4. The TDC would coordinate the activities of the Tool Rooms.1 To facilitate location of industries in rural/backward areas and to promote stronger linkages between agriculture and industry. and the quality of its delivery.3 Adequacy and equitable distribution of indigenous and imported raw materials would be ensured to the small scale sector. it has been decided to allow equity participation by other industrial undertakings in the SSI.(SSIDCs).4 A beginning has been made towards solving the problem of delayed payments to small industries by setting up of ‘factoring’ services through Small Industries Development Bank of India (SIDBI). and efforts would be made to ensure both adequate flow of credit on a normative basis. Network of such services would be set up throughout the country and operated through commercial banks. A special monitoring agency would be set up to oversee that the genuine credit needs of the small scale sector are fully met.2 To provide access to the capital market and to encourage modernisation and technological upgradation. 4. not exceeding 24 per cent of the total shareholding. A suitable legislation will be introduced to ensure prompt payment of Small Industries’ bills. and would also interact with the other industrial research and development organisations to achieve its objectives. a new Scheme of Integrated Infrastructural Development (including Technological Back-up Services) for Small Scale Industries would be implemented with the active participation of State Governments and financial institutions. 4. A Limited Partnership Act will be introduced to enhance the supply of risk capital to the small scale sector. except for specified target groups. Such an Act would limit the financial liability of the new and non-active partners/entrepreneurs to the capital invested.2 A Technology Development Cell (TDC) would be set up in the Small Industries Development Organisation (SIDO) which would provide technology inputs to improve productivity and competitiveness of the products of the small scale sector. 3. leading to expansion of employment opportunities.3 Regulatory provisions relating to the management of private limited companies are being liberalised. This would also provide a powerful boost to ancillarisation & sub-contracting. for viable operations of this sector. 3. would also be channelised through commercial banks. 3. existing as well as to be established under SIDO. Emphasis would henceforth shift from subsidised/cheap credit. A beginning in this direction will be made this year itself. 3.0 INFRASTRUCTURAL FACILITIES 4. Policies would be so designed .

that they do not militate against entry of new units. a large potential remains untapped. 6. market promotion would be undertaken necessary.2 National Small Industries Corporation (NSIC) would concentrate on marketing of mass consumption items under common brand name and organic links between NSIC and SSIDCs would be established.2 Industry Associations would be encouraged and supported to establish quality counselling and common testing facilities. The tiny/small scale sector will be enabled to have a significant share of such markets. 5. Industry associations would be encouraged to establish sub-contracting exchanges.4 A proper and adequate arrangement for delivery of total package of incentives and services at the District level will be evolved and implemented. both direct and indirect. as considered . 5. 6. Specific through cooperative/public sector institutions. The SIDO has been recognised as the nodal agency to support the small scale industries in export promotion.0 MARKETING AND EXPORTS 5. Based on the capacity needs. 4. Parts. TECHNOLOGICAL AND QUALITY UPGRADATION 6.3 Government recognises the need to widen and deepen complementarily in production programmes of large/medium and small industrial sectors.3 Where non-conformity with quality and standards involves risk to human life and public health.4 A reoriented programme of modernisation and technological upgradation aimed at improving productivity. other specialised/professional marketing agencies and consortia approach. required by large public/private sector undertakings would be encouraged for production in a techno-economically viable manner through small scale ancillary units. An Export Development Centre would be set up in SIDO to serve the small scale industries through its network of field offices to further augment export activities of this sector. Tiny/Small Scale units would be given priority in allocation of indigenous raw materials. In addition to the existing support mechanism. Mass consumption labour intensive products are predominently being marketed by the organised sector. 5. Technology Information Centres to provide updated knowledge on technology and markets would be established. components. marketing remains a problem area for small and tiny enterprises.1 In spite of the vast domestic market. 5.4 Though the Small Scale Sector is making significant contribution to total exports. 6. in addition to strengthening the existing ones under the SIDO.1 A greater degree of awareness to produce goods and services conforming to national and international standards would be created among the small scale sector.0 MODERNISATION. backed up by such incentives. efficiency and cost effectiveness in the small scale sector would be pursued. Emphasis would also be laid on promotion of a viable and competitive ‘component’ market. sub-assemblies. etc. compulsory quality control would be enforced. 6.

8.2 Procedures would be simplified. 7. Large number of EDP trainers and motivators will be trained to significantly expand the Entrepreneurship Development Programmes (EDP). the performance has been commendable both in terms of value and their share within the SSI sector while in some cases like sports goods they account for 100% share to the total exports of the sector. bureaucratic controls effectively reduced. Definition of "Women Enterprises" would be simplified. processed foods. being required to maintain a number of registers and submit returns. Industry Associations would also be encouraged to participate in this venture effectively. Such studies will establish commercial viability of modernisation prescriptions. and financial support would be provided for modernisation of these industries on a priority basis. 8. 6.1 Government will continue to support first generation entrepreneurs through training and will support their efforts. would be attended to within a specified time frame of three months. EXPORT PROMOTION Rationale Behind Export Promotion The capability of Indian SSI products to compete in international markets is reflected in its share of about 34% in national exports. The present stipulation regarding employment of majority of women workers would be dispensed with and units in which women entrepreneurs have a majority shareholding and management control. preferential treatments to SSIs in the market . would be defined as "Women Enterprises". In view of this. export promotion from the small scale sector has been accorded high priority in India’s export promotion strategy which includes simplification of procedures. and face an army of inspectors.2 EDP would be built into the curricula of vocational and other degree level courses. unnecessary interference eliminated and paper work cut down to the minimum to enable the entrepreneurs to concentrate on production and marketing functions. leather goods.industries in large concentrations/clusters would be identified for studies in conjunction with SIDBI and other banks.3 Women entrepreneurs will receive support through special training programme.0 PROMOTION OF ENTREPRENEURSHIP 7.5 Indian Institutes of Technology (IITs) and selected Regional/other Engineering Colleges will serve as Technological Information. engineering items. Design and Development Centres in their respective command areas.0 SIMPLIFICATION OF RULES AND PROCEDURES 8.1 The persistent complaint of small scale units of being subjected to a large number of Acts and Laws. incentives for higher production of exports. 7. 7. In case of items like readymade garments.

Participation in the named fairs/exhibitions generated large number of Trade enquiries besides certain export orders. O/o the DC(SSI) participated in 7 International Trade Fairs/ Exhibitions. simplification of duty drawback rules. During the current financial year. techniques etc.scale sector in identifying new foreign buyers/markets. it is proposed to participate in 8 International fairs/ exhibitions. are met by the office of the Development Commissioner (Small Scale Industries) under one of the plan schemes. With a view to acquaint SSI Exporters of the latest Packaging standards. International Exposure to SSI Products With a view to rendering assistance to Small Scale Units in the field of exploring market potential. Enquiries generated during such exhibitions abroad are disseminated to all SSI units through a network of field offices of this organisation. export promotion and exhibitional publicity.development fund. Packaging for Exports Role of packaging for exports has gained much significance in view of trends in the world markets. These programmes are organised in association with Indian Institute of Packaging which has requisite expertise on the subject. training programmes on packaging for exports are organised in various parts of the country. The basic objective behind this scheme is that SSI units which otherwise are not in a position to display their products may participate in foreign exhibition/fairs so as to promote their exports. Expenditure on account of space rent. handling and clearing charges. Basic objective of . etc. This strategy has been found to be successful for exporters from small. The need for better and scientific packaging for exports from small sector was recognised long back. It also provided an opportunity to SSI units to display their products in the world market. Products of SSI exporters are displayed in international exhibitions free of cost under SIDO Umbrella abroad. During 2003-2004. the following schemes are being implemented:Export Promotion Programmes / Measures Participation in International Fairs/Exhibitions With a view to ensure that exporters from small -scale sector exhibit their products in the International Exhibitions. required assistance & support is provided. insurance and shipment charges etc.

a Certificate and a Cash Prize of Rs.6) National Awards encourage Small Scale Industries units to produce quality goods which further enables them to enter into export market.these programmes is to generate the much needed consciousness in the industry and to educate the entrepreneurs about the scientific techniques of Packaging. National Awards for Quality Products are given to the outstanding small scale units. 3. The scheme is being operated since 1986. Winners of National Awards get a Trophy. National Awards for Quality Products With a view to encourage the small scale units for producing Quality goods. who have made significant contribution for improving quality of their products. Technical & Managerial Consultancy Services Technical & Managerial Consultancy Services to the SSI manufacturers/exporters is provided through a network of field offices of this office so as to ensure higher level of production and generation of higher exports.000/-($559. Objectives of the study (customer satisfaction) OBJECTIVES OF THE STUDY: The main aim of this study is to investigate the pros and cons of the Export Development finance scheme of NSIC for SSI units for the . With the assistance of EAN India to sensitize Indian exporters about barcoding.25. 7 training sessions were conducted in 2000-01 at different locations across the country.

To study about the Export development finance to SSI units 4. 4. 5. 2. 2. The principal objectives of Export Policy are: 1. 3.To draw conclusions. intermediates. industry and services.To study about the export of SSI Products. with a shared vision and commitment and in the best spirit of facilitation. To enhance the technological strength and efficiency of Indian agriculture. The objectives will be met through the coordinated efforts of the State Governments and all the departments of the Government of India in general and the Ministry of Commerce and Industry and the Directorate General of Foreign Trade and its network of Regional Offices in particular. consumables and capital goods required for augmenting production and providing services.export of their products in the present economic scenario under globalization. To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers. thereby improving their competitive strength while generating new employment opportunities. and to encourage the attainment of internationally accepted standards of quality.To forward certain suggestions and recommendations based on the observations. To stimulate sustained economic growth by providing access to essential raw materials. 3. in the interest of promotion of trade in goods and services .To study about the SSI. To facilitate sustained growth in exports to attain a share of atleast 1% of global merchandise trade. components. 1.

3. 5. This information has been studied and used at different phases of the project work. Chapter-2 1. was collected from journals. Limitations 1. Secondary data based on company source.4. The suggestions are based on the data collected during the project work and information available with NSIC.Hyderabad. The NSIC being the nodal agency for all SMEs a lot of data available regarding the Small and Medium entrepreneurs. The following two methods are applied to extract the necessary data. Methodology of study: METHODOLOGY: The primary data was collected through personal contacts with officials of NSIC and SSI entrepreneurs. 2.Primary data-through questioner: A questioner has been prepared and submitted to 25 different SMEs in and around hyderbad and based on there responses the 2. The data collected is mostly from component manufacturers and the SMEs involved in service sector needs a separate study. Profile of the industry . The companies visited are mostly from Electronic industry. 1. The secondary data regarding SSI. research reports prepared by ministry of SSI etc. Hence the problems reflected during the study are most of electronic cluster.

These sudden changes have thrown up as many opportunities as challenges to the Small Scale Enterprises in the country. . The Small Scale Sector continues to remain an important instrument for enterprise building. quality consciousness. even during polarization of various economic forces. small scale sector has to face stiff competition as the insulated and protected market conditions are no more going to be available to it. NSIC has been successfully able to play its assigned role in this endeavor. to assist the small scale sector in the country. QUALITY POLICY We shall endeavor to achieve total customer satisfaction at all times. Due to changed industrial scenario and gradual globalization of the economy. growth and development of small scale sector.NSIC PROFILE National Small Industries Corporation Ltd. strengthening linkages with large and medium scale enterprises and boosting exports of products from Small Enterprises. We shall continuously upgrade our service quality. NSIC continues to remain at the forefront of industrial development throughout the country. communication facilities and skill sets to meets customer requirements efficiently. showing its progressive attitude towards modernization. with it’s various programs and projects. Recent Transitions of industrial climate and liberalization of the total economic environment within the country and international arena has witnessed tremendous changes in the domestic as well as international markets. NSIC has already initiated various steps so that SSIs can play their due role. was established in 1955 by the Government of India with a view to promote. upgradation of technology. aid and foster the growth of Small Industries in the country. dispersal of industries for even regional economic development and employment generation. To enable the Small Scale sector to meet this challenge. it has proved its strength within the country and abroad dynamically. Over a period of four decades of this transition.

To achieve reduction in service delivery time. QUALITY OBJECTIVES To achieve reduction in cost of operations for attaining better productivity. To keep pace with the changes in business environment and continuously upgrade the professional skills of all employees for development of customer centered business. To provide congenial work environment for effective contribution by every employee in all aspects of our services to the customers. To maintain safe. We commit ourselves for effective and prompt service on the basis of fair play. To design and launch new assistance programmers in keeping with emerging market trends and the needs of customers. We shall abide by statutory and legal regulations while carrying out our activities. We shall strive to achieve operational efficiency by attaining better productivity and profitability. transparency and sincere endeavor for the promotion and growth to small-scale industries. innovate and refine our processes in line with global business trends to maintain credibility and leadership in our fields.We shall constantly adapt. FOCUS ON SPECIFIC SECTORS Agro and Food Processing  . clean and hygienic work environment.

Tender Marketing The Corporation participates in bulk global tender enquiries and local tenders of Central & State Government and Public Sector Enterprises on behalf of small scale units. It is aimed to assist SSIs with ability to manufacture quality products but which lack brand equity & credibility or have limited financial capabilities. the . Infomediary Service and Financial support to Small Scale Sector. NSIC acts as a nodal agency to bring SS'I’s closer to various Government purchasing agencies.          Auto components Biotechnology Glass and Ceramics Dimensional Stones Information Technology Knitwear and Garments Leather and Leather Products Light Engineering Low Cost Building Materials Pharmaceuticals and Chemicals The Corporation provides integrated Technology. with the intention of creating confidence in the purchasing agencies about SMEs and their capability to supply goods and services of requisite quality. MARKETING SERVICES NSIC provides diversified marketing support to SSI’s through various marketing assistance schemes for reaching multidimensional and multi-locational markets in India and abroad. competitive prices and adherence to agreed delivery schedules. Marketing. the largest buyer of various types of products and services. Under this scheme.

testing. On receipt of the orders. energy audit. which inhibits and restricts the growth of SSIs. These orders are then farmed out to small units in tune with their production capacity. toolkits. NSIC. . environment management etc. which are normally out of reach of the individual units because of the bulk requirement. Consortia Marketing A SSI unit in its individual capacity faces problem very often to procure & execute large orders. Corporation farms out these orders to the units on whose behalf it has quoted. NSIC registers SSI units under Single Point Registration scheme for participation Government Purchases. the Government Stores Purchase Programme was launched in 1955-56. Government Stores Purchase Programme The Government is the single largest buyer of a variety of goods. thereby easing out marketing problem of SSIs. The range of technical services provided through these centres include training in Hi-Tech as well as conventional trades. TECHNOLOGY SERVICES NSIC provides technical support to SSIs through 'NSIC Technical Services Centres' and a number of extension and sub centres spread across the country. Testing facilities are also provided to enable units to improve and maintain the quality of their products conforming to the standard specifications. With a view to increase the share of purchases from the small scale sector. This assistance has enabled a large number of small units to compete for the orders. accordingly adopted Consortia Approach and built groups/consortia of units manufacturing same products. The Corporation explores market and secures orders for bulk quantities.Corporation has identified large number of items for which it actively participates in tenders of these Departments and Enterprises. common facilities.

Sheet Metal and Wood Working Machinery NTSC. CHENNAI:  Leather and Footwear NTSC. Various Technical Services Centres in India along with their area of specialization are as follows: NTSC. RAJKOT:  Diesel Engine Development & Testing. HYDERABAD:  Electronics and Computer Application NTSEC. GUWAHATI: . Energy Audit.In addition to this access to latest information in connection with technology upgradation and its transfer is provided to SSIs through the 'Technology Transfer Centre' at New Delhi. HOWRAH:  Plastic Machinery and Instrumentation NTSC. Rural Technology and Computer Applications NTSC. OKHLA:  Machine Tools. Energy Conservation. Design & Testing. RAJPURA:  Domestic Electrical Appliances NTSEC. ALIGARH:  Lock & Brass Hardware NTSEC.

technology and finance. And with the increase in competition and melting away of international boundaries. SMEs seeking business collaboration and coproduction opportunities. the demand for information is reaching new heights. We need it every minute of our working lives. as well as domestically. Training on Sheet Metal. Energy Audit & Enterprise Buiding. NSIC’s Infomediary Services use a professionally managed HR base and modern technology for dissemination of vital information-websites. Salient Features Sector based focus Information on Trade and tender leads. events Virtual Catalogue shows Internet-related support Banner display on NSIC’s Website Access to a wide range of technologies from India and abroad Access to national and international business leads. INFOMEDIARY SERVICES Information today is becoming almost as vital as the air we breathe. and e-mails. JV opportunities and trade information        . joint ventures. and also exhibit the core competence of Indian SMEs in terms of price and quality-internationally. Keeping in mind the information needs of small industries NSIC has launched its “Infomediary Services”. and those looking for technology transfer. Potential beneficiaries would be entrepreneursboth existing and aspiring-R&D labs. Leather Wear. exporters and importers. A one-stop. sector-specific newsletters (both print and electronic). one-window bouquet of aids that will provide information on business.

rules and regulations.nsicindia. 423) Fax: 91-11-6927502 Email: info@nsicindia. India Tel: 91-11-6926145.. product design. telephone. energy and environment audit. Comprehensive information on Government policies. members’ directory and importers/exports directories Access to NSIC’s Business Centre with facilities such as conference hall. schemes and incentives Access to industrial databases. Okhla Industrial Estate New Delhi. developing catalogues and product literature. common facility at NSIC Technical Services Centre(s). fax. For further information on membership benefits. Skill up gradation Training. Access to a wide range of assistance for participation in business delegations. introduction of information technology (IT) solution in Business operations. mentoring services. 6926275 (Ext. e.110020.com . NSIC-STP complex.nsicindia. credit and support rating.com Website: www. photocopy and A/V aids etc. contact: Infomediary Division National Small Industries Corporation Ltd. banners display on websites and market studies. For details on membership benefits and online registration visit www.      Access to Infomediary services is through Premium and Basic memberships. exhibitions/fairs Availability of a wide range of escort services.com.g. banner advertisements on Infomediary site.

Project NSIC undertakes export of industrial projects under its scheme associated with the exports of Small Scale Industries products to other countries on turnkey basis.     Product NSIC is associated with the exports of Small Scale Industries products to other countries. Supply of Small Industry Projects on turnkey basis. NSIC provides a package of services for setting up of Industrial Projects to other countries IT Export NSIC operates on behalf of a consortium of Software Companies and bids for large tenders and projects worldwide for Software Exports.EXPORT SERVICES NSIC is a recognized Export House. This enables NSIC to offer comprehensive solution to the customer on a high productive and cost effective basis. NSIC is involved in exporting product and projects of Small Scale Industries of India to other countries. hand tools etc. UN Supply . leather items. The major areas of operation are: Export of Indian products like handicrafts. Export of Relief supplies from India to UN and other International Agencies. Export of IT solutions from India.

UNOPS. Techmart NSIC has so far organised nine International Technology Fair . etc. like UNICEF. In tune with this NSIC is organising consideration. WFP. 'Techmart' is a centre stage for those associated with the small sector and interested in keeping abreast with the latest technological developments in the Indian small sector. UNFPA. technical collaboration etc.    . including its various agencies. Udyog Expo The new spirit of economic liberalisation has unleashed hidden capabilities of the vibrant Indian small scale sector. New Delhi. UNDP. Such a market is well worth serious EXHIBITION SERVICES NSIC organises and participates in domestic and specialised product & technology related & international exhibitions to help SSIs in marketing their products and projects in both national and international arenas. It assisted small enterprises to market their products and services and help large companies and buyers to identify SMEs in becoming their ancillaries. and on the other is the growing competition from from imports. represents an international market of about US$ 3 billion for suppliers of virtually all type of goods and services.The United Nations. partners in joint ventures and sub contracting. Pragati Maidan. WHO. UNHCR.'Techmart' coinciding with India International Trade Fair at the Hall of States. On one hand is the era of growth.. These exhibitions facilitate: Marketing of products and projects of SSIs Closer interaction between technology seekers and offerers Development of mutual contact to discuss all issues involving technology transfer.

80 crores to 28. UDYOG EXPO 2001 will be the stage for those associated with the small sector. Hire-Purchase scheme is available on attractive terms to Technocrats. FINANCIAL SERVICES Financial Services Division of NSIC provides assistance to the small enterprises. 2001 at CODISSIA Trade Fair Complex.UDYOG EXPO from 19-24 Sept. It would assist small enterprises to market their products and services and help large companies and buyers to identify SMEs in becoming their ancillaries. Equipment Leasing Scheme  . The main features of the financial services offered are: Financial assistance for the production and marketing activities under one roof with speed and efficiency. SC/ST category Entrepreneurs. Coimbatore.international technology fair in south of India .907 machines of the value of Rs.  Prompt clearance of the proposals with minimum processing time and without cumbersome paper work.  On the spot assistance in preparing the proposals and completion of document formalities  Attractive interest rates and service charges with liberal terms of margin. Backward Areas. level of assistance and repayment schedules. NSIC has supplied 66. partners in joint ventures and sub-contracting. Women Entrepreneurs. This scheme is in operation for the last 40 years..956 units upto 1997-98. 422.  Working Capital finance for meeting emergent needs of small enterprises and export oriented units for export development Hire Purchase Scheme The Hire Purchase Scheme is aimed at promoting the development of small scale industrial sector in the country.

Raw Material Assistance Raw Material Assistance Scheme aims at helping Small Scale Industries/Enterprises by way of financing the purchase of Raw Material (both indigenous & imported). Bill Financing Scheme The Large and Medium Scale Units generally buy products. Accordingly NSIC has evolved a scheme of financing sale bills of the SSI's i. Composite Term Loan Scheme . Diversification & Technological Upgradation of existing & financially viable Small Scale Industries (SSIs). This scheme is in operation for the last 40 years. 6670. NSIC has supplied 1597 machines of the value of Rs. Bill Financing Scheme. from the SSI sector on a deferred payment basis which results in shortage of funds for the SSI units.e. Under this scheme pre and post shipment finance is also provided to the units.The Equipment Leasing Scheme is aimed at Expansion. Export Development Finance Finance for export development to export oriented units is provided under this scheme for meeting their emergent requirements. 2000. Under this scheme bills drawn by small scale units for the supplies made to the reputed and well established enterprises and duly accepted by them will be financed / discounted by NSIC for a maximum period of 90 days. sub-assemblies etc. Ancillary Units & Enterprises. Modernisation.48 crores to 1003 units upto March. This gives an opportunity to SSI to focus better on manufacturing quality products.

) for extending line of credit to the NSIC. ‘Programme for development of small and medium enterprises’. This approach is expected to lead to a sustainable and two-way relationship.00 Lacs.The Composite Term Loan is granted for acquisition of Land & Building. which can be termed as partnership rather than one way flow of information from a seller of technology to a buyer in India and vice -versa. INTERNATIONAL PROGRAMME International Programmes of NSIC aim at developing and fostering sustainable enterprise to enterprise business relationships between Indian enterprises and enterprises in other countries. Partner Institutions . which focuses on the selected sectors.00 Lacs approx. Machinery & Equipment and Working Capital to Tiny units with total assistance upto Rs. Strategy The strategy is to play upon the strengths of Indian enterprises and match these strengths with that of foreign enterprises identified through partner institutions in selected countries. 25. NSIC has been appointed by the Govt. NSIC advocates a partnership approach rather than a one-way transaction/transfer of technology or short-term business relationship. Italian Line of Credit The Italian Ministry of Foreign Affairs and the Govt. of India for operating the. 2030. of India agreed on a ‘Programme for the development of small and medium enterprises’. The Italian Government has made available to the Indian Government a soft loan of Lire 10 billion (Rs.

New Delhi SOFTWARE TECHNOLOGY PARKS NSIC has setup NSIC-STP Complex at New Delhi and Chennai under the Software Technology Parks of India (STPI) Scheme. The units operating under this scheme enjoys various benefits. Software Technology Parks facilitate small scale units to establish their units for the 100% export of software products. The partner institutions actively co-operate with NSIC in identifying enterprises in their respective areas who are interested to enter into long term and durable relationships with Indian enterprises. of India under DOE. of India Enterprise.NSIC has identified partner institutions in different countries through interactive sessions with industry associations & leading small entrepreneurs. These Software Technology Parks cater to the needs of entrepreneurs establishing units for 100% export of software and also act as the nodal point for day-to-day formalities and as the resource centre for member units. Salient Features of STP Scheme: . (A Govt. NSIC Software Technology Park is one of such parks established by the National Small Industries Corporation Ltd. Software Technology Parks of India (STPI) an autonomous society was set up by Govt. Technology & Trade Missions Details of all previous and forthcoming Technology and Trade Missions can be had from Technology Transfer Centre. Ministry of Industry) under the STPI scheme to promote small entrepreneurs in software development. STPI Scheme To give a philip to software exports and to encourage entrepreneurs in this industry.

whichever is earlier. Domestic purchases by STP units are eligible for the benefit of deemed exports.       Benefits Duty Free Imports: No import license is required. Approvals for project involving imported capital goods upto a cost of US $ 10 million with Indian investment are cleared by jurisdictional STP authorities in a time bound manner under delegated authority. All the imports in the STP units are completely duty free.  DTA Sales: The sales in domestic tariff area are permissible upto 25% of the exports in value terms made by the STP unit. STPI (Noida / Chennai) . (the commercial centre of computer industry)   . Subcontracting of software development activity by STP units is permitted.  Income Tax Holiday: Income tax holiday is available for STP units for a block of ten years OR upto the year 2010.  Location Of NSIC-STP: NSIC Software Technology Park. Use of computer system for training purposes is permissible subject to the condition that no computer terminals are installed outside the STP premises. This location is in the near vicinity to Nehru Place.  Approvals are given under single window clearance mechanism. New Delhi is located in a prime location at Okhla Industrial Area adjacent to NSIC Bhawan. Import certificates are issued on request by Director STPI (Noida / Chennai) for duty free Imports of Capital Goods/Raw Material/Components. Excise Relief: Excise exemption is available on Capital goods bought from Domestic Market on request from Director. 100% foreign equity is permitted. Re-export of capital goods are permitted.

This location is in the near vicinity to domestic and international Airports. 19.6 kbps dedicated leased channels.  Telephones: Each member units will be provided with one telephone line for business promotion on occupation. Photocopier. Chennai is located in a prime location at Guindy Industrial Estate with a total built area of 48.25 Million OR   . etc. US $ 0. is available inside the STP complex for the member units. Infrastructure Following facilities are available at NSIC Software Technology Park.  High Speed Data Link: High speed data communication facility through satellite connection is available.  Business Centre: A business centre comprising of Conference Hall. which will allow software units to work without any interruptions. A complete environment for software development is thus set up as you work in the cluster of software industries.ft. Built-up Space: This enables the software industries to commence their operations with minimum gestation period.NSIC Software Technology Park.  Instant Power Connection: Instant power connections are available at these locations.000 Sq. Generator facility is also available on site. Space is available in multiples of 1000 sq. TCP/IP connections are also available. Obligations for the Units Export Obligation: Member Units in STP Scheme have to fulfill export obligation as per the following formula. The member units can avail 64 kbps. Training aids. Ft.2 and 9. Fax.

Chennai Project Officer NSIC-STP Complex B-24.com NSIC-STP. Guindy Industrial Estate . Application Procedure For establishing a unit under NSIC-STP Complex. ensure that you give all the required information) and contact Project Officer. NSIC-STP at the contact points given below. download the application forms from the following links. Please note that blank application forms are also available at the office of Project Officer. NSIC-STP.5 times of CIF Value of imported capital goods whichever is higher and 20% net Foreign Exchange against export earnings  Monitoring of Private Bonded Warehouse: In order to facilitate duty free imports the operation is required to be within customs bonded area. New Delhi Project Officer NSIC-STP Complex Adjacent to NSIC Bhawan Okhla Industrial Estate New Delhi .110 020 E-Mail: stp@nsicindia. Fill in the application form (pl. Contact Details NSIC-STP. Units have to get the customs bonding done for the area where they are going to establish their software development and exporting unit.

One of the effective ways to address strategic issues which face small enterprises. fast dismantling of tariff barriers. This can vary from several hours a week to . generally retired and a specialist in a specific area.600 032 E-Mail: rochen@nsicindia. Chennai . Envisaged Role of a Mentor The Mentor will play a very crucial role of handholding in the initial stages of an enterprise. Most of the SSI units are not sensitive to the changes in the environment and fast changing developments in the business scenario in terms of easy imports.com MENTORING SERVICES Over a period of time. whereas an Advisor is a senior professional. The Mentor and the Mentee have to mutually agree on the time the Mentor will spend with the Mentee. Mentors / Advisors can also be provided to existing units facing critical operational problems due to changes in environment. it has been observed that unbalanced management skills in small enterprises are a major cause for early sickness and non-performance in the SSI sector. removal of quantitative restrictions.Ekkaduthangal. is to have a Mentor-Pupil relationship in which the Mentor is an experienced person with a back ground of running his own enterprise (preferably in the same industrial sector) who volunteers his services at no or notional cost to individual or a group of units and the Pupil is the unit / units being assisted. The Mentors / Advisors provide the necessary professional and moral support in the early life cycle of an enterprise and this handholding is akin to a child growing up under the protective care of the parent. integration with the information society and other core issues resulting from compliance with WTO / IPR regime. The Mentor will provide business guidance and share his experience and skills with the entrepreneur. He will be the guardian angel to whom an entrepreneur can turn when in distress.

Envisaged Role of an Advisor The Advisor will resolve specific issues and problems related to the unit or a group of units based on his knowledge and experience. work-shops and conferences with a view to: Make SSI units conversant with the developments taking place at different places within the country and outside. Unlike a mentor.  . the advisor will be associated with a particular unit or group of units for a short period to advise on specific issues. He will also ensure implementation of the suggestions and solutions offered for effective translation on the ground so that the beneficiary obtains anticipated results. Mentor-Mentee relationship will be generally a long-term association. SEMINARS NSIC organises Seminars. Areas of Operations Marketing Manufacturing and systems Production processes Product Design and Packaging Usage of Information Technology Finance and other fiscal issues such as taxation etc. Quality & standards Environmental Issues         The above services will be offered in the selected clusters. The Mentor may have one or more Mentees in a cluster of industries depending on the nature of support needed.several days in a month.

Leather and Foundry sectors. skill upgradation and training. These seminars address to financial. NSIC has organised a series of workshops for SSI clusters located at Ahmedabad. Software Exports. Sports Goods. marketing & technology related issues relevant to SMEs. Mumbai. Calcutta. financing. Disseminate information on the challenges both existing and potential. Chemicals.    Inform about the opportunities available for business growth. Building Materials. Sensitize the SSI units on the needs of technology upgradation. technology generators and suppliers as well as financial institutions and state level technical consultancy and industrial promotion organisations for evolving packages both for financing and technology. Machine Tools. Food Processing. Indore. These workshops covered areas relating to Electrical and Electronics. Packaging. Light Engineering. Textiles. Information Technology. The workshops facilitated interaction amongst SSI Units. Review of the literature (reference from books) . Ludhiana and New Delhi. Disseminate information on facilities being offered by various institutions both national and international Facilities can relate to institutional support in the area of marketing. Bangalore. Hosiery. Chapter-3 1. Drugs & Pharmaceuticals.

at least those where similar needs and conditions exist. and finance and how will these demands be met? Are the expected benefits worth the costs. then it is likely that you will be successful overseas. market. If those features are hard to duplicate abroad. Assessing Your Company's Export Readiness Answering these general questions about how exporting will enhance into your company's short. Other countries may not need state-of-the-art technology and/or may be unable to afford the most sophisticated and expensive products. The most common approach is to examine the success of your products domestically. Finally. A unique product may have little competition and demand for it might be quite high. Sizeable export markets may still exist. or would company resources be better used for developing new domestic business? . your product may have export potential even if there are declining sales in the NATIONAL. market. Such markets may have a surprisingly healthy demand for NATIONAL. especially if the product once did well in the United States but is now losing market share to more technically advanced products. products that are older or considered obsolete by NATIONAL. management and personnel.Study Phase: Developing an Export Strategy There are several ways to evaluate the export potential of your products and services in overseas markets. production capacity. there is a good chance that it will also be successful in markets abroad. If your company succeeds at selling in the NATIONAL. medium and long-term goals will help determine your company's readiness to export: • • • • What does the company want to gain from exporting? Is exporting consistent with other company goals? What demands will exporting place on the company's key resources. market standards. Another means to assess your company's potential in exporting is by examining the unique or important features of your product.

the export plan will become more detailed and complete From the start. At least the following ten questions should ultimately be addressed: 1. import controls. What specific operational steps must be taken and when? 7. must be made to adapt them for overseas markets? 2. all aspects of an export plan should be agreed upon by the personnel involved in the exporting process. it should be kept simple. the plan should be viewed and written as a management tool. objectives. etc. and it marks milestones so that the degree of success can be measured and help motivate personnel. What will be the time frame for implementing each element of the plan? 8. . A crucial first step in planning is to develop broad consensus among key management on the company's goals. The purposes of the export plan are (a) to assemble facts. What special challenges pertain to each market (competition. if any. What will be the cost in time and money for each element? 10. and constraints. What personnel and company resources will be dedicated to exporting? 9. it sets forth time schedules for implementation. as they will ultimately execute the export plan. The company should not hesitate to modify the plan and make it more specific as new information and experience are gained. capabilities.Developing an Export Plan Once you have decided to sell your products abroad. cultural differences. it is time to develop an export plan. How will the product's export sale price be determined? 6. and what strategy will be used to address them? 5. Objectives in the plan should be compared with actual results to measure the success of different strategies. In each country. what is the basic customer profile? What marketing and distribution channels should be used to reach customers? 4. not as a static document. Which products are selected for export development? What modifications. As the planners learn more about exporting and your company's competitive position. and goals and (b) to create an action statement that takes all of these into account. Which countries are targeted for sales development? 3. The statement includes specific objectives. It need be only a few pages long. since important market data and planning elements may not yet be available. constraints. In addition. The initial planning effort itself gradually generates more information and insight.). How will results be evaluated and used to modify the plan? The first time an export plan is developed.

Developing a Marketing Plan As you can imagine. the availability of foreign exchange. Once you have decided that your company is able and committed to exporting. For more information on different approaches to exporting and their advantages and disadvantages. the next step is to develop a marketing plan. many foreign markets differ greatly from the United States. Formulating an export strategy based on good information and proper assessment increases the chances that the best options will be chosen. social and cultural factors. that resources will be used effectively. NOTE: Many companies begin export activities hap-hazardly. your company may be misled into abandoning exporting altogether. While these companies may or may not have a measure of success. If early export efforts are unsuccessful because of poor planning. . and that efforts will consequently be carried through to success. varying amounts of purchasing power. lower wage costs. Companies choosing indirect export methods may require much simpler plans. and government import controls. local availability of raw materials or product alternatives. Some differences include climatic and environmental factors. they may overlook better export opportunities. without carefully screening markets or options for market entry.A detailed plan is recommended for companies that intend to export directly.

. and competitive firms and products. 3. or ignored by those charged with executing them. This last advantage is especially noteworthy. overlooked.A clearly written marketing strategy offers six immediate benefits: 1. They indicate to lenders that you have a serious approach to the export venture. market conditions and practices. sometimes even several years. Market research encompasses all methods that a company can use to determine which foreign markets have the best potential for its products. top management can make sure that the firm will finish what it begins and that the hopes that prompted its export efforts will be fulfilled. 2. It usually takes months. 4. before an exporting company begins to see a return on its investment of time and money. Actually. as well as to identify prospective buyers and customers. Written plans give management a clear understanding of what will be required of them and thus help to ensure a commitment to exporting. the fastest growing markets. market trends and outlook. Building an international business takes time. The purpose is to identify marketing opportunities and constraints abroad. Market Research To successfully export your product. Because written plans display strengths and weaknesses more readily. Written plans are easier to communicate to others and are less likely to be misunderstood. Written plans allocate responsibilities and provide for an evaluation of results. Results of this research inform the firm of: the largest markets for its product. it is likely to be due to a deliberate and thoughtful choice. If deviation from the original plan occurs. 5. they are a great help in formulating and polishing an export strategy. Written plans are helpful when seeking financial assistance. 6. Written plans are not easily forgotten. you should examine foreign markets through research. a written plan signals that the decision to export has already been made. By committing to the specifics of a written plan.

Yet.Your firm may begin to export without conducting any market research if it receives unsolicited orders from abroad. The most recent statistics for some countries may be more than two years old. surveys. secondary research is a valuable and relatively easy first step for a company to take. Statistics may also be distorted by incomplete data-gathering techniques. Because many intermediaries such as EMCs and ETCs have strengths in certain markets. a company collects data directly from the foreign marketplace through interviews. It may be the only step needed if the company decides to export indirectly. since the intermediary firm may have advanced research capabilities. For example. most firms rely on secondary data sources. the company may discover even more promising markets by conducting a systematic search. a thawing of political hostilities often leads to the opening of economic channels between countries. even with these limitations. the data may be too broad to be of much value to a company. A firm may research a market by using either primary or secondary data resources. statistics for services are often unavailable. . Keep abreast of world events that influence the international marketplace. and other direct contact with representatives and potential buyers. Although secondary data sources are critical to market research. Moreover. a company collects data from various sources. such as trade statistics for a country or a product. Methods of Market Research Because of the expense of primary market research. Finally. The three following recommendations will help you obtain useful secondary information: 1. they do have limitations. In conducting primary market research. When conducting secondary market research. You may also want to do market research if you export indirectly. Working with secondary sources is less expensive and helps the company focus its marketing efforts. but the collection of such data is time-consuming and expensive. you may wish to select markets to enter before selecting the intermediary. If your firm opts to export indirectly by using an intermediary such as an Export Management Company (EMC) or Export Trading Company (ETC). watch for announcements of specific projects. it is valuable to select the intermediary after deciding on markets to enter. Primary market research has the advantage of being tailored to the company's needs and provides answers to specific questions. or simply visiting likely markets. Although this type of selling is valuable.

These statistics provide the NATIONAL. Demographic and general economic statistics. Published export statistics provide a reliable indicator of where NATIONAL. A Step-by-Step Approach to Market Research Your company may find the following approach useful. Talk with successful exporters of similar products. There are several ways of obtaining this advice: • • • • • Contact experts at the NATIONAL. Gathering and evaluating secondary market research can be complex and tedious. Obtain export statistics that indicate product exports to various countries. However. and drawing conclusions. government agencies. The following approach to market research refers to these publications and resources that are described later in this chapter. Trade statistics are generally compiled by product category and by country. Obtain advice from experts. • Step 2. Department of Commerce and other Attend seminars. Census Bureau provides these statistics in a published format. Trade statistics also can be obtained using the National Trade Data Bank (NTDB). and international trade shows. Has market growth been consistent year to year? . Look at them over the past three to five years. Analyze trade and economic statistics. assessing the targeted markets. several publications are available that can help simplify the process. A. and production levels by industry can be important indicators of the market potential for a company's products. exports are currently being shipped. Identify five to ten large and fast-growing markets for the firm's product. The NATIONAL. such as population size and makeup. workshops. Contact trade and industry association staff. 3. Hire an international trade and marketing consultant. Screen Potential Markets • Step 1. firm with information concerning shipments of products over specified periods of time.2. per capita income. It involves screening potential markets.

• Step 2. cultural idiosyncrasies. If the market is just beginning to open up. freight forwarders. if the company is new to exporting. • Step 5. Identify any NATIONAL. including the extent of domestic industry production and the major foreign countries the firm is competing against in each targeted market by using ISAs and competitive assessments. that could influence demand. Identify any foreign barriers (tariff or non tariff) for the product being imported into the country (identify any NATIONAL. The National Trade Data Bank (NTDB)and the National Technical Information Service (NTIS) offer Industry Sector Analyses (ISAs). Again. Assess Targeted Markets • Step 1. channels of distribution. the ISAs and Customized Market Analyses (CMAs) offered by the Department of Commerce are useful. • Step 4. such as end-user sectors. Consult with a Department of Commerce Export Assistance Center (business associates. Analyze factors affecting marketing and use of the product in each market. given the lower starting point.Did import growth occur even during periods of economic recession? If not. Target three to five of the most statistically promising markets for further assessment. barriers (such as export controls) that affect exports to the country. Calculate overall consumption of the product and the amount accounted for by imports. Ascertain the sources of competition. Country Commercial Guides (CCGs). the company may conclude that its marketing resources would be applied more effectively to a few countries. Demographic information (such as population and age) can be obtained from World Population (Census) and Statistical Yearbook (United Nations). Draw Conclusions • After analyzing the data. market share. • Step 4. and others to further evaluate targeted markets. B. did growth resume with economic recovery? • Step 3. or foreign government incentives that promote exporting of your particular product or service C. and other reports that give economic backgrounds and market trends for each country. there may be fewer competitors than in established markets. • Step 3. This information is available from the NTDB and the NTIS. Growth rates should be substantially higher in these countries to qualify as up-and-coming markets. In general. Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. Look at each competitor's NATIONAL. and business practices. then . Examine trends for company products as well as related products.

The next section describes the publications that have been mentioned as well as additional sources. Because there are many research sources. Several of these sources are given here and others may be found in the bibliography to this publication. foreign. these individuals can provide a wealth of market research information. world trade centers or clubs. and 2) industry and country specific resources. Either in face-toface interviews or by telephone. Sources of Market Research There are many domestic. Each category is also divided into several subgroups. share of the total country market in order to gauge the overall competitiveness of NATIONAL. Trade statistics indicate total exports or imports by country and by product. and trade associations. Market surveys provide a narrative description and assessment of particular markets along with relevant statistics.efforts should be directed to fewer than ten markets. the firm may wish to seek advice from their local Export Assistance Center). In the private sector. an exporter can determine which markets are growing and those that are shrinking. Most state governments maintain active . This information ranges from simple trade statistics to in-depth market surveys. The reports are often based on original research conducted in the countries studied and may include specific information on both buyers and competitors. The following sources fall into two broad categories: 1) general information resources. By looking at statistics over several years. and international sources of information concerning foreign markets. They allow an exporter to compare the size of the market for a product in various countries. A surprisingly large number of people in both the public and private sectors are available to assist exporters in any aspect of international market research. producers. sources of market research expertise include local chambers of commerce. Exporting to one or two countries will allow the company to focus its resources without jeopardizing its domestic sales efforts. The company's internal resources should determine its level of effort. Some statistics also reflect the NATIONAL. One of the best sources of information is personal interviews with private and government officials and experts.

• Commerce Business Daily (CBD). The NTDB is a low-cost business service run by the Department of Commerce. The center maintains a computerized calendar of NATIONAL. State and Agriculture. companies seeking information on federal programs and activities that support NATIONAL. In the federal government. legal ramifications of exporting.000. policy and trade practices. including information on overseas markets and industry trends. exports. The NTDB is a must-have resource.export promotion offices. General Information • Business America. This information center was established as a comprehensive source for NATIONAL. gathering trade information from over 20 different government agencies into one place. government-sponsored domestic and overseas trade events. • Economic Bulletin Board (EBB). This center maintains a computerized calendar of NATIONAL. trade statistics. by the Department of Commerce. economic. Subscription costs are low and vary. EBB is a great resource for business. • Trade Information Center. contacts overseas. an export promotion calendar. and success stories of export marketing. The NTDB is one of the primary sources of export information from the federal government. advance notice of planned exhibitions of NATIONAL. Monday through Friday (except holidays). products worldwide. which provides market research reports. You can connect to this vast collection of information and download trade leads. incisive economic analyses. depending on which information you choose to access. subcontracting leads. Governmentsponsored domestic and overseas trade events. industry and commodity experts are available through the Departments of Commerce. market research reports. including information on overseas markets and industry trends. CBD is published daily. and the Commerce Business Daily via your computer. exports. and publications (for example. It lists government procurement invitations over $25. as well as certain foreign government procurements. This information center was established as a comprehensive source for NATIONAL. • The National Trade Data Bank (NTDB). A Basic Guide to Exporting and SBA's Breaking . It is available by subscription and on-line (electronically). This monthly publication of the Department of Commerce contains country-by-country marketing reports. and the Small Business Administration (SBA). worldwide trade leads. sales of surplus property. and foreign business opportunities. and trade information on a daily basis in a traditional dial-up platform. Country Commercial Guides. companies seeking information on federal programs and activities that support NATIONAL. contract awards.

including: Marketing for Small Business: An Overview. seven days a week. covers data through 1996. including population. Contact the Small Business Answer Desk. The CD-ROM version is avail-able to use for at over 1. The latest edition.into the Trade Game). • STATUS: A comprehensive collection of business. Much of this data is downloadable. The Web site address is • Selected SBA market research-related general resources. Researching Your Market. export-import trade. including information on importing countries useful in assessing import competition. state and metropolitan area export data. It provides international trade information on products. The Basics of Exporting. All releases are available 24 hours a day. The Small Business Administration publishes many helpful guides to assist small and medium-sized companies. The most popular fax documents include the daily trade leads and numerous NATIONAL. government economic press releases. commodity. A comprehensive source for NATIONAL. The World Bank Atlas provides demographics. Published by the United Nations (UN). Breaking into the Trade Game. The NTDB is updated daily on the Internet) and updated monthly on CD-ROM. Through this address you can access the NTDB. agriculture. economic and trade information available on the Web. this yearbook is one of the most complete statistical reference books available. gross domestic product.000 federal depository libraries throughout the country. International Information • UN Statistical Yearbook. 1997. daily trade leads and economic news. trade statistics by country and commodity classifications. Maintained by the Commerce Department's Office of Trade and Economic Analysis. • World Bank Atlas. and many other areas. . The most current addition is from 1993. The yearbook contains data for 220 countries and territories on economic and social subjects. manufacturing. or the videos Marketing: Winning Customers with a Workable Plan. • STAT-USA:This fax on demand service providing instant hard copy of business and economic information from the federal government. both current and historical. export and import data. the Commerce Business Daily and the latest economic press releases and statistical series from the federal government. and trade and industry statistics. this web site contains total and disaggregated NATIONAL. and average growth rates for every country. • TRADESTATS. it is available in hard copy and CD-ROM.

Information on each country . communications. • International Financial Statistics (IFS). economy. • World Population Profile. growth rate. Contact the International Monetary Fund. money and banking. NATIONAL. Department of Commerce The Trade Information Center (TIC) is an excellent source for export assistance. Published by the International Monetary Fund. Other chapters in this guide will provide more information on the specialized services of these organizations and how to use them. Each organization contacted can contribute different perspectives based on different experience and skills. production. It is available in hard copy as a monthly subscription or on CD-ROM. and local government agencies. this publication provides country-bycountry data on demographics. and infant mortality. IFS presents statistics on exchange rates. fertility. interest rates.total population.• World Fact book. state. The data is available through a subscription to the NTDB . urban population. You may feel overwhelmed at first by the number of sources of advice available. including analysis of labor force structure. This chapter gives a brief overview of assistance available through federal. you may choose to look for advice or assistance. and other subjects. Produced annually by the CIA. mortality. as well as in the private sector. The TIC operates the toll free 1-800-USA-TRADE (1-800-872-8723) number for the Department of Commerce and is a comprehensive resource for information on federal export assistance . The document also contains detailed demographic profiles of individual countries. Making the Government Work for You Now that you have had an opportunity to examine some of the complex factors involved in an exporting and marketing plan. Assistance Sources The Trade Information Center. and defense. it is valuable to know at least a little about each of them. Department of Commerce. Advice and assistance are available to your company at little or no cost. government finance. Census collects and analyzes worldwide demographic data that can help exporters identify potential markets for their products. This valuable resource is produced by the Bureau of the Census of the NATIONAL. and life expectancy .is updated every two years. Although it is not necessary to use all of these resources.

3) sources of general market information. International trade exhibitions. NATIONAL. Department of Commerce The NATIONAL. Export seminars and conferences. and 4) basic export counseling. help you assess the export potential of your products. Each EAC can offer information about: • • • • • • • • • Services to locate and evaluate overseas buyers and representatives. Trade specialists will counsel your company on the steps involved in exporting. products and services. TIC staff can provide your company with information on 1) locating and using government programs. and locate potential overseas partners. Foreign economic statistics. Foreign markets for NATIONAL.. and Puerto Rico that assist small and medium-sized companies.programs. Export documentation requirements. NATIONAL. 2) the export process. Trade specialists operate offices known as Export Assistance Centers (EACs) located in almost 100 cities in the NATIONAL. and. marketing and finance. International trade opportunities abroad. identify markets. and Commercial Service (the Commercial Service) of the Department of Commerce has developed and maintains a network of international trade specialists in the United States to help American companies export their products and conduct business abroad. which describes the programs of the 20 federal agencies involved in exporting. Thus they provide companies with a wide array of services in one location). export licensing and foreign nation import requirements. EACs also maximize resources by working closely with state and local government as well as private partners to offer companies a full range of expertise in international trade. You may also request a free copy of the Export Programs Guide: A Business Guide to Federal Export Assistance. Export trade financing options. EACs are known as "one-stop shops" because they combine the trade and marketing expertise and resources of the Commercial Service along with the finance expertise and resources of the Small Business Administration (SBA) and the Export-Import Bank (Ex-Im Bank). TIC trade specialists also answer technical questions on how to access reports and statistics from the computerized National Trade Data Bank (NTDB). .

and other service organizations involved in world trade. ranging from giant international companies to highly specialized. Another important advantage of membership in a local world trade club is the availability of benefits .Export Intermediaries Export intermediaries are of many different types. One advantage of using an intermediary is that it can immediately make available marketing resources that a smaller firm would need years to develop on its own. relieving the manufacturer of all the details except filling orders. Intermediaries may work simultaneously for a number of exporters on the basis of commissions. and contacts . such as performing market research. In short. salary. These organizations conduct educational programs on international business and organize promotional events to stimulate interest in world trade.such as services. exhibiting a client's products at international trade shows. World Trade Centers and International Trade Clubs Local or regional world trade centers and international trade clubs are composed of area business people who represent firms engaged in international trade and shipping. facilitating prompt payment to the exporter. . forwarders. the intermediary can often take full responsibility for the export end of the business. a company can receive valuable and timely advice on world markets and opportunities from business people who are already knowledgeable on virtually any facet of international business. appointing overseas distributors or commission representatives. government agencies. Products of a trading company's clients are often related. banks.from affiliated clubs in foreign countries. They provide a multitude of services. Many export intermediaries also finance sales and extend credit. advertising. shipping. small operations. or retainer plus commission. and arranging documentation. discounts. Some take title to the goods they handle. There are 320 world trade centers or affiliated associations located in major trading cities throughout the world. although the items usually are noncompetitive. customs brokers. buying and selling in their own right. By participating in a local association.

Developing trade promotion programs. Hosting visiting trade missions from other countries. Some chambers have a set schedule of charges for services rendered to nonmembers. pavilions in foreign trade shows. workshops. actual and potential competition. Providing contacts with foreign companies and distributors. . Providing certificates of origin. They often publish articles and newsletters that include government research. Relaying export sales leads and other opportunities to members. call 1-800USA-TRADE. including overseas missions. American Chambers of Commerce Abroad A valuable and reliable source of market information in any foreign country is the local chapter of the American Chamber of Commerce. business. Organizing NATIONAL. and roundtables. These local chapters are knowledgeable about local trade opportunities. American Chambers of Commerce abroad usually handle inquiries from any NATIONAL. Industry trade associations typically collect and maintain files on international trade news and trends affecting manufacturers. mailings. and event planning. some industry associations can supply detailed information on market demand for products in selected countries or refer members to export management companies. In addition. Conducting international activities at domestic trade shows. However. For contact information on American chambers in major foreign markets. detailed service is ordinarily provided free of charge for members of affiliated organizations. Among these services are the following: • • • • • • • • • Conducting export seminars.Chambers of Commerce and Trade Associations Many local chambers of commerce and major trade associations in the United States provide sophisticated and extensive services for members interested in exporting. periods of maximum trade activity. and similar considerations. Organizing transportation routings and shipment consolidations.

and specialized marketing firms provide international trade consulting services. law firms. Trade consultants usually specialize by subject matter and by global area or country. advice should be sought from other exporters and some of the other resources listed in this chapter. and taxation. and how to conduct business with them. Export Seminars In addition to individual counseling sessions.International Trade Consultants and Other Advisers International trade consultants can advise and assist a manufacturer on all aspects of foreign marketing. Consultants are of greatest value to a firm that has specific requirements. who the competitors are. Many large accounting firms. Trade consultants do not normally deal specifically with one product. They research domestic and foreign regulations and also assess commercial and political risk. They are also knowledgeable about foreign government regulations. such as advertising companies. When selecting a consulting firm. After sales agreements are completed. as well as conduct feasibility studies for the sale of manufacturing rights. trade consultants can also ensure that implementation is smooth and that any problems that arise are dealt with effectively. These consultants can locate and qualify foreign joint venture partners. and the establishment of foreign branches. Their consultants can advise on which agents or distributors are likely to be successful. what kinds of promotion are needed. They conduct foreign market research and establish contacts with foreign government agencies and other necessary resources. the exporter should pay particular attention to the experience and knowledge of the consultant who is in charge of its project. For example. To find an appropriate firm. some may be thoroughly knowledgeable on legal aspects and taxation and less knowledgeable on marketing strategies. the location and construction of manufacturing facilities. such as the Export Assistance Centers and local chambers of commerce. and local attorneys. Some firms may also be more specialized than others. an effective method of informing local business communities of the various aspects of international trade is through the conference and seminar . For this reason. product service facilities. and because private consultants are expensive. although they may advise on product adaptation to a foreign market. contract laws. it pays to take full advantage of publicly funded sources of advice before hiring a consultant.

trade promotion and trade policy initiatives. and workshops on topics such as export documentation and licensing procedures. Other factors to consider when deciding whether to market indirectly or directly include: • • • The size of your firm. Each year. In indirect selling. and other trade organizations. Previous export experience and expertise. the NATIONAL. Chapter-4 1. producer deals directly with a foreign buyer. and NATIONAL.000 conferences. SBA field offices also co-sponsor export training programs with the Department of Commerce. and various private sector international trade organizations.. other federal agencies. an export intermediary such as an export management company (EMC) or an export trading company (ETC) normally assumes responsibility for finding overseas buyers.program. The seminars are usually held in conjunction with DECs. The nature of your products. The paramount consideration in determining whether to market indirectly or directly is the level of resources a company is willing to devote to its international marketing effort. local chambers of commerce. state agencies. Practice in the company Developing an Export Strategy The most common methods of exporting are indirect selling and direct selling . and getting paid. . export trading companies. EACs participate in approximately 5. shipping products. seminars. country-specific market opportunities. In direct selling.

However.• Business conditions in the selected overseas markets. even small or medium-sized firms can export directly if they are able to commit enough staff time to the . general contractors. Someone else has decided that the product in question meets foreign demand. This approach is the most ambitious and difficult. international banks. These buyers are a large market for a wide variety of goods and services. With appropriate help and guidance from the Department of Commerce. With this approach. There are at least four approaches. 3. since the exporter personally handles every aspect of the exporting process from market research and planning to foreign distribution and collections. EMCs. In this case a company may know its product is being exported. Approaches to Exporting The way your company chooses to export its products can have a significant effect on its export plan and specific marketing strategies. and others in the United States purchase for export. which may be used alone or in combination: 1. Consequently. the exporter can still retain considerable control over the process and can realize some of the other benefits of exporting. Exporting indirectly through intermediaries. a significant commitment of management time and attention is required to achieve good results. 4. state trade offices. but it is still the buyer who assumes the risk and handles the details of exporting. Yet. foreign trading companies. These sales are indistinguishable from other domestic sales as far as the original seller is concerned. Passively filling orders from domestic buyers who then export the product. and other service groups. That party takes all the risk and handles all of the exporting details. foreign government agencies. such as learning more about foreign competitors. The basic distinction among approaches to exporting relates to the company's level of involvement in the export process. and other market opportunities. this approach may also be the best way to achieve maximum profits and long-term growth. a company engages the services of an intermediary firm capable of finding foreign markets and buyers for its products. international trade consultants. new technologies. and other intermediaries can give the exporter access to well-established expertise and trade contacts. in some cases without even the awareness of the original seller. Many NATIONAL. ETCs. foreign distributors and retailers.) 2. Exporting directly. and foreign corporations. Seeking out domestic buyers who repre-sent foreign end users or customers. (Many companies take a stronger interest in exporting when they discover that their product is already being sold over-seas. freight forwarders.

they may be found through the same means that NATIONAL. They do not. the main task is to find a suitable intermediary firm that can then handle most export details. after experience has been gained and sales volume appears to justify added investment. The next chapter presents information on a variety of organizations that can provide this type of help .) If the nature of the company's goals and resources makes an indirect method of exporting the best choice. mailing lists. for instance. You may also choose to gradually increase the level of direct exporting later. In such a case. ETC. However. Firms that are new to exporting or are unable to commit staff and funds to more complex export activities may find indirect methods of exporting more appropriate. For sources of information about foreign government import regulations. trade consultant. perhaps as much as 30 percent of NATIONAL.in many cases. or the Bahamas while letting an EMC handle more ambitious sales to Egypt or Japan. In general. certificates of inspection. and trade associations. require consular invoices. Many governments. involve the firm in the export process. Import Regulations of Foreign Governments Import documentation requirements and other regulations imposed by foreign governments vary from country to country. There is no single source or special channel for identifying domestic buyers for overseas markets. your company may try exporting directly to such "easy" nearby markets as Canada. Buyers are found. or other qualified intermediary are indispensable. exports. however. It is vital that exporters be aware of the regulations that apply to their own operations and transactions. For those who cannot make that commitment. little further planning may be needed. industry directories. Sales. using an EMC or other intermediary does not exclude all possibility of direct exporting for your firm. health certification. the services of an EMC. at no cost. Customs Benefits for Exporters Drawback of Customs Duties . Consulting advisers before making these decisions can be helpful. for example through trade shows. Approaches 1 and 2 represent a substantial proportion of total NATIONAL.effort. For example. Mexico. and various other documents.

then drawback not exceeding 99 percent of the duty which was paid on the imported merchandise is payable on the exports. (less 1 percent which is retained by the NATIONAL. Title 19. United States Code: 1. It is immaterial whether the actual imported merchandise or the domestic merchandise of the same kind and quality was used in the exported articles. the duty paid on imported merchandise. and consequently in his sales price. Types of Drawback Several types of drawback are authorized under section 1313. When certain products manufactured with the use of domestic alcohol are exported or shipped to various island possessions. 3. wholly. This provision in the code makes it possible for firms to obtain drawback without the expense of maintaining separate inventories for imported and domestic merchandise (section 1313(b) drawback .Historically. a drawback of the internal . some of which are exported or destroyed before use. Since then. although from time to time the conditions under which it is payable have changed. it has been part of the law. then the duties paid on the imported merchandise used may be refunded as drawback. 2. If articles are exported or destroyed.the substitution provision). If both imported merchandise and any other merchandise of the same kind and quality are used to manufacture articles. because of a particular use made of the commodity on which the duty or tax was collected. Customs Service (Customs) to defray costs (section 1313(a) drawback). then 99 percent of the duties which were paid on the merchandise may be recovered as drawback. or partially. the word "drawback" has denoted a situation in which the duty or tax. If merchandise is exported or destroyed because it does not conform with sample or specifications. is refunded or remitted. The rationale for drawback has always been to encourage American commerce or manufacturers to compete in foreign markets without the handicap of including costs. which were manufactured in the United States with the use of imported merchandise. or was shipped without the consent of the consignee. Drawback was initially authorized by the first tariff act of the United States in 1789. lawfully collected. 4.

99 percent of the duties on the merchandise may be recovered as drawback (section 1313(j) drawback). or destroyed under Customs supervision. 7. The drawback procedure has been designed to give the manufacturer this assurance and protection. that he will be entitled to drawback on his exports. the duties paid on the imported merchandise may be recovered as drawback. If imported materials are used to construct and equip vessels and aircraft built for foreign account and ownership. 9. The purpose of drawback is to enable a manufacturer to compete in foreign markets. or (j). To do so. (b). If imported salt is used to cure meat which is exported. may receive 99 percent of the duties paid on the packaging materials as drawback (section 1313(q) drawback). in the strict meaning of the word. the manufacturer must know. exported (section 1313(g) drawback). (c). How to Obtain Drawback As most manufacturers are interested in sections 1313(a) and (b). If imported salt is used to cure fish. a drawback. when the engines are exported (section 1313(h) drawback). the duties on the salt may be remitted (section 1313(e) drawback). 99 percent of the duties paid on the materials may be recovered as drawback. in the amounts not less than $100. If merchandise that is commercially interchangeable with imported merchandise is exported or destroyed under Customs supervision and at the time of exportation or destruction has not been used. Packaging material used to package merchandise exported or destroyed under section 1313(a).revenue taxes paid on the domestic alcohol may be refunded (section 1313(e) drawback). . If imported merchandise is used in the United States to repair jet aircraft engines originally manufactured abroad. even though the vessels and aircraft are not. prior to making contractual commitments. If imported merchandise is exported without being used. 5. 99 percent of the duties paid on the merchandise may be recovered as drawback (section 1313(j) drawback). 6. 8. of duties paid on the salt may be obtained (section 1313(f) drawback). in amounts not less than $100. however. only the procedures for obtaining drawback under these provisions are discussed.

the time period for exportation is three years after importation. Completion of Drawback Claims Claims must be filed within three years after the exportation of the articles. first prepare a drawback proposal (statement) and file it with a Regional Commissioner of Customs for section 1313(a) drawback and with the Entry Rulings Branch. Synopses of all contracts are published in the Customs Bulletin and Decisions The proposal and approval together is called a drawback contract or drawback rate. There are three . including combination 1313(a) and (b) drawback. Customs Service headquarters to the Regional Commissioner of Customs where the applicant will file claims. There are currently several general drawback contracts available (orange juice. for other types of drawback. For completion of same condition Export Procedure It is necessary for a drawback claimant to establish that the articles on which drawback is being claimed were exported within five years after importation of the imported merchandise which is the basis for the drawback. If the manufacturer desires to have his contract (rate) changed in any way. The approval of a section 1313(b) drawback proposal takes the form of a letter from NATIONAL. To prevent tolling by the statute of limitations. sugar. steel. although no payments will be made until the contract is approved. component parts. In the case of same condition drawback. Customs headquarters. Approval The approval of section 1313(a) proposal takes the form of a letter from a Regional Commissioner of Customs to the applicant.Drawback Proposal To obtain drawback. he should file a new proposal (statement) and the procedure is the same as above. a claim may be filed before a drawback contract (rate) is effective. The applicant receives a copy of this letter. These have been published in the Customs Bulletin and Decisions with instructions as to the procedure for adhering to them. and grieve goods) which eliminate the need for submission of a proposal.

methods which can be used to do so. 1996.56 of the Customs Regulations.51 through 191. Accelerated drawback currently applies to same condition drawback. Drawback . Export of qualified NATIONAL. 2001.-made petroleum products may be shown by matching production at a specific refinery with exports of qualified petroleum of the same kind and quality that occur within 180 days after the refinery produced the designated petroleum product. Export of qualified imported petroleum products may be shown by matching the amount imported with exports of qualified petroleum products of the same kind and quality that occur within 180 days after the import (section 1313(p) drawback). and these are described in sections 191. the entry will be liquidated by the Regional Commissioner of Customs to determine the amount of drawback due. Accelerated payment generally will ensure that a claimant will receive his drawback no later than two months after he files a claim.72 of the Customs Regulations. Payment of Claims When a claim has been completed by the filing of all required documents. The NAFTA provisions on drawback will apply to goods imported into the United States and subsequently exported to Mexico on or after January 1. Drawback is payable to the exporter unless the manufacturer reserves to himself the right to claim the drawback. Before exporting. a future claimant should make certain that he is taking the necessary steps to comply with one of these procedures. Effect of the North American Free Trade Agreement The North American Free Trade Agreement (NAFTA) provisions on drawback will apply to goods imported into the United States and subsequently exported to Canada on or after January 1. Accelerated Payment Accelerated payment of drawback under certain conditions is authorized by section 192.

no customs duties. on condition of export. For import and re export activities. or products made from them. federal excise taxes. and (g). reduced. the amount of Customs duties that will be refunded. More than 2.800 business firms used foreign-trade zones in fiscal year 1995. same condition substitution drawback was eliminated as of January 1. No NAFTA country. or a fee pursuant to section 22 of the NATIONAL. Foreign-Trade Zones Exporters should also consider the customs privileges of NATIONAL. will refund. (f). Moreover. This means that the use of zones can be profitable for operations involving foreign dutiable materials and components being assembled or produced here for re export. Agricultural Adjustment Act. Export shipments from zones and sub zones amounted to nearly $17 billion. These zones are domestic NATIONAL. reduce. the zones provide accelerated export status for purposes of excise tax rebates and customs drawback. (h). are moved into customs territory. These facilities are available for operations involving storage. Associated with these projects are some 356 sub zones. 1994. or waived is the lesser of the total amount of Customs duties paid or owed on the finished good in the NAFTA country to which it is exported. or waive the following: antidumping or countervailing duties. exhibition. or state or local ad valorem taxes are charged on foreign goods moved into zones unless and until the goods. NATIONAL. The value of merchandise moved to and from the zones during that year exceeded $143 billion. from local Commerce Export Assistance Centers. no quota restrictions ordinarily apply to export activity. foreign-trade zones. and other processing. Also. inspection. . There are now 217 approved foreign-trade zones in port communities throughout the United States. tariff rate quotas or trade preference levels. premiums offered or collected pursuant to any tendering system with respect to the administration of quantitative import restrictions. for purposes of sections 1313(a). sites that are considered outside NATIONAL. customs territory and are available for activities that might otherwise be carried on overseas for customs reasons. assembly. Foreign-Trade Zones Board.Under the NAFTA. repacking. or from the Executive Secretary. manufacturing. (b). For export operations. Information about the zones is available from the zone manager.

C. or Withdrawn for consumption within the United States after payment of duty. and similar customs-privileged facilities are now in operation in some 75 foreign countries. manipulated . and Washington. 20230. Withdrawn for supplies to a vessel or aircraft in international traffic.C. sections 1311 and 1312. NATIONAL. Department of Commerce. more than 300 free ports. Upon entry of good into the warehouse. The liability is canceled when the goods are: o o o o Exported.1): . manufacturers and their distributors use free ports or free trade zones for receiving shipments of goods that are reshipped in smaller lots to customers throughout the surrounding areas. Customs Regulations (19 CFR 19. United States Code (NATIONAL. the importer and warehouse proprietor incur liability under a bond. Customs Bonded Warehouse A Customs bonded warehouse is a building or other secured area in which dutiable goods may be stored. Many NATIONAL. usually in or near seaports or airports.International Trade Administration. or undergo manufacturing operations without payment of duty.) section 1555. Authority for establishing bonded storage warehouses is set forth in Title 19. D.1. NATIONAL.C. Destroyed under Customs supervision. free trade zones.. NATIONAL. Bonded manufacturing and smelting and refining warehouses are established under Title 19. Types of Customs Bonded Warehouses Nine different types or classes of Customs bonded warehouses are authorized under section 19. Foreign Free Port and Free Trade Zones To encourage and facilitate international trade.

or 5. Public bonded warehouse used exclusively for the storage of imported merchandise. Bonded warehouses. or on behalf of. imported merchandise. is under seizure. Premises owned or leased by the government and used for the storage of merchandise that is undergoing Customs examination. Bonded warehouses established for the cleaning. 3. An importer. or corrals. No duty is collected until merchandise is withdrawn for consumption. Bonded bins or parts of buildings or elevators to be used for the storage of grain. 9. 5. Warehouses bonded for smelting and refining imported metal-bearing materials for exportation or domestic consumption. 8. repacking. known as duty-free stores. used for selling conditionally duty-free merchandise for use outside the Customs territory. 4. under Customs supervision. feeding pens. sorting. in which case it should be known as a private bonded warehouse. individuals departing from the Customs territory for foreign destinations. Bonded yards or sheds for the storage of heavy and bulky imported merchandise. or other similar buildings or limited enclosures for the storage of imported animals.4. A class 4 or 5 warehouse may be bonded exclusively for the storage of goods imported by the proprietor thereof. Merchandise in this class must be owned or sold by the proprietor and delivered from the warehouse to an airport or other exit point for exportation by. and for the manufacture for home consumption or exportation of cigars made in whole of tobacco imported from one country. solely for exportation. or is pending final release from Customs custody. 7. therefore. but not the manufacturing of. such goods may be stored in a warehouse of class 3. and tanks for storage of imported liquid merchandise in bulk. or otherwise changing the condition of. and at the expense of the proprietor. of articles made in whole or in part of imported materials or of materials subject to internal revenue tax. Unclaimed merchandise stored in such premises shall be held under "general order. 2. Importers' private bonded warehouses used exclusively for the storage of merchandise belonging or consigned to the proprietor thereof." When such premises are not sufficient or available for the storage of seized or unclaimed goods. 6. Advantages of Using a Bonded Warehouse There are several advantages of using a bonded warehouse. has control over use .1. stables. Warehouses for the manufacture in bond.

may be stored. Imported merchandise may be stored in a Customs bonded warehouse for a period of five years. sorted. that merchandise will be inventoried and the proprietor's records will be audited on a regular basis. other than class 6 or 7.of money until the duty is paid upon withdrawal of merchandise from the bonded warehouse. thereby canceling his obligation to pay duty. be transferred from one bonded warehouse to another in accordance with the provisions of Customs Regulations. but not manufactured Articles manufactured in a class 6 warehouse must be exported in accordance with Customs Regulations. Waste or byproduct from a class 6 warehouse may be withdrawn for consumption upon payment of applicable duties. Duties owed on articles that have been manipulated are determined at the time of withdrawal from the Customs bonded warehouse. Merchandise in a Customs bonded warehouse may. Check with the nearest Customs office before assuming that such merchandise may be placed in a bonded warehouse. with certain exceptions. If no domestic buyer is found for the imported articles. Treatment All merchandise subject to duty may be entered for warehousing except perishables and explosive substances other than firecrackers. repacked. or otherwise changed in condition. How to Establish a Customs Bonded Warehouses Application . Storage. the importer can sell merchandise for exportation. cleaned. Bonded merchandise may not be commingled with domestic merchandise and must be kept separate from unbounded merchandise. merchandise placed in a Customs bonded warehouse. Basically. Full accountability for all merchandise entered into a Customs bonded warehouse must be maintained. Many items subject to quota or other restrictions may be stored in a bonded warehouse. Merchandise: Entry.

the blueprint shall show all outlets.An owner or lessee seeking to establish a bonded warehouse must make written application to his or her local Customs port director describing the premises. the application must also state the general character of the merchandise to be stored therein. When a part or parts of the building are to be used as a warehouse. Duty-free shops (class 9) have specific requirements governing their establishment. record-keeping systems. . If the warehouse is to be operated as a private bonded warehouse. certificates should be obtained and signed by officers of agents of two or more insurance companies. Bonds Required Bonds for each class of warehouse shall be executed on Customs Form 301. exit ports. Except in the case of a class 2 or 7 warehouse. inlets. and the approval of local governments. gallons per inch or fraction of an inch of height. the application must state whether the warehouse is to be operated only for the storage or treatment of merchandise belonging to the applicant. Other Requirements The application must be accompanied by the following: A certificate signed by the president or a secretary of a board of fire underwriters that the building is a suitable warehouse and acceptable for fire insurance purposes. giving the location. If the warehouse to be bonded is a tank. a detailed description of the materials and construction of all partitions shall be included. with an estimate of the maximum duties and taxes that will be due on the merchandise at any one time. shall be included and certified by the proprietor as correct. These requirements include location. or whether it is to be operated as a public bonded warehouse. and pipelines and shall be certified as correct by the proprietor of the tank. A blueprint showing measurements to be bonded. A gauge table showing the capacity of the tank in NATIONAL. and stating the class of warehouse to be established. At ports where there is no board of fire underwriters.

Where is Customs Offices Located? The NATIONAL. Customs Service. such as export trading companies. exporter can take to reduce federal income tax on export-related income is to set up a foreign sales corporation (FSC). Please consult your local telephone directory under "NATIONAL." Foreign Sales Corporations One of the most important steps a NATIONAL. This tax incentive for NATIONAL. The tax exemption can be as great as 15 to 30 percent on gross income from exporting. While the interest charge DISC allows exporters to defer paying taxes on export sales.C. An FSC can function as a principal. possessions (other than Puerto Rico) to obtain a corporate tax exemption on a portion of its earnings generated by the sale or lease of export property and the performance of some services. Virgin Islands. the FSC is entitled to an exemption on qualified export transactions in which it performs the required foreign economic processes. buying and selling for its own account. A firm that is exporting or thinking of exporting can optimize available tax benefits with proper planning. and the expenses can be kept low through the use of intermediaries who are familiar with and able to carry out the formal requirements. the tax incentive provided by the FSC legislation is in the form of a permanent exemption from federal income tax for a portion of the export income attributable to the offshore activities of FSCs (26 NATIONAL. except the interest charge DISC. It can be related to a manufacturing parent or it can be an independent merchant or broker.. FSCs can be formed by manufacturers. and the NATIONAL. A corporation initially qualifies as an FSC by meeting certain basic formation tests. and assistance from an accountant or lawyer. . non manufacturers. or as a commission agent. An FSC is a corporation set up in certain foreign countries or in NATIONAL. Puerto Rico. or groups of exporters. Customs Service has more than 300 ports of entry in the United States. If it complies with those requirements. evaluation. Treasury Department. sections 921-927). exporters replaced the domestic international sales corporation (DISC). An FSC (unless it is a small FSC) must also meet several foreign management tests throughout the year.

Mexico. possession of interest for specific information. Also. Norway. American Samoa. Iceland. corporate taxation is 30 percent for a corporate-held FSC if it buys from independent suppliers or contracts with related suppliers at an "arm's-length" price . To qualify. Some nations. Denmark. Finland. cannot have more than 25 shareholders. a company must identify itself as an FSC to the host government. the qualified countries were Australia. New Zealand. a group may not own both an FSC and an interest charge DISC. Barbados. 1996. a firm must file for incorporation by following the normal procedures of the host nation or NATIONAL. possession. resident. Ireland. Canada. and Trinidad and Tobago. the Marshall Islands. Cyprus. Most FSCs are incorporated in the NATIONAL. As of September 17. Egypt.An FSC must be incorporated and have its main office (a shared office is acceptable) in the NATIONAL. Honduras. Peru. In general. Netherlands. Department of the Treasury. Dominica. Jamaica. Grenada. cannot have any preferred stock. Bermuda. Lucia. Belgium. The tax benefits of a small FSC or an interest charge DISC are limited by ceilings on the amount of gross income that is eligible for the benefits. Consult the government tax authorities in the country or NATIONAL. the Philippines.a price equivalent to that which would have been paid by an unrelated purchaser to an unrelated seller. must keep one set of its books of account (including copies or summaries of invoices) at its main offshore office. it is generally advantageous to locate an FSC only in a country where local income taxes and withholding taxes are minimized. An FSC supplied by a related entity may also qualify to use the special administrative pricing rules to compute its tax exemption. The FSC (unless it is a small FSC) must have at least one director who is not a NATIONAL. Since the Internal Revenue Service (IRS) does not allow foreign tax credits for foreign taxes imposed on the FSCs qualified income. Guam. and must file an election to become an FSC with the IRS. A country qualifies as an FSC host if it has an exchange of information agreement with the United States approved by the NATIONAL. Small FSCs and interest charge Discs are designed to give export incentives to smaller businesses. Korea. Guyana. The portion of the FSC gross income from exporting that is exempt from NATIONAL. Virgin Islands or Guam. Austria. Sweden. Costa Rica. these rules may provide additional tax savings for certain FSCs. offer tax incentives to attract FSCs. Malta. . Although an FSC does not have to use the two special administrative pricing rules. St. Pakistan. Germany. the Northern Mariana Islands. the Dominican Republic. France. Virgin Islands. Morocco. or a qualified foreign country.

For more information about FSCs. the tax year of the new DISC must match the tax year of its majority stockholder. A shared FSC is a means of sharing the cost of the FSC. Each exporter-shareholder owns a separate class of stock and each runs its own business as usual.which means it does not have to meet foreign management or foreign economic process requirements. An individual who is the sole shareholder of an interest charge DISC can defer 100 percent of the DISC income up to the $10 million ceiling. do not participate in the exporter's tax benefits. except that a small FSC must file an election with the IRS designating itself as a small FSC . companies in general. An interest charge DISC must meet the following requirements: the taxpayer must make a new election. exporters pay a commission on export sales to the FSC. regional authorities. However. the benefits and proprietary information are not shared. or private businesses can sponsor a shared FSC for their state's companies. An exporter can still set up a DISC in the form of an interest charge DISC to defer the imposition of taxes for up to $10 million in export sales. or their business clients or customers or for NATIONAL. . Typically. which distributes the commission back to the exporter. NATIONAL. A corporate shareholder of an interest charge DISC may defer the imposition of taxes on approximately 94 percent of its income up to the $10 million ceiling if the income is reinvested by the DISC in qualified export assets. their association's members. Treasury bill rates on their proportionate share of the accumulated taxes deferred. and are not a risk for another exporter's debts. A small FSC tax exemption is limited to the income generated by $5 million or less in gross export revenues. companies may contact the Office of the Associate Chief Counsel for International Commerce. A shared FSC is an FSC that is shared by 25 or fewer unrelated exporter-shareholders to reduce the costs while obtaining the full tax benefit of an FSC. States. and the DISC shareholders must pay interest annually at NATIONAL. The sponsor and the other exporter-shareholders do not participate in the exporter's profits. trade associations.The small FSC is generally the same as an FSC.

In addition. as well as designs and trade secrets. An invention may become public and therefore unpatentable in many countries. copyright. or a product or its mark and packaging. Rights may be greater or less than those provided under NATIONAL. National intellectual property laws create. or regulate a property right without which others could use or copy a trade secret. trademark registration. an expression. To secure rights in any country. The Paris Convention's "right of priority" provides a solution to this problem by giving an inventor an alternative to filing applications in many countries . and unfair competition is the Paris Convention for the Protection of Industrial Property. There is no such thing as an international patent. confirm. which are protected by trademark law. There is no real "short cut" to worldwide protection of intellectual property.Intellectual Property Considerations Intellectual property refers to a broad collection of rights relating to such matters as works of authorship. Copyright protection depends on national laws. a delay in filing a patent or trademark application leaves open the possibility that those rights will be lost because of intervening acts such as sale of the invention or registration of the trademark by another. The United States and over 130 other countries are parties of this treaty. you must apply for a patent or register a mask work or trademark in that country. International Agreements: The oldest treaty relating to patents. inventions. trademark. However. law but the rights given will be the same as that country provides to its own citizens. or mask work (semiconductor chip) registration extend only through the United States and its territories and possessions. but registration is typically not required. or copyright. some advantages and minimum standards for the protection and enforcement of intellectual property exist under treaties or other international agreements. No international treaty completely defines these types of intellectual property. The Paris Convention sets minimum standards of protection and provides two important benefits: the right of national treatment and the right of priority. patent. The rights granted by a NATIONAL. a design. which are protected under patent law. They confer no protection in a foreign country. marks. when a patent is issued or an application is laid open to inspection in any country. and the laws of the various countries differ from each other in significant respects. Over generalizing. trademarks. which are protected under copyright law. "national treatment" means that a Paris Convention country will not discriminate against foreigners in granting patent or trademark protection.

simultaneously. or by virtue of bilateral obligations. Older works may also be protected as a consequence of simultaneous publication in a Berne country. or works first or simultaneously published in a Berne country are automatically eligible for protection in every other country of the Berne Union. with the same effect as filing national applications in each of those countries. Under the Berne Convention. works created by a national of a Berne Union country. In any event. the requirements and protection available vary from country to country. if published with the formalities specified in that convention. and should be investigated before first publication anywhere. The applicant may then later proceed with the filing of separate "national" applications in those countries. The United States is also a party to the Patent Cooperation Treaty (PCT). by reference for adherence by WTO members. 1989 the date on which the United States acceded to the Berne Convention. which provides procedures for filing patent applications in its member countries. Publication or sale of an invention after first filing will therefore not jeopardize patentability in countries which grant a right of priority to NATIONAL. These substantive obligations have been incorporated into the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property (TRIPs). to which more than 120 other nations adhere. Neither of these agreements bestow . without registration or compliance with any other formality of law. The United States is also a member of the Universal Copyright Convention (UCC) and has special bilateral relations with a number of foreign countries. Not all countries adhere to the Paris Convention but these benefits may be available under another treaty or bilateral agreement. Works first published before March 1989 were protected in many countries by virtue of the United States' membership in the UCC. It allows the applicant one year from the date of the first application filed in a Paris Convention country (six months for a design or trademark) in which to file in other countries. This is true of works first published in the United States on or after March 1. North American Free Trade Agreement and Agreement on Trade-related Aspects of Intellectual Property: Both the North American Free Trade Agreement(NAFTA) and the Agreement on Trade-related Aspects of Intellectual Property (TRIPs) (which is under the auspices of the World Trade Organization) establish minimum standards for the protection and enforcement of intellectual property. The United States' international copyright regulations are governed principally by the Berne Convention for the Protection of Literary and Artistic Works ("Berne"). The PCT allows an applicant to file one "international application" designating member countries in which a patent is sought. applicants.

even the publication of an invention in a NATIONAL. application. In addition. many countries require that an invention be "worked" locally to retain the benefit of the patent. patent rights to possible imprisonment if classified information is released. patent law differs from the laws of most other countries in several important aspects. as described. other export control laws require that a license be obtained prior to the export of certain technologies. The penalties for filing abroad without following these requirements range from loss of NATIONAL. This prohibition protects against transfer of information which might damage the national security. a patent application must be filed before making the invention public anywhere. Patents: NATIONAL. Many countries. including most European countries. unless the applicant is entitled to claim the "right of priority" under the Paris Convention. The United States also provides a one-year "grace period" that does not preclude an inventor from obtaining protection after an act such as publishing. or may be met by importation of goods covered by the patent. Rather. intellectual property owners. or using the invention which would make the invention public. NATIONAL. both agreements ensure that a member state that is party to one or both of these agreements provides a certain level of protection to those individuals or companies protected under that member state's laws.rights upon NATIONAL. which may include a compulsory license at a reasonable royalty followed by possible forfeiture of the patent for continuing to fail to work an invention. In countries with an "absolute novelty" rule. depending on a particular country's law. Trademarks: A trademark is a word. even if no patent application is filed. Service marks perform the same function for businesses dealing in services rather than goods. or device which identifies and distinguishes the source of sponsorship of goods and may serve as an index of quality. Hence. patent law grants a patent to the first inventor even if another person independently makes the invention and files an application first. symbol. or bar their export altogether. The Paris Convention permits penalties for nonworking. offering for sale. For . "Working" may require commercial-scale manufacture within the country. Unlike the United States. law prohibits filing abroad without a foreign filing license from the Patent and Trademark Office unless six months have elapsed since filing a NATIONAL. The NATIONAL. Most other countries award the patent to the inventor who first files a patent application. lack such a grace period to allow an inventor to so disclose the invention prior to filing a patent application. patent grant is a disclosure that can defeat the right to obtain foreign patents. For an invention made in the United States.

trademark rights are acquired only through registration. this protection gives the owner the exclusive right to reproduce the work. At a minimum. Where to file is a business decision. Copyrights: A copyright protects original works of authorship. or perform or display the work publicly. as a practical matter. although the right of priority under the Paris Convention confers a substantial benefit. balancing the expense of registration against its benefit. The United States is not a member of any agreement under which a single filing will provide international protection. but it is the color of mourning in most of the Far East. and many countries require local use of the registered mark to maintain the registration. Each country protects them in accordance with its own business practices. In the United States. or trade dress before making a major investment in another country. some countries do not protect service marks. Even packaging colors may connote different meanings. prepare derivative works. . service marks. although some require local use to maintain a registration. in most countries. and other marks such collective marks are acquired through use or prior foreign registration. Trade names are also protected on a country-by-country basis. Whether a given mark can be registered in a particular country will depend on the law of that country. It is prudent to decide early where trademark protection will be needed and to protect rights by filing in those countries. trade name. it may help to investigate the connotation of a trademark. silly. Expanding businesses sometimes face a period of time in which their mark may be known and perhaps registered in the United States. In the United States. Although the Paris Convention requires protection of trade names. For example. For example. distribute copies. you will want to file in countries in which you will do business. number. a business should register promptly in order to avoid having its mark registered by someone else. an airplane manufacturer might register its service mark. You may also find it desirable to file in countries which are known sources of counterfeit goods. rights to trademarks. A different language or culture may have unfavorable. or even rude meanings for words or symbols with neutral or favorable connotations in the United States. Although not a legal requirement. but they are not quite ready to do business abroad. Although trademark laws impose no deadlines for registering a mark. they are not necessarily registered as is the case in the United States. However. white may imply purity in the United States.example.

Protection on an interim basis is available to foreign nationals whose country undertakes good faith efforts to provide protection for mask works of NATIONAL. through the Patent and Trademark Office. as well as the specific legal requirements for copyright protection in countries in which copyright protection is desired. bans "restrictive business practices" that would restrict trade among the countries of the Union. Before publishing a work anywhere. their coverage may not be as extensive as in the United States. subject to registration by the Copyright Office. federal law protects exclusive rights in patents. nationals. copyrights. it would be wise to investigate the protection available in the recipient's country and in any country . A computer program. Some countries require certain formalities to maintain copyright protection. The European Union. Not all countries have unfair competition laws. Most developed countries have unfair competition laws similar to the United States. "original works of authorship" include literary. The Secretary of Commerce. although details vary. nationals. dramatic. musical. trade names.In the United States. Before divulging any information which could be helpful to a potential competitor. Many other countries. particularly member countries of the Berne Union. offer copyright protection without these formalities. and certain other intellectual works. Unfair Competition and Related Rights: In the United States. for example is considered a literary work protected by copyright in the United States and in a large and increasing number of foreign countries. it is advisable to investigate the scope of protection available. and know-how are protected against unfair competition by federal and state law. protection for trade secrets of valuable unpatented technology may be inadequate. The act also created an incentive for other countries to provide such protection since its benefits are available to any foreign national whose home country's laws extend similar protection to NATIONAL. and mask works. the place of first publication determines whether copyright protection is available. trade secrets. business goodwill. For example. In most countries. determines which countries are entitled to protection under this act. for example. artistic. It confers the exclusive right to produce and distribute mask works for a term of ten years. Still others offer little or no protection for the works of foreign nationals. and even in some countries that do have them. Other intangible property such as trademarks. Semiconductor Chips and Mask Works: The Semiconductor Chip Protection Act of 1984 provides a special system of legal protection for original mask works used in the production of semiconductor chips.

Some countries restrict the right to do business unless the foreign concern assists in meeting certain goals. better treatment for businesses with local ownership. These penalties can amount to a fine of as much as $1 million and 15 years imprisonment of individuals. Customs Service. Enforcement must be accomplished through local law. Typical examples include requirements for generic labels of comparable size with the trademark. In the United States. intellectual property rights are enforced by a civil suit for infringement. Civil penalties can include the recovery of the trademark owner of treble damages and attorney's fees. and restrictions on intellectual property regulations may still require submission of proprietary information to the authorities. Ex prate seizure orders are also authorized in certain cases. and many other factors. Enforcement: After securing valuable intellectual property. The intellectual property owner may be awarded damages or an injunction against infringement. requirements for local working of patented inventions. In the United States and many countries. The ease of enforcement depends on local law. the United States views intellectual property as a private right to be enforced by its owner. Preliminary injunctions may also be available to prevent ongoing violations of intellectual property rights before a final decision on the merits by a court.which may be a potential market. The Trademark Counterfeiting Act of 1984 imposes heavy criminal penalties for trafficking in goods or services which bear a counterfeit mark. the resources of the intellectual property owner. Social and economic policies may also affect the value of intellectual property. In general. criminal penalties may apply. licensing agreements and employment agreements). the owner must enforce it vigorously to derive the maximum benefit.g. An intellectual property owner also may bring a proceeding before the International Trade Commission under Section 337 of the Tariff Act of 1930 for an exclusion order to prevent infringing goods from entering the country or a cease and desist order to prevent an infringing use once the goods have entered the country. Written agreements also should be used to protect all trade secrets that are divulged (e. The best rule is to investigate before you invest. the owner may protect against importation of infringing goods by recording a trademark or copyright with the NATIONAL. without restricting access to it by local competitors. the attitude of local officials. In more serious matters. .

the penalties may be as much as $250. Labeled correctly to ensure that the goods are handled properly and arrive on time at the right place. In the United States. as well as proper collection standards. a person who willfully infringes a copyright for financial gain is subject to a $25. It is important that exporters ensure that the merchandise is: • • • • Packed correctly so that it arrives in good condition. or trafficking in counterfeit labels for phonorecords. as with criminal penalties. If a government action is required. either as the exclusive remedy or in addition to private suits. The remedies available against an infringer will vary from country to country. are the local authorities cooperative? If private remedies are available. may the intellectual property owner get an injunction as well as damages? How long will it take to get enforcement? What methods are available to obtain proof? These and other questions are part of a detailed study that should be done for each country before investing. the exporter must be aware of packing. Ease of enforcement will depend on a number of factors. and Insured against damage. a court may order seizure and destruction or other disposition of infringing copies and equipment used in their manufacture.Piracy of copyrighted materials is also subject to criminal penalties. documentation.00 fine. one-year imprisonment. If the offense involves a substantial number of infringing copies of phonorecords or motion pictures. or both. motion pictures. Shipping Your Product When shipping a product overseas. pilferage and delay. and foreign government requirements. loss. and insurance requirements. or other audiovisual works.000 and five-year imprisonment. . Some foreign countries provide criminal penalties for infringement. In addition. labeling. Documented correctly to meet NATIONAL.

After shipment. or other charges assessed or collected. costs of special documentation. or the refund. its classification and valuation. or drawback thereof. If the exporter prefers. Freight forwarders can also make arrangements with customs brokers overseas to ensure that the goods comply with customs export documentation regulations. or truck. and the documents related to foreign trade. . and their handling fees. Customs business is limited to those activities involving transactions related to the entry and admissibility of merchandise. A customs broker is an individual or company that is licensed to transact customs business on behalf of others. Freight forwarders assist exporters in preparing price quotations by advising on freight costs. freight forwarders can reserve the necessary space on a vessel. the export regulations of the NATIONAL. aircraft. government. The cost for their services is a legitimate export cost that should be included in the price charged to the customer Once the order is ready for shipment. They may also prepare the bill of lading and any special required documentation. or to a paying bank. moisture. the payment of duties. they can route the documents to the seller. This is of particular importance with letter of credit payment terms. Export freight forwarders are licensed by the International Air Transport Association (IATA) to handle air freight and the Federal Maritime Commission to handle ocean freight. insurance costs.Most exporters rely on an international freight forwarder to perform these services because of the multitude of considerations involved in physically exporting goods. They recommend the packing methods that will protect the merchandise during transit or can arrange to have the merchandise packed at the port or containerized. consular fees. Freight Forwarders An international freight forwarder is an agent for the exporter in moving cargo to an overseas destination. port charges. the methods of shipping. Packing Exporters should be aware of the demands that international shipping puts on packaged goods. train. the buyer. Exporters should jeep four potential problems in mind when designing an export shipping crate: breakage. freight forwarders should be review all documents to ensure that everything is in order. These agents are familiar with the import rules and regulations of foreign countries. rebate. taxes. pilferage and excess weight.

Theft and pilferage are added risks. handling facilities may be less sophisticated than in the United States and the cargo could be dragged. though they should still be adequately protected. but they are best suited for standard package sizes and shapes. In other instances. refrigerated and liquid bulk containers are usually readily available. avoid writing contents or brand names on packages. Goods should be palletized and when possible containerized. or dropped during unloading. . adequately sealed and filled when possible. regardless of size. high-test (at least 250 pounds per square inch) cardboard or tri-wall construction boxes are more than adequate. rolled. material. be sure the goods are prepared using these guidelines: • • • • • • Pack in strong containers. that puts an added strain on the package. air shipments require less heavy packing than ocean shipments. In many instances. Besides the normal handling encountered in domestic transportation. cargo is carried in containers. Some containers are no more than semi-truck trailers lifted off their wheels. a break-bulk shipment transported by ocean freight may be loaded aboard vessels in a net or by a sling. pushed. Other safeguards include using straps. To provide proper bracing in the container.Generally. One popular method of shipment is to use containers obtained from carriers or private leasing companies. goods may be stacked on top of or come into violent contact with other goods. Also. conveyor. Packages and packing filler should be made of moisture-resistant material. but sometimes it is still shipped as break-bulk cargo. Another aspect of this problem is that cargo may also be unloaded in precipitation. Overseas. or the foreign port may not have covered storage facilities. or in transit to the final destination. Observe any product-specific hazardous materials packing requirements. seals. Buyers are often familiar with the port systems overseas. and construction and accommodate most cargo. especially if the product is durable and there is no concern for display packaging. so they will often specify packaging requirements. These containers vary in size. especially if they are highly pilfer able. If the buyer does not specify this. standard domestic packing is acceptable. Normally. or chute. make sure the weight is evenly distributed. and shrink wrapping. During the voyage. placed on a vessel at the port of export and then transferred to another set of wheels at the port of import. while moving through customs. To avoid pilferage. Moisture is a constant concern because condensation may develop in the hold of a ship even if it is equipped with air conditioning and a dehumidifier.

Weight marking (in pounds and in kilograms). exporters need to put the following markings on cartons to be shipped: • • • • • • • • • Shipper's mark. also included in the language of the destination country).A. Conceal the identity of the contents. Products can require many markings for shipment.Finally. Labels for hazardous materials (universal symbols adapted by the International Airi Transport Association and the International Maritime Organization). Labeling Specific marking and labeling is used on export shipping cartons and containers to: • • • • • Meet shipping regulations. as well as ensure that the goods are properly packed. This service is usually provided at a moderate cost. such as "This Side Up" or "Use No Hooks" (in English and in the language of the country of destination). Help receivers identify shipments. It is recommended that a professional firm be hired to pack the products if the supplier is not equipped to do so. because transportation costs are determined by volume and weight. For example. Ingredients (if applicable. and Insure compliance with environmental and safety standards. Cautionary markings. Port of entry. Number of packages and size of cases (in inches and centimeters). Packages should be clearly marked to prevent misunderstandings and delays in shipping. Ensure proper handling. Packing goods to minimize volume and weight while reinforcing them may save money. The overseas buyer usually specifies which export marks should appear on the cargo for easy identification by receivers. Markings should appear .). Letters are generally stenciled onto packages and containers in waterproof ink. specially reinforced and lightweight packing materials have been developed for exporting. Country of origin (NATIONAL. Handling marks (international pictorial symbols). and.

and dimensions. the marks should include the package number. Most freight forwarders and export packing specialists can supply the necessary information regarding specific regulations. The exporter should also add any special handling instructions. If more than one package is being shipped. Documentation Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires as forwarders are specialists in this process. government and the government of the importing country. These invoices are often used by governments to determine the true value of goods when assessing customs duties. and use standard international shipping and handling symbols. the customer identification code. the total number of packages in the shipment should be included in the markings. which can never be made in negotiable form A bill of lading is a contract between the owner of the goods and the carrier (as with domestic shipments). gross and net weights. or traded while the goods are in transit. For vessels. • • Air freight shipments are handled by air waybills. For example. Governments that use the commercial invoice to control imports will . In addition to the port marks. and an indication of origin. The following documents are commonly used in exporting. The latter can be bought. preferably on the top and on the two ends or the two sides. sold. many countries require that the country of origin be clearly labeled on each imported package. there are two types: a straight bill of lading which is nonnegotiable and a negotiable or shipper's order bill of lading. but which of them are necessary in a particular transaction depends on the requirements of the NATIONAL. The customer usually needs an original as proof of ownership to take possession of the goods • A commercial invoice is a bill for the goods from the seller to the buyer. It is a good idea to repeat these instructions in the language of the country of destination. Customs regulations regarding freight labeling are strictly enforced.on three faces of the container. Ant old markings must be completely removed from previously used packaging.

• A dock receipt and a warehouse receipt are used to transfer accountability when the export item is moved by the domestic carrier to the port of embarkation and left with the ship line for export. consignee. SEDs must be prepared. and other characteristics • A consular invoice is a document that is required in some countries. . or vessel line). Certified by the consular official of the foreign country stationed here. It describes the shipment of goods and shows information such as the consignor. Postal Service when the shipment is valued over $500. is over $2. export statistics. • A destination control statement appears on the commercial invoice. language to be used. Postal Service when the value of the commodities. quantity. regardless of value. • • A NAFTA certificate of origin is required for products traded among the NAFTA countries (Canada. • A certificate of origin is a document that is required in certain nations.often specify its form. This is usually performed by a third party and often obtained from independent testing organizations. This document may be required for most or all exports to some countries or for other countries only under special circumstances.500. and Mexico). and value of the shipment. for all shipments requiring an export license or destined for countries restricted by the Export Administration Regulations SEDs are prepared by the exporter or the exporter's agent and delivered to the exporting carrier (for example. number of copies. it is used by the country's customs officials to verify the value. SEDs are required for shipments not using the NATIONAL. Inspection certification is required by some purchasers and countries in order to attest to the specifications of the goods shipped. • A Shipper's Export Declaration (SED) is used to control exports and act as a source document for official NATIONAL. the United States. Customs Service at the port of export • An export license is a government document that authorizes the export of specific goods in specific quantities to a particular destination. the post office. such as a local chamber of commerce. SEDs must be prepared for shipments through the NATIONAL. Certificate of origin are usually signed through a semiofficial organization. A certificate may still be required even if the commercial invoice contains the information. content. and nature of the shipment. airline. and ocean or air waybill of lading to notify the carrier and all foreign parties that the item can be exported only to certain destinations. It is a signed statement as to the origin of the export item. The exporting carrier will present the required number of copies to the NATIONAL. classified under any single Schedule B number.

or foreign government customs. Export marks are added to the standard information on a domestic bill of lading. The following sources also provide information pertaining to foreign import restrictions: Shipping The handling of transportation is similar for domestic and export orders. It also shows the individual net. The number and kind of documents the exporter must deal with varies depending on the destination of the shipment. drum. These marks show the name of the exporting carrier and the latest allowed arrival date at the port of export. the exporter must be careful to provide all proper documentation. such as a box. or even result in the seizure of the exporter's goods by NATIONAL. Since carriers are often used for large and bulky shipments. Most documentation is routine for freight forwarders and customs brokers. Documentation must be precise because slight discrepancies or omissions may prevent merchandise from being exported. NATIONAL. Collection documents are subject to precise time limits and may not be honored by a bank if the time has expired. the exporter should reserve space on the carrier well before actual shipment date. tare. Exporters may find it useful to consult with a freight forwarder when determining the method of international shipping. and foreign customs officials may use the list to check the cargo. and metric systems). It an itemizes the material in each individual package and indicates the type of package. legal. or carton. Because each country has different import regulations. but the exporter is ultimately responsible for the accuracy of its documents. crate. In addition. result in nonpayment. This reservation is called the booking contract. The list is used by the shipper or forwarding agent to determine the total shipment weight and volume and whether the correct cargo is being shipped. Instructions for the inland carrier to notify the international freight forwarder by telephone upon arrival should also be included. and gross weights and measurements for each package (in both NATIONAL. Package markings should be shown along with the shipper's and buyer's references.• An export packing list considerably more detailed and informative than a standard domestic packing list. .

rough handling by carriers. The cost of the shipment. Export shipments are usually insured against loss. insurance. Arrangements for insurance may be made by either the buyer or the seller. exporter an edge over other competitors. Although sellers and buyers can agree to different components. the delivery schedule. firm should be sure to check with the foreign buyer about the destination of the goods. If the terms of sale make the exporter responsible for insurance. their cost may be offset by lower domestic shipping costs (for example. the exporter should either obtain its own policy or insure the cargo under a freight forwarder's policy for a fee. exporters. the NATIONAL. the coverage is substantially different from domestic coverage. If the terms of sale make the foreign buyer responsible. the exporter should not assume (or even take the buyer's word) that adequate insurance has been obtained. Buyers often want the goods to be shipped to a free-trade zone or a free port where they are exempt from import duties . Insurance Damaging weather conditions. The multimodal transit operator (frequently one of the transporters) takes charge of and responsibility for the entire movement from factory to final destination. using a local airport instead of a coastal seaport) and quicker delivery times. and delay in transit by cargo insurance.International shipments are increasingly made on a through bill of lading under a multimodal contract. Carrier liability is frequently limited by international agreements. Before shipping. These factors may give the NATIONAL. damage to the cargo may cause a major financial loss to the exporter. Exporters are advised to consult with international insurance carriers or freight forwarders for more information. coverage is usually placed at 110 percent of the CIF (cost. freight) or CIP (carriage and insurance paid to) value. Shipments by sea are covered by marine cargo insurance Air shipments may also be covered by marine cargo insurance or insurance may be purchased from the air carrier. Although air carriers can be more expensive. and other common hazards to cargo make insurance an important protection for NATIONAL. in accordance with the terms of sale. . Additionally. and the accessibility to the shipped product by the foreign buyer are all factors to consider when determining the method of international shipping. If the buyer neglects to obtain adequate coverage. damage.

port handling fees. favorable payment terms make a product more competitive. these costs will influence how much the buyer is willing to pay for your product. while importers usually prefer to delay payment until they have received or resold the goods. • The length of time the product is being financed. Contract negotiation and closure are important. the importer pays these charges.Tariffs Finally. In some cases. If the competition offers better terms and has a similar product. Because of the intense competition for export markets. but at the end of the day. Typically. Exporters naturally want to get paid as quickly as possible. . being able to offer attractive payment terms customary in the trade is often necessary to make a sale. In many cases. This determines how long the exporter will have to wait before payment is received and influences the choice of how the transaction is financed. the buyer may have preference for buying from a particular exporter. a sale can be lost. your company must get paid. In other cases. it is very important to consider the effects of tariffs. Methods of Payment Financing Export Transactions Export financing is often a key factor in a successful sale. but might buy your product because of shorter or more secure credit terms. and taxes when determining your product's final cost as they can be high. Exporters should be aware of the many financing options open to them so that they choose the most acceptable one to both the buyer and the seller. government assistance in export financing for small and medium-sized businesses can increase a firm's options. The following factors are important to consider in making decisions about financing: • The need for financing to make the sale. However.

the lender may require the most secure methods of payment. For help in determining which financing options may be available or the most beneficial to your exporting endeavors. D. sellers who are reluctant to extend credit may face the possibility of the loss of the sale to their competitors. A useful guide for determining the appropriate credit period is the normal commercial terms in the exporter's industry for internationally traded products. NATIONAL. Production for an unusually large order. Extending Credit to Foreign Buyers Foreign buyers often press exporters for longer payment periods. Buyers generally expect to receive the benefits of such terms. While it is true that liberal financing is a means of enhancing export competitiveness. normal commercial terms . may present unexpected and severe strains on the exporter's working capital. Moreover. Even during normal periods. the extension of credit by the seller to the buyer is more common outside the United States. and spare parts and components. or for a surge of orders. Your local Small Business Administration office. • The need for pre-shipment finance and for post-shipment working capital. The riskier the transaction. For off-the-shelf items like consumer goods. The Export-Import Bank in Washington. or export credit insurance or guarantee. However. the harder and more costly it will be to finance. Interest rates and fees vary. their effect on price and profit should be well understood before a pro forma invoice is submitted to the buyer. assistance is available through public and private sector resources discussed in this chapter. The political and economic stability of the buyer's country can also be an issue. chemicals. the following sources may be consulted: • • • • • Your banker.C. Where an exporter can expect to assume some or all of the financing costs. agricultural commodities. • The risks associated with financing the transaction. and other raw materials. Your local Department of Commerce Export Assistance Center (EAC). and selected cities. To provide financing for either accounts receivable or the production or purchase of the product for sale. and Your state export promotion or export finance office. inadequate working capital may curb an exporter's growth.• The cost of different methods of financing. exporters need to weigh carefully the credit or financing they extend to foreign customers. a letter of credit (possibly confirmed).

suitable when the purchase involves capital goods and the repayment period extends a year or longer. so the exporter should review with special care any credit terms extended to first-time buyers. The exporter also should recognize that longer credit periods may increase any risk of default. An important reason for controlling the credit period is the cost incurred through use of working capital or through interest and fees. Another way is to expand working capital resources. are often sought to finance export sales until payment is received. A fourth possibility. Once credit terms are extended to a buyer. (An allowance may have to be made for longer shipment times than are found in domestic trade. Exporters should follow the same careful credit principals they follow for domestic customers.range with few exceptions from 30 to 180 days. the exporter must exercise judgement in balancing competitiveness against consideration of cost and safety. If the buyer is not responsible for paying these costs.) Custom-made or high-value capital equipment. including revolving lines of credit for working capital. may warrant longer repayment periods. or other costs by the exporter. A third approach. on the other hand. . Customers are frequently charged interest on credit periods of a year or longer but less frequently on short-term credit (up to 180 days). with the exporter being paid immediately from the loan proceeds while the bank waits for payment and earns interest. An example of this is a bank making a loan directly to the buyer for the product. Most exporters absorb interest charges for short-term credit unless the customer pays after the due date. then the exporter should factor them into the selling price. Converting export receivables to cash at a discount with a bank is one way to do so. when financing is difficult to obtain. because foreign buyers are often unwilling to have the credit period start before receiving the goods. is to engage in counter trade to afford the customer an opportunity to generate earnings with which to pay for the purchase. Commercial Banks The same commercial bank facilities used to finance domestic activities. Some options are more feasible when the amounts are in larger denominations. Thus. is to arrange for third-party financing. fees. they tend to be precedent for future sales. Obtaining cash immediately is usually a high priority with exporters. These options may involve the payment of interest. Exporters should also determine whether they incur financial liability should the buyer default.

The exporter should be knowledgeable about loans from his own bank with Export-Import Bank medium. the exporter may wish to approach a commercial bank with an international department. Generally. Such loans are available for well-established foreign buyers in more stable markets. and ability to perform. the bank's representative handing the exporter's account will not be lodged in the international department. or similar repayment reinforcement. Government agencies that offer export financing assistance. The responsibility for repaying a working capital loan ordinarily rests with the exporter. recourse on the exporter in case of default.and long-term export guarantee programs. to discuss export plans. the bank may require a standby letter of credit. The bank may be willing to raise the overall limit on an existing working capital line of credit. . even if the foreign buyer fails to pay. assuming that the commercial bank is willing to utilize them. or approve a separate line specifically adapted to export-related transactions such as discounting. available banking facilities. The exporter should visit the bank's international department. Alternatively. processing drafts. An exporter shipping capital goods may want the commercial bank to make medium-term loans directly to the foreign buyer to finance the sale. repayment record. including the discounting of drafts. Such a bank will be familiar with export business and also be in a position to provide international banking services related to documentary collections and letters of credit. and about the bank's experience in working with NATIONAL. credit need. the bank will be familiar with the exporter's financial standing. If the bank previously has extended credit to the exporter. A logical first step for an exporter seeking to finance short-term export sales is to approach the local commercial bank with which it already does business. but seek a referral to a correspondent bank that has an international department. An intermediate approach is to retain a relationship with the exporter's bank. expand its scope to cover export transactions. It is to the benefit of the bank and the exporter to improve the quality of the export receivables by using letters of credit by making use of credit insurance. It is in the exporter's best interest to create and foster a close working relationship with the international department. The exporter may wish to inquire about such matters as: fees for amending or confirming a letter of credit. and applicable charges. The bank takes this contingency into account in deciding on an export working capital line of credit. but where there is an element of risk.Banks do not regularly extend financing solely on the basis of an individual order as they prefer to establish an ongoing business relationship. or by using Export-Import Bank or Small Business Administration working capital guarantees.

This in effect converts the time draft into immediate cash. The amount received by the exporter is less than the face value of the draft. As another course of action. Only a few well-known banks are accepted in the market as "prime-name" banks for purposes of creating banker's acceptances. the specific arrangements should be verified by the exporter. The difference. Other Private Sources Factoring. market. and European forfeiting houses. bank presents relatively little risk of default." represents interest and fees that the bank charges for holding the draft until maturity. are active in the NATIONAL.Discounting and Banker's Acceptances A time draft under an irrevocable letter of credit confirmed by a NATIONAL. Factoring of foreign accounts receivable is less common than factoring of domestic receivables. of longer term accounts receivable or promissory notes of the foreign buyer. . The exporter transfers title to its foreign accounts receivable to a factoring house (an organization that specializes in the financing of accounts receivable) for cash at a discount from the face value. and Confirming Factoring is the discounting of a foreign account receivable that does not involve a draft. so an exporter may be willing to hold such a draft until it matures. a commercial bank may undertake to accept the obligation of paying a draft for a fee. which purchase the instruments at a discount from the exporter. time drafts from an exporter that a creditworthy foreign buyer has accepted or agreed to pay at a specified future date. Because forfeiting may be done either with or without recourse to the exporter. These instruments may also carry the guarantee of the foreign government. or lend against. Unless the exporter has ample funds needed for other purposes. this is called a banker's acceptance. called a "discount. The bank may also require the exporter to reimburse the bank in case the draft is unpaid at the due date. at a discount. the exporter's bank may be willing to buy. the specific arrangements should be verified by the exporter. Forfeiting is the selling. holding drafts will use up working capital. Although factoring is sometimes done without recourse to the exporter. Banker's acceptances are usually in large denominations. Forfeiting. Both NATIONAL. In a third instance.

some banks allow only a single transfer or assignment of a letter of credit. Letters of credit that allow for progress payments upon inspection by the buyer's agent or receipt of a statement by the exporter that a certain percentage of the product has been completed are not uncommon. forwarding fees. can help finance export sales.Confirming is a financial service in which an independent company confirms an export order in the seller's country and makes payment for the goods in the currency of that country. confirming means that the entire export transaction from plant to end user can be fully coordinated and paid for over time. inland. air. . However. many export intermediaries. such as export trading companies (ETCs) and export management companies (EMCs). Among the items eligible for confirmation (and thereby eligible for credit terms) are the goods themselves. which also reduce other financing requirements. In addition. Some of these companies may provide short-term financing or may simply purchase the goods to be exported directly from the manufacturer. Export Intermediaries In addition to acting as export representatives. custom brokerage fees. Therefore. Buyers and Suppliers as Sources of Financing Foreign buyers of capital goods may make down payments that reduce the need for financing from other sources. the exporter should investigate the policy of the bank that will be advising or confirming the letter of credit. suppliers may be willing to offer terms to the exporter if they are comfortable that they will receive payment. thus eliminating any risks associated with the export transaction as well as the need for financing. and ocean transportation costs. Suppliers may be willing to accept assignment of a part of the proceeds of a letter of credit or a partial transfer of a transferable letter of credit. Nevertheless. and duties. buyers may make progress payments as the goods are completed. where offered locally. Some of the larger companies may make counter trade arrangements that substitute for financing in some cases. Although confirming is common in Europe. In addition. it is still in its infancy in the United States. These three financing options are less frequently encountered and less widely available than commercial bank financing. they help fill a financing gap for exporters. For the exporter.

OPIC provides specialized assistance to NATIONAL. Department of Agriculture offers several medium. goods and services are reluctant to provide the financing without support from a NATIONAL. as well as large. Government agency. The Small Business Administration (SBA) offers programs to address the needs of smaller exporters. firms and thereby seeks to give a NATIONAL. as well as a number of state and local ones. With few exceptions.and long-term credit for durable goods. Other agencies fill various market niches. The following descriptions provide a basic overview of government financing programs. The NATIONAL. Government programs generally aim to improve exporters' access to credit rather than to subsidize the cost at below-market levels. In other cases. offering numerous programs to address a broad range of needs and small and medium-sized. lenders to a foreign buyer of NATIONAL. the Export-Import Bank (Ex-Im Bank) is the federal government’s largest and most comprehensive trade finance agency. exporters. and with an exporter's ability to be paid. export counseling is available through its extensive network of EACs (Export Assistance Centers). Lenders concerned with an exporter's ability to perform under the terms of sale. firms through its performance bond and contractor insurance programs for NATIONAL. imprint on project feasibility studies and design (see Although the Department of Commerce does not offer any financing programs of its own.and long-term credit programs to foster agricultural exports. banks are allowed to charge market interest rates and fees including fees paid to the government agencies to cover the agencies' administrative costs and default risks.Government Assistance Programs Several federal government agencies. often use government programs to reduce the risks that would otherwise prevent them from providing financing. exporters. investments abroad that also can be accessed by NATIONAL. In overview. Some are guarantee programs that require the participation of an approved lender. offer programs to assist exporters with their financing needs. Other guarantee and loan programs extend medium. . Credit insurance protects against default on exports sold under short-term credit. others provide loans or grants to the exporter or a foreign government. Government guarantee and insurance programs are used by commercial banks to reduce the risk associated with loans to exporters. The Trade Development Administration provides grants for project planning activities conducted by NATIONAL.

exportable inventory purchased with the proceeds of the loan. raw materials. but a longer period of renewals may be arranged. the insurance protects short-term credit extended for the sale of consumer goods. If the exporter defaults on a loan guaranteed under this program. Ex-Im Bank insurance premiums reflect various risk factors. Another policy. such as war and expropriation. If the buyer fails to pay. and other items normally sold on terms of up to 180 days. Coverage is also available for some bulk commodities sold on 360-day terms and for capital and quasi-capital goods sold on terms of up to five years. Ex-Im Bank's policies generally cover up to 100 percent of defaults due to specified political risks. Exporters generally must meet NATIONAL. the Umbrella Policy enables an administrator to handle most administrative duties for a group of exporters. and up to 95 percent due to defaults arising from other commercial risks.thereby reducing the lender's overall risk. such as buyer default and insolvency. Ex-Im Bank insurance policies for exporters include the Small Business Policy. In keeping with insurance principals. The Working Capital Guarantee Program can be used either to support ongoing export sales or to meet a temporary cash flow demand arising from a single export transaction. content requirements and. Post-export Financing Ex-Im Bank offers commercial and political risk insurance. an exporter can assign the rights to any proceeds to a lender as collateral for financing. The loan principal can be up to 100 percent of the value of the collateral put up by the exporter. including length of credit period. as well as finance short-term accounts receivable.generally. Under the majority of policies. Single-Buyer Policy. Eligible collateral includes foreign receivables. . a relatively generous percentage. The term of the guaranteed line of credit is generally one year.Pre-export Financing The Working Capital Guarantee Program enables lenders to provide financing an exporter needs to purchase or produce a product for export. and the country of the buyer. under some policies. Ex-Im Bank insurance is by far the largest federal program supporting short-term export credit. With prior written approval. Ex-Im Bank seeks a reasonable spread of risk among the different export markets and avoids unduly concentrated credit exposure. and Multi-Buyer Policy. must insure all eligible foreign sales. commodities. payment method. spare parts. 90 percent of the loan . Ex-Im Bank reimburses the exporter in accordance with the terms of the policy. Ex-Im Bank reimburses the lender for the guaranteed portion . and goods in production.

must bear a reasonable assurance of repayment. with the important difference that the bank sets the interest rate in accordance with international agreements. and transport facilities and equipment. the bank will help develop an appropriate project structure that offers the requisite reasonable assurance of repayment. the remaining 85 percent is financed. goods and services. dollars or any other freely convertible currency. Ex-Im Bank loans ate made on the same terms and conditions as guarantees. Ex-Im Bank's guarantee covers 100 percent of the political and commercial of default on the principal on loans. A minimum 15 percent cash payment is required from the buyer. In some cases. over five and up to ten years repayment) for heavy equipment and capital projects such as power plants. Ex-Im Bank offers its guarantee to encourage banks and other lenders to make export loans to creditworthy foreign buyers of NATIONAL. Ex-Im Bank guarantees loans made in NATIONAL. To satisfy this requirement. telecommunications systems. Ex-Im Bank's guarantee supports either medium-term financing (one to five years repayment after delivery or equipment installation) or long-term financing (in most cases. Ex-Im Bank also extends medium. Under Ex-Im Bank's project loan program for major projects lacking a sovereign guarantee.Several private companies also offer export credit insurance covering political and commercial risks. Often. Ex-Im Bank may require credit enhancements such as a counter-guarantee by the government or by a creditworthy party. $1..and long-term loans of its own as an alternative to its guarantees. by law. . Coverage for contract repudiation and wrongful calling of a bid or performance bond may also be available in the private market. In fiscal year 1996. Under a separate program. Ex-Im Bank charges a fee for its guarantee depending on the risk it assumes and the duration of the credit. Private insurance is available for established exporters with a proven track record. although underwriting capacity in particular markets may be limited. Coverage for the loan's interest is also provided. often at competitive premium rates. Ex-Im Bank takes into consideration the financial soundness of the credit recipient and capacity to repay the export debt supported by Ex-Im Bank. Contact an insurance broker for more information. an Ex-Im Bank guarantee results in an all-in cost that is lower than an Ex-Im Bank loan. Lenders charge the market rate for interest on the loan.2 billion in loans and $6 billion in guarantees were approved by Ex-Im Bank. Ex-Im Bank guarantees and loans.

Multilateral Development Banks
The Multilateral Development Banks (MDBs) are international financial institutions owned by member governments. Their individual and collective objective is to promote economic and social progress in their developing member countries. The MDBs (African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank, and the World Bank Group) achieve this objective by providing loans, technical cooperation, grants, capital investment, and other types of assistance to governments, government agencies, and other entities in their developing member countries. The practical expression of MDB support usually takes the form of a project or study. Increasingly, the MDBs are providing funding to private sector entities for private projects in developing countries. A growing number of companies and project developers around the world are taking advantage of this funding, which is secured based on the financial, economic, and social viability of the projects in question. The MDBs have been traditionally been heavily involved in infrastructure and poverty-alleviation projects. All of the banks support projects in the following sectors: agriculture, energy, environment, finance, industry, transportation, telecommunications, health, education, urban development, tourism, micro enterprise, and public sector, as well as other types of economic reform. All of the banks provide some funding for private ventures. The design and execution of MDB-financed public sector projects affords lucrative business opportunities for suppliers, consultants, and contractors from MDB member countries. Many of the goods and services required for these projects are procured or purchased through International Competitive Bidding (ICP) or open tendering. These methods require notification to the international community that a contract is being let; the notification is to provide potential bidders with timely and adequate notification of a purchaser's requirements and an equal opportunity to bid. The MDBs also provide debt, equity, and guarantee financing to eligible private ventures in developing countries. These funds, offered on commercial terms, can be accessed directly by private project sponsors and do not require a government guarantee. The NATIONAL. Government organization responsible for assisting American businesses pursue MDB opportunities is the Multilateral Development Bank Operations (MDBO) office within the NATIONAL. Department of Commerce's International Trade Administration.

The MDB Counseling Center is the Commerce Department's centralized repository of electronic and hard copy information on MDBs. In addition to basic brochures provided by each of the MDBs, the Counseling Center supplies specific project information and "how to" guides written by MDBO and commercial liaison staff. Additionally, the Counseling Center provides electronic access to MDB information via the Commerce Department's National Trade Data Bank (NTDB). There is a section on the NTDB devoted exclusively to the MDBs, which includes the Monthly Operational Summary for each bank.

State and Local Export Finance Programs
Several cities and states have funded and operate export financing programs, including preshipment and post shipment working capital loans and guarantees, accounts receivable financing, and export insurance. To be eligible for these programs, an export sale must generally be made under a letter of credit or with credit insurance coverage. A certain percentage of state or local content may also be required. However, some programs may require only that certain facilities, such as a state or local port, be used; therefore, exporters may have several options. As exporters have several options for financing, they should contact a Department of Commerce EAC (Export Assistance Center) or their state economic development agency for more information.

After-sales Service
Quality, price, and service are three factors are critical to the success of any export sales effort. Quality and price are addressed in earlier chapters. Service, which is addressed here, should be an integral part of any company's export strategy from the start. Properly handled, service can be a foundation for growth. Ignored or left to chance, it can cause an export effort to fail. Service is the prompt delivery of the product. It is courteous sales personnel. It is a user or service manual modified to meet your customer's needs. It is ready access to a service facility. It is knowledgeable, cost-effective maintenance, repair, or replacement. Service is location. Service is dealer support. Service varies by the product type, the quality of the product, the price of the product, and the distribution channel employed. For export products that require no service - such as food products, some consumer goods, and commercial disposables - the issue is resolved once distribution channels, quality criteria, and return policies have been identified.

On the other hand, the characteristics of consumer durables and some consumables demand that service be available. For such products, service is a feature expected by the consumer. In fact, foreign buyers of industrial goods typically place service at the forefront of the criteria they evaluate when making a purchase decision. All foreign markets are sophisticated, and each has its own expectations of suppliers and vendors. NATIONAL. manufacturers or distributors must therefore ensure that their service performance is comparable to that of the predominant competitors in the market. This level of performance is an important determinant in ensuring a reasonable competitive position, given the other factors of product quality, price, promotion, and delivery. An exporting firm's strategy and market entry decision may dictate that it does not provide aftersale service. It may determine that its export objective is the single or multiple opportunistic entry into export markets. Although this approach may work in the short term, subsequent product offerings will be less successful as buyers recall the failure to provide expected levels of service. As a result, market development and sales expenditures may result in one-time sales.

Service Delivery Options
Service is an important factor in the initial export sale and ongoing success of products in foreign markets. NATIONAL. firms have many options for the delivery of service to foreign buyers. A high-cost option - and the most inconvenient for the foreign retail, wholesale, commercial, or industrial buyer - is for the product to be returned to the manufacturing or distribution facility in the United States for service or repair. The buyer incurs a high cost and loses the use of the product for an extended period, while the seller must incur the export cost of the same product a second time to return it. Fortunately, there are practical, cost-effective alternatives to this approach. If the selected export distribution channel is a joint venture or other partnership arrangement, the overseas partner may have a service or repair capability in the markets to be penetrated. An exporting firm's negotiations and agreements with its partner should include explicit provisions for repairs, maintenance, and warranty service. The cost of providing this service should be negotiated into the agreement. For goods sold at retail outlets, a preferred service option is to identify and use local service facilities. Though this requires up-front expenses to identify and train local service outlets, the costs are more than repaid in the long run.

and supervisory overhead costs associated with such a warranty and service program. For the many NATIONAL. and about the firm's experience in servicing similar products. however. models. a leading Canadian manufacturer of consumer personal care items uses NATIONAL. Such on-site service may be available from service organizations in the buyer's country. There are administrative. exporters should keep this example in mind when entering foreign markets. NATIONAL. If the product being exported is to be sold directly to end users. training. or a market should be based not only on the distributing company's ability to sell effectively but also on its ability and willingness to service the product. administration. cities to provide service or replacement for its product line. Exporting a product into commercial or industrial markets may dictate a different approach. companies that sell through distributors. it may become cost-effective for a NATIONAL. the manufacturer can include a certificate with each product listing "authorized" local warranty and service centers. about training practices for service personnel. or the exporting company may have to send personnel to the site to provide service. is that the company is now perceived to be a local company that competes on equal footing with domestic NATIONAL. selection of a representative to serve a region. company to establish its own branch or subsidiary operation in the foreign market. The sales contract should anticipate a reasonable level of on-site service and should include the associated costs. provided that personnel are . The benefit. At some level of export activity. distributors and sales representatives to generate purchases by large and small retailers across the United States. Consequently. exporter must be prepared. The nature of the product may require delivery of on-site service to the buyer within very specific time parameters. The Canadian firm contracted with local consumer electronic repair facilities in leading NATIONAL. Assessing that ability to service requires that the exporter ask questions about existing service facilities.For example. manufacturers. a nation. most of whom are local nationals in the market. The products are purchased at retail by individual consumers. and age of existing service equipment. This high-cost option enables the exporter to ensure sales and service quality. about the types. These are negotiable issues for which the NATIONAL. The branch or subsidiary may be a one-person operation or a more extensive facility staffed with sales. This practice is accepted by small and large exporters alike. Existing performance and service history can serve as a guide for estimating service and warranty requirements on export sales. and sales can be costed accordingly. and other personnel. service. service and timely performance are critical to success.

and long-term success of the NATIONAL. . The benefits of this option include the control it gives to the exporter and the ability to serve multiple markets in a single region. manufacturer's reputation there. Exporters that are considering it should therefore obtain competent legal counsel when developing this joint operating arrangement. For better or worse. antitrust laws. exporter. the quality of service in a country or region affects the NATIONAL. with associated quality and performance. therefore. Care and attention to the development of in-country sales and distribution capabilities is paramount. Another part of the representative agreement may detail the training the exporter will provide to its foreign representative. Manufacturers of similar or related products may find it cost-effective to consolidate service. It is important to promise only what can be delivered. which provides limited immunity from NATIONAL. where the training is provided. and which party absorbs travel and per diem costs Each foreign market offers a unique opportunity for the NATIONAL. and service on an ongoing basis.-based personnel. This detail can include frequency of training. products. A trademark is a mark of source. this option raises a number of issues. Delivery of aftersales service is critical to the near. which must be trained. inspection provisions. It is. the number of people on the staff.trained in sales. Legal Considerations Service is a very important part of many types of representation agreements. Service can be delivered by NATIONAL. because one can argue that. or a jointly owned foreign-based service facility. training programs. imperative that agreements with a representative be specific about the form of the repair or service facility. a foreign facility under contract. Such joint activity may be interpreted as being in restraint of trade or otherwise market controlling or monopolistic. the manufacturer has abandoned the trademark to the distributor. training. and payment of costs associated with maintaining a suitable facility. The depth or breadth of a warranty in a given country or region should be tied to the service facility to which the manufacturer has access in that market. the manufacturer can lose its rights to the product. and support in each export market. Quality of service also affects the intellectual property rights of the manufacturer. within that foreign market. Exporters may wish to consider obtaining an export trade certificate of review. company's efforts in any market. If quality control is not maintained. Despite its cost benefits.

of. and others who are important to the success of the firm in that market. the in-country representative appreciates the attention and understands the importance of the foreign market in the exporter's long-term plans. clients.units 250 200 150 no. Export Items and Manufacturing Units no. such visits help build a strong.units 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 no. Among those persons would be the commercial officer at the Commercial Service's post and representatives of the American Chamber of Commerce and the local chamber of commerce or business association.of. First. Second. As a result. productive relationship.units produced products The data collected in the survey has been plotted as shown in the above graph which indicates that most of the export form Electronic SMEs is on basic component kind of . Analysis & interpretation 1. The benefits of such a program are twofold. executive management learns more about the foreign marketplace and the firm's capabilities.of.Senior personnel should commit to a program of regular travel to each foreign market to meet with the company's representatives. 2.

of. The major export segment includes the chokes .units 237 55 66 44 34 71 87 45 140 34 78 118 120 54 .coils . This indicates that the exports are based on the individual components that are going to be used in other major equipments. s. power supplies and stabilizers.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 product chokes&coils dcpowersupply defence leds nonfervous payphones pco plasticmould powerleds powersavers powersuppilers software tools stabilizers transformers no.items only. power leds.

Products Vs %exports .2.

5 0 % 4 7 % 4 8 % 4 7 .p r o d u c t v s e x p o rts 70% 60% 50% 40% % of exports 30% 20% 10% 0% led s non ferv pay o us ph o nes pco pla stic mo u pow ld e pow rleds ers pow ave rs ers u sof ppiler twa s re t oo sta ls bili tran zers sfo rme rs cho ke dcp s&coi ow ls ers upp ly def enc e 60% 50% 45%45% 40% 55% 45% 50% 50% 4 7 . This is because of the technical known how and experience available with the SMEs.5 0 % 45% % o f E x p o rts n a m e o f th e p r o d u c t According to the survey data the export percentage in higher for non-fervous components.For pco and power savers the experience needs to be gained and new techniques to be implemented to improve the exports . Power leads & transformers.

s.50% 45% 47% 48% 47.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 product Chokes& coils dcpowersupply defence leds nonfervous payphones pco plastic mould powerleds powersavers powersuppilers software tools stabilizers transformers % of Exports 50% 45% 45% 40% 60% 55% 45% 50% 47.50% 50% .

BANK FIN.Bank’s contribution in financing exports Bank's contribution in Financing Exports AB. 2.5048. 9% NSIC. The electronic SMEs participated in the survey are interested both preshipment and post-shipment finance.75. The different financial institutions are their fiancé amount has been plotted in the above graph from which it is evident that most of the SMEs are depending on the nationalized banks or govt. 1% SBH. 0.62.69192. financial institutions like NSIC. 0% HDFC. 1. 0. 33% AB DCB HDFC NSIC SBH SBI The banks involved in export finance are providing diversified support to the different export groups.069. 0. 36% DCB. GRANTED .3.015. 21% SBI. 2.

AB DCB HDFC NSIC SBH SBI TOTAL 1.69192 2.Countries Vs %exports % of exports to countries 70% 60% 50% Export % 40% 30% 20% 10% 0% japan % of exports 45% africa 47% australia 50% dubai 45% england 47% france 60% germany 48% nepal 50% newzeal singapor portugal and e 55% 50% 45% 45% 47% 50% 45% 47% 60% 55% 48% 50% 50% 45% 46% usa 46% Country Country Japan Africa Australia Dubai England France Germany Nepal New Zealand Portugal Singapore Usa % of exports 45% 47% 50% 45% 47% 60% 48% 50% 55% 50% 45% 46% .5048 0.069 2.65072 4.75 7.62 0.015 0.

6 exports 1.02 0. which are going to be assembled in the heavy equipment. exports P ro d u c tio n V s E x p o rts 16 14 12 10 8 6 4 2 0 Ch ok es de & fen Co dc po i ce w e ls cu sto rs up md ply ev no ep nfe lom rvo en us t ca sti led ng s& s pr ec is i pa on yp pla ho st i ne cm s ou lde pc dc om o po ne nts po we rle po ds we rs av po ers we rs up p il so ftw ers ar et oo sta ls b il ize tra rs ns for m er s Amount(in Crores) Total ex ports Total production P rod ucts This is graph indicates the share of exports in the total production capacity of the units. 5.03 0. The reason behind the less export percentage has been assigned to the quality and timely deliver of the units involved.54 1. Portugal.009 0.2025 2 0.9 2.production Vs.591 0. England and Germany. This shows that most of the exports are not even half the production. Total production 3.45 5 0.Most of the export related electronic components are towards the European countries such as France.43 . These exports are mostly in the areas of high precision components.

7.014 9.029 0.0. Most of the SMEs are not having any quality benchmark and not aware of the quality standards to consider the product for exports. where as 55% are looking forward for the assistance in legal and procedural matters of the exports. 2. 40% of the companies visited are looking for financial assistance. 6. The assistance is required both at Pre-Shipment and Post-shipment phases. Marketing strategies adopted for exports are not adequate.16 0.0141 0.00672 4.03 0.6 0. 1.5 0.02 0.06 0. Most of the exports are at sub-components level but not at full product level.08 0. 4. 3. 5. .225 0. The electronic components manufactured here got a very good demand in foreign countries. 8.Findings: The following observations have been made during the project work. The Small and Medium industries are not paying the necessary attention towards the exports.225 0. Most of the SMEs not aware of the procedure involved in the exports.5 0.04 Chapter-5 1.4 0.

9. The interest rates seem to be on higher side in case of NSIC. Each SME should float a web site with all the details of the products with specifications. 10. Suggestions: The following suggestions can be put forward to improve the export capabilities of the SMEs. 1. 11. 7.2. Awareness campaigns should be organized by the institutions such as NSIC. SIDO and other Nationalized Banks related to finance. 3. The period of finance should be of minimum of 6 months instead of 90 days. . 5. 6. 2. All the SMEs shuld make use of new technologies such as IT and internet in their day to day operations. 8. organizations such as NSIC. The timely deliver of the product is very important. Most of the SMEs are looking for an incubator kind of facilities in the first one/two years of their enterprise to participate in exports. The SMEs should participate in international trade fairs/exhibitions. The SMEs opting for exports should have a quality certification such as ISO 9001:2000. legal and procedural assistance available regarding the exports. 4. SMEs should approach the international market as consortia to compete with international players in exports. 12.SIDO and SIDBI should involve in developing export zones related to the products of SMEs. The quality of the product should be given the highest priority. Govt.

3. 10.Keown Scott B.SMART 4. 6. 2. barriers laws) Finance for managers (Harvard business essentials) The essential of finance & accounting for non-financial managers Essentials of corporate finance+ self study CD-ROM +power web Foundations of finance: the logic & practice of financial management Corporate finance Author Kenneth D.3.Johnson frank Reynolds Harvard business school press Edward fields Stephen A. Bibliography (reference books) S. controls.NO 1. Ross Arthur J. Annexure:I QUESTIONER: A SURVEY ON EXPORT DEVELOPMENT FINANCING FOR NSIC-HYDERABAD 1) Name of the company: 2) Address: . 4. 8. 7. Name of the book Building an import/export business import/export (how to get started in international) Start your own import/export business Export/import procedures and documentation Managing exports (navigating the complex rules. 5. Nelson Joann Padgett Thomas E.weiss Carl A. 9.

3) Name of the CEO/Manager: 4) Products/Services oriented: Products Services 5) If Product oriented. 12) Any export development finance is taken: Yes No 13) Are you planning any exports in near future (Specify the period in months): 14) Name of the Bank or Institution provided Export development finance: 15) Are you looking for any finance regarding the exports (expected): Yes 16) What kind of finance is expected? (i) (ii) (iii) Pre-Shipment Post-Shipment Both Yes Yes No No No Yes No 17) Are you aware of NSIC schemes: 18) Are you registered with NSIC: 19) Under which schemes you are registered : 20) Quantity of Production per year: 21) How much % of your production intended for exports: 22) Shipment mode: 23) Post shipment difficulties: 24) Pre-shipment problems if any: 25) If you are looking for pre-shipment finance. mention the types of services provided: 7) What is the turn over (approximate)? 8) Are involved in exports: 9) Mention the names of the countries: 10) What products you are exporting 11) Since how long you are involved in exports. Mention the amount expected: . mention the name of the products manufactured: 6) If Service oriented.

co-sponsored by local governments/associations).26) If you are looking for post-shipment finance Mention the amount expected: 27) What kind of further services regarding exports you are looking for: 28) Is Financing Obtained Through Other Public Funded Programs (like SME support institutions.(Select your option on the scale of 5 ) Very Poor Quantity: Quality: 1 1 Poor 2 2 Average 3 3 Good 4 4 Very Good 5 5 32) Please rate indigenous industrial management capabilities to develop. produce. 29) If yes. and market technology-intensive products Very Poor 1 33) Any Suggestions: Poor 2 Average 3 Good 4 Very Good 5 Date: Signature: LIST OF COMPANIES VISITED S. which ones? What are their terms and instruments? 30) Is Self-Financing an Important Factor in Business Financing? Yes No Yes No 31) Please rate the quantity and quality of skilled manufacturing labor available in this country.NO 1 2 NAME OF THE COMPANY KWALITY PHOTONICS PVT.LTD JAYA ENTERPRISES .

LTD TWIN DATA SYSTEMS PVT LTD SCALE MASTER ADLAM PVT.LTD ELECTRO MECHANO APOLLO COMPUTING LABORATORIES DECCAN POWER PRODUCTS CD ELECTRO DEVICES PVT LTD ATLANTA SYSTEM INTERGRAPH PVT.3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 SERVO MAX INDIA LTD BHAGYA LAKSHMI INDUSTRIES POWER TRONICS META SUN ELECTRICAL ELECTRO MAGNETIC DEVICES ELMAS POWER SYSTEM VERATRONIKS KAVDEVI SPECK SYSTEMS LTD TOUCH STONE ELECTRONICS PVT. LTD Appendix :II SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) .

SIDBI has a license to deal in foreign exchange as a "restricted" Authorized Dealer (i. . Assistance in Rupees is also considered. The Mumbai Head Office (MHO) of SIDBI operates as a Category 'A' branch that maintains foreign currency positions.SIDBI SCHEMES 1.e. nostro account with foreign correspondent banks and provides cover to other branches (Category 'B' branches) that carry out forex business. SIDBI confines its foreign exchange activities only to its own exposures and to exposures for its customers. independent of foreign currency limits. International financing The main objective of the various International Finance schemes is to enable small-scale industries to raise finance at internationally competitive rates to fulfill their export commitments. It has a Dealing Room at Mumbai that acts as a central service provider to all branches. The financial assistance is being offered in USD and Euro currencies.

100 lakh Norms Need based limit.75% over 6 Month of FC limits.2. For PSCR . profit making units with proven track record in exports for last three years and sound financial position b. 3. POSTSHIPMENT CREDIT IN FOREIGN CURRENCY (EBF)/RUPEE (PSCR) Purpose To provide post-shipment credit in foreign currency at internationally competitive rates of interest by discounting of usance export bills / purchase of sight/demand export bills and negotiation of bills under LCs. requirement of export finance assistance of at least Rs. Assistance in rupees is also considered Rate For EBF Not exceeding independent of 0. interestLIBOR. depending on the normal trade terms and credit period given to overseas buyers by exporters not exceeding 180 days. Eligible Borrowers All SME units and Export / Trading houses sourcing their requirements from SMEs with a. PRE SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC)/RUPEE (PCR) .As per RBI guidelines and the score chart introduced by SIDBI.

Quantum Period Margin of Credit need based linked minimum to linked production 10% to cycle and working (Maximum capital 180 gap. . Assistance in Rupees is also considered independent of FC limits. profit making units with proven track record in exports for last three years and sound financial position b.Purpose To enable Small scale industries to raise finance at internationally competitive rates as per Reserve Bank of India guidelines to fulfill their export commitments. requirement of export finance assistance of at least Rs.by discounting / negotiation of Export bills within a maximum period of 180 Rate For PCFC of Not exceeding interest 0. days) 25% maximum Repayment .75% over 6 Month LIBOR.100 lakh Norms Pre-shipment Credit in Foreign Currency (PCFC) is being extended in USD & EURO Currencies.As per RBI guidelines and the score chart introduced by SIDBI. days For PCR . Eligible Borrowers Industrial concerns in the small scale sector and Government recognized Export / Trading Houses sourcing their requirement for export from SME sector with a.

4.0% over 6 month LIBOR for USD and Euro. linked to the cash flow of the unit. FOREIGN CURRENCY TERM LOAN SCHEME (FCTL) FCTL will be extended in USD & Euro currencies. Eligible Borrowers Industrial concerns in the SME sectors. diversification.5% to 4.maximum 5 years with a moratorium of 1 year. For acquisition of fixed Assets Purpose For setting up new projects as well as for expansion. . technology up gradation and modernization of existing units with good track record covering both indigenous and imported.Market related rates up to 3. The units should preferably be export-oriented. Rate of interest :. Norms Repayment .

diversification. OPENING OF FOREIGN LETTERS OF CREDIT(FLCS) Purpose To enable small scale industries to import capital equipment for new projects. 5. . expansion. To enable import of raw materials.For Working capital purposes Purpose For meeting working capital requirements. consumables etc.maximum 5 years. both indigenous and imported. Norms Repayment . by SME units and Export / Trading Houses sourcing their requirements for export from SMEs Eligible Borrowers Industrial concerns in the small scale sector and Export / Trading Houses sourcing their requirements from SME sector. Eligible Borrowers SME units and Export / Trading Houses sourcing their requirements for export from SME sector and having consistent export performance. technology up gradation and modernization of existing units.

000 or equivalent. EUR. LINE OF CREDIT FOREIGN CURRENCY TO COMMERICAL BANKS (LOCFC) .As per FEDAI guidelines Lending Institutions 6. Amount . Margin .minimum of USD 25. however FLCs for lesser amounts may be considered on case to case basis. JPY LC in other convertible currencies are also opened subject to the cross currency exchange risk being borne by the importer.Norms Currency USD.100% or backed by a term loan or Pre-shipment credit limits sanctioned by SIDBI/Primary Charges .

.Purpose For providing resource support to institutions/banks for extending export and domestic credit to SME units.Market related spread over 6 Month LIBOR. Norms Currency Amount Validity One year or shorter period USD / Need from the date of EURO based sanction Rate of interest . Eligible Borrowers All Commercial bank in private and public sector and approved factoring companies. Government recognized Export Houses / Trading Houses sourcing their requirements from SSIs.

However Forward Contracts for lesser amounts may be considered on case to case basis. BOOKING OF FORWARD CONTRACT Purpose To provide SIDBI's clients with the facility of hedging of foreign exchange risks related to their import / export transactions. Norms Currency Presently can be booked in USD / EURO / JPY Amount . Charges . Eligible Borrowers Assisted borrowers having exposure in foreign currency.7.As per FEDAI guidelines .Minimum of USD 25.000 or equivalent.

8. MARKETING FINANCE A.MARKETING FUND FOR WOMEN OBJECTIVE .

track record of performance and viability of future operations. etc. warehousing. ELIGIBLE BORROWERS • • SSI units managed by women entrepreneurs. SIDBI could also consider. on a selective basis. common testing centers. both in domestic and international markets. CONSORTIA Organizations / Associations / Women Groups / Marketing Consortia that have an exclusive marketing mandate and have. as their vendor base. common testing centers. warehousing. etc. exhibitions. marketing research. trade related information. seminars. DEVELOPMENTAL ASSISTANCE Besides providing financial assistance as mentioned above. • Marketing related service providers Organizations / units in the corporate / co-operative / NGO sectors which are providing support services like internet. developmental assistance by way of soft loans/grants for organizing group activities and programmers such as trade fairs. . training programmers. advertising. to promote marketing of products manufactured by women entrepreneurs. Marketing related service providers Organizations / units in the corporate / co-operative / NGO sectors which are providing support services like internet. to enterprises owned and managed by women. While the terms and conditions for sanction of assistance would be flexible. advertising. workshops. etc.The assistance under the in Fund is available of to women entrepreneurs by and organizations involved marketing products manufactured women entrepreneurs to increase their reach. to enterprises owned and managed by women. a wide range of small and tiny units owned and managed by women entrepreneurs. trade related information. marketing research. they would essentially depend upon the soundness of the management. buyer-seller meets.

B. infrastructure and support services to industrial concerns in the small scale sector. New units could also be considered on a selective basis. • Specialized organizations incorporated as corporate entities and providing marketing assistance. PURPOSE • Assistance under the scheme may be availed of for undertaking various marketing related activities such as: .MARKETING OF SSI PRODUCTS OBJECTIVE • To provide financial assistance to SSI units to undertake various activities necessary to increase their sales turnover in the domestic and export markets. • To finance corporate entities to enable them to provide support services and/or infrastructural facilities to small scale sector to improve its marketing capabilities ELIGIBLE BORROWERS • Existing SSI units in the small scale sector with a good track record and sound financial position are eligible for assistance under the scheme.

1. Marketing research. 2. R & D, product up gradation and standardization. 3. Preparation of strategic marketing plan 4. Advertising, branding, catalogue preparation, production of audiovisual aids, etc. 5. Participation in trade fairs and exhibitions, undertaking sales promotion tours, etc. 6. Establishing distribution network including showrooms/retail outlets and warehousing facilities. 7. Training of personnel in activities relevant to marketing etc. • For setting up new showrooms and/or renovation of existing showrooms for marketing predominantly small scale, cottage and village industry products. Such showrooms could be set up within the country or abroad. • Development of infrastructure like permanent exhibition centers, industrial parks e.g. garment and software parks, marketing emporia, design and fashion forecasting studios, auction houses (say for floriculture products), container depots and container freight stations and trade centers (within India and abroad) Such infrastructural projects should largely benefit the small scale, cottage and village industries. • • Setting up of facilities for providing marketing support to SSI units, e.g. data bank, libraries, internet services, etc. Any other activity directed towards promoting the marketing of SSI products in domestic or international markets.

AMOUNT OF LOAN Would be need based, but would not normally be below Rs. 10 lakh per borrower. PROMOTER'S CONTRIBUTION As may be requested to arrive at a Debt Equity Ratio of not more than 2 : 1. RATE OF INTEREST

May be fixed in a broad band up to 3.5% above the applicable prime lending rate SECURITY Exclusive charge over the assets acquired out of the loan; first/second charge on existing fixed assets and other collateral security as may be deemed necessary PERIOD OF INTEREST This may vary from three to eight years with a moratorium up to one year.

9. OTHER SCHEMES
A.SCHEME FOR DOMESTIC FACTORING (FAC)
Purpose To provide factoring service to the manufacturers in SSI sector supplying their products on credit terms to various purchasers in the domestic market with a view to assisting them in their receivable management as also providing them with finance against the receivables factored. Eligible Borrowers Facilities are extended to existing units in SSI sector - with good track record of performance and sound financial position supplying components/ parts/ accessories/ sub-assemblies etc. on short term credit to well established purchasers units. They should have been in operation for at least three years and have earned profits and/or declared dividend during the two years prior to taking up the scheme. Norms

Sales of the unit should preferably be spread over a minimum of 3 customers with maximum sales concentration in a single buyer being less than 50%. Maximum credit period shall be of 90 days.