Biggest IMPORTER of world-

1) US $119B
2) GERMANY $58.5B
3) JAPAN $36B
4) UK $34B
5) FRANCE $33.9B

Methods of payment.
There are 3 standard ways of payment methods in the export import trade international
trade market:

1. Clean Payment
2. Collection of Bills
3. Letters of Credit L/c

4.1. Clean Payments

5.

6. In clean payment method, all shipping documents, including title documents are
handled directly between the trading partners. The role of banks is limited to
clearing amounts as required. Clean payment method offers a relatively cheap and
uncomplicated method of payment for both importers and exporters.
7. There are basically two type of clean payments:
8. Advance Payment
9. In advance payment method the exporter is trusted to ship the goods after
receiving payment from the importer.
10. Open Account
11. In open account method the importer is trusted to pay the exporter after receipt of
goods.
12. The main drawback of open account method is that exporter assumes all the risks
while the importer get the advantage over the delay use of company's cash
resources and is also not responsible for the risk associated with goods.
13.

14. 2. Payment Collection of Bills in

International Trade
15.

16. The Payment Collection of Bills also called “Uniform Rules for Collections” is
published by International Chamber of Commerce (ICC) under the document
number 522 (URC522) and is followed by more than 90% of the world's banks.
17. In this method of payment in international trade the exporter entrusts the handling
of commercial and often financial documents to banks and gives the banks
necessary instructions concerning the release of these documents to the Importer.
It is considered to be one of the cost effective methods of evidencing a transaction
for buyers, where documents are manipulated via the banking system.
18. There are two methods of collections of bill :
19. Documents Against Payment  D/P
20. In this case documents are released to the importer only when the payment has
been done.
21. Documents Against Acceptance D/A
22. In this case documents are released to the importer only against acceptance of a
draft.
23.

24. 3. Letter of Credit L/c

25.

26. Letter of Credit also known as Documentary Credit is a written undertaking by the
importers bank known as the issuing bank on behalf of its customer, the importer
(applicant), promising to effect payment in favor of the exporter (beneficiary) up to
a stated sum of money, within a prescribed time limit and against stipulated
documents. It is published by the International Chamber of Commerce under the
provision of Uniform Custom and Practices (UCP) brochure number 500.
27. Various types of L/Cs are :
28. Revocable & Irrevocable Letter of Credit (L/c)
29. A Revocable Letter of Credit can be cancelled without the consent of the exporter.
An Irrevocable Letter of Credit cannot be cancelled or amended without the
consent of all parties including the exporter.
30. Sight & Time Letter of Credit
31. If payment is to be made at the time of presenting the document then it is referred
as the Sight Letter of Credit. In this case banks are allowed to take the necessary
time required to check the documents.
If payment is to be made after the lapse of  a particular time period as stated in
the draft then it is referred as  the Term Letter of Credit.
32. Confirmed Letter of Credit (L/c)
33. Under a Confirmed Letter of Credit, a bank, called the Confirming Bank, adds its
commitment to that of the issuing bank. By adding its commitment, the
Confirming Bank takes the responsibility of claim under the letter of credit,
assuming all terms and conditions of the letter of credit are met.
CONTACT DETAILS OF EVERYONE IN SUPPLY CHAIN

Various stakeholders are-

1) Buyer/seller
2) Importer/ exporter
3) Consignee/consignor
4) Ship to/ship from
5) Payor/payee
6) Transport service supplier
7) Freight forwarder
8) Bank
9) Insurance provider
10) Custom agents
11) Broker
12) Commission agent
13) Customs
14) Environment
15) Agriculture
16) Standards
17) Consular
18) Health
19) Port
20) Intervention board
21) Chamber of commerce

THINGS TO CONSIDER WHILE EXPORTING

1. Decide where to sell

Research is vital! Identify the markets with a little desk research. Find the consumption / import
figures of products similar to your own and the economic growth rate of a potential new market.
Look up the demographics, cultural and religious practices and your potential competition.

2. Have a plan
Your export plan should include your people.

Your People
Can someone from your team drive this programme or do you need to recruit?
Your Capacity
Do you have enough capacity to meet a new market’s demands? Do you need to upscale?
Your Packaging
Will your packaging design appeal to your market? Is there a legal requirement to label things
differently or do you need to translate your labelling?
Your Knowledge
Visit your potential new market. Showcase your products at trade fairs and build new contacts.
3. Choose a route to market
You can do one of four options:
1. Sell directly
2. Use a distributor
3. Use a sales agent
4. Create a joint venture.

Whichever option you chose, you must ensure clarity of responsibility for things like delivery and
payment and ALWAYS remember to protect your intellectual property.

4. Find the opportunities

Trade fairs are one of the best ways to find opportunities both in the UK and abroad. Meet buyers
and generate new business. Check with us about available grants to subsidise the cost of
exhibiting, or see if you can share the cost of a stand with another business.

5. Start marketing
Adverts can help you gain exposure but can be expensive. As with the UK, be mindful of the
target audience and expense vs. return on investment. Another option is to create a website with
content translated according to your target market. Global social media sites such as Linkedin,
Facebook and Twitter can also help you to promote your message quickly and free of charge.
Although these do not cost anything to set up, they need time invested to keep updated.
Whatever you use, make sure all your marketing materials have up-to-date contact details for
your company along with the person responsible for export sales.

6. Understand the admin

There are certain admin obligations that need to be correct from the start. HMRC and the UK
Embassy of the destination country will help you to clarify the requirements for customs
registration, forms, and payments.

Documentation is at the very heart of exporting, without it there is no contract, no transport and
no payment. The requirements vary from country to country.

7. Get paid and get insured

Once the orders start to come in, you need to be paid. We can help make sure you do that with:

Incoterms
Internationally agreed rules setting out delivery terms for goods traded across borders. Buyer
and seller agree details on the terms of sale to prevent misunderstandings or disputes. Incoterms
set out responsibility for the cost of transporting goods, insurance, taxes or duties, pick up points,
destinations, and responsibility for the goods at each stage.

Export documentation
Get the right documents to enter the market.

Written quotations
A written quotation must set out the details of your product including the size and packaging
formats, as well as any potential additional cost for providing export labelling and packaging
which you may be charging on to the customer. Setting out the price and delivery terms
(incoterms), the estimated date of shipment on arrival and payment terms and conditions is vital
 to avoid any disputes further down the line. Late, or non-payment of bills is a risk and insurance
could be a consideration. Any new customers requesting a form of trade credit need a credit
check. An irrevocable letter of credit could be advised which will secure payments according to
the terms of the credit and at an agreed rate. Make sure you are insured for your goods during
transportation.

8. Legal considerations 
Understanding the legal and regulatory environment in all countries to which you would like to
export is vital. We can help get your paperwork in place and put you in touch with international
lawyers should it be required.

Things to consider:

Are your product compliance certificates and liability cover valid overseas?
Check your intellectual property rights and registered trademarks.

9. Transport logistics
Now you’ve made the sale and agreed the terms, you have to get the goods there! We can help
make sense of transportation. From your Incoterms insurance, duties and customs clearance, to
the packaging you require and the method(s) of transport or freight forwarders required.

10. Success!
Congratulations. Now you have successfully become an international exporter. The work doesn’t
stop here. Now you need to increase your chances of repeat business and become a reliable
international exporter with a solid brand.

Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that
exporting requires; freight forwarders are specialists in this process. The following documents are commonly used in
exporting; which of them are actually used in each case depends on the requirements of both our government and the
government of the importing country.
1. Commercial invoice
2. Bill of lading
3. Consular invoice
4. Certificate of origin
5. Inspection certification
6. Dock receipt and warehouse receipt
7. Destination control statement
8. Insurance certificate
9. Export license
10. Export packing list

TAXATION ON EXPORTS
Tax concession for export profits

Before GST, duties were imposed even on the export of goods and services. However, as per
the new tax system, the export of goods and services from India to any other place outside
the country are to be treated as ‘zero-rated supplies’. This means that no GST is applicable
for the exporters. The registered taxable individuals that are exporting goods or services to
places outside the country can claim refund.

Finance (No. 2) Act, 1962

By way of rebate of tax

11. Section 2(5) of the Finance (No. 2) Act, 1962 provides for a tax concession in
the case of profits derived from the export of goods or merchandise out of India.
This tax concession will be admissible in the case of all assessees except
companies which have not made the prescribed arrangements for the declaration
and payment of dividends within India. The tax concession has been given in the
form of a rebate of tax which will be equal to the income-tax and super tax
calculated respectively at one-tenth of the average rate of income-tax and the
average rate of super tax on the amount of export profits included in the total
income. If the export profits are set off against any losses in the process of
computing the total income, no tax concession will be available. Rules will be
issued shortly laying down the method as to how the amount of such export profits
should be computed in a case where the assessee derives income by sales in India
in addition to income from exports.

Finance (No. 2) Act, 1962

12. It should be noticed that this tax concession will be available only to the person
who exports the goods or merchandise out of India. If a manufacturer himself
exports the goods or merchandise out of India, he will get the benefit of this
concession. But if he sells such goods or merchandise to another merchant or
manufacturer in India who in turn exports them out of India, it is the latter and not
the former who will get the benefit of the tax concession.

MODE OF TRANSPORTATION

The mode of transport depends on the terms specified in the contract entered between the

exporter and importer. These are the following modes of transport that are normally, mentioned

in the contract.

1. Sea Transport
2. Air Transport

3. Multi Modal Transport

4. Road Transport.

Sea Transport Sea transport involves carriage of goods by the ship from the point of shipment to

port of discharge. The contract of carriage of cargo by sea refers to the contract between the

shipper and shipping company (carrier) for transportation of goods against payment

remuneration, known as freight, to the carrier. The shipper may be exporter or Consignor

becomes the shipper when he is acting on behalf of the exporter. Exporter may enter into the

contract with overseas buyer and later the exporter may enter into another contract with a third

party for execution of the export contract. In such a case, the third party consigns the goods and

sends the bill of lading, duly endorsed, to the exporter for negotiation of documents. In bill of

lading, the third party becomes the consignor. In a similar way, buyer may be buying the goods

on behalf of a customer. In such a case, buyer requests the exporter to send the goods direct to

the customer's destination. With the development of trade, exporter may not be the real supplier

of goods and buyer may not be the actual customer. Exporter and importer may he acting for

different parties and in such an event, goods move direct from the port of actual supply to the

port of destination where the actual consumer is located.

EXPORT CHANNELS

So essentially here we are talking about signing up with two different Export Sales Agreements.
In the first instance the Exporters would need to identify and sign up a Sales Agent or Sales
Representative Agency and a Country Distributor. In some of the markets you might find a
Marketing Agency cum Distributor who is a dominant market player in which case you stand to
benefit from having to deal with one agency. When the Exporter is initially getting a feel of the
markets and is looking to tap the customers he would need to hold the stocks at hand so that he
is able to offer immediate delivery to the new customer and help bag orders. In such cases the
exporter will use a Consignment Agent who will import and hold the consignment on behalf of
the exporter. Once the orders are received and the consignment is delivered, the Consignment
Agent will receive payment from the customer and in turn repatriate the amount received back
to the Exporter after keeping the agreed amount of margin as per his agreement. In such cases
the stocks are owned by the Exporter until it is invoiced by the Consignment Agent to the
Customer. The Consignment agent acts as a custodian of goods only and does not carry any
other ownership. He provides a legal entity for the Exporter to send goods to in the foreign
country and manages the supply chain services as per instructions of the Exporter. The entire
responsibility, risk including marketing, pricing, collections and liquidation of stocks lies with the
Exporter.
Clearance Process at Customs

On arrival of the consignment at the Customs Bond, the Customs carries out physical inspection
as well as valuation of the import. Valuation of the import consists of ascertaining the correct
description of the items, classification of the items under relevant Customs Chapter and Tariff,
Ascertaining that there is no case of under invoicing and certifying the valuation of the
consignment and arriving at the Customs Duty required to be paid. The clearance agency
proceeds to advice and co-ordinate with the importer to make necessary Customs Duty
Payments and takes physical delivery of the Consignment and delivers it to the Importer at the
designated place along with the set of Original documents.

Customs Rules permit a free bonding or warehousing period of three to seven days (depends
from country to country and location). Normally the air shipments are given only three days for
clearance while the sea shipments are given up to seven days of free warehousing in Customs
Bonded Warehouse. The importer through the Customs Clearance agent has to clear the
consignment within the free period, failing which a daily demurrage would be charged on the
consignments for all days up to the time of actual delivery. The demurrage could prove to be
very expensive and hence it is important to ensure that the Customs Clearance Agency is
efficient and knows its job well enough.

Importer cannot be expected to spend his time on getting the consignments cleared after
ensuring that he is compliant with all the processes. Hence the role of the Customs Clearance
Agency comes into the picture for he undertakes to represent the Importer with the Customs
Department and follow through the process.