Beginner’s Guide to Export

Exporting is merely a process of selling goods to buyers in other countries. The difference is, when goods are sold, local compliance of several procedural requirements including filling and submission of documents etc is required. But when the buyer is thousands of miles away, speaking a different language, having different customs, preferences, currency and import regulations, various documents and comprehensive knowledge is required. In order to facilitate trade with other countries, certain sets of rules have been developed by the trading nations over the centuries, which are normally followed in foreign trade today. International Trade as we all know is governed by rules made by the World Trade Organisation (WTO).

SELECTION OF A PRODUCT

To enter the export trade market, the first thing to do is to decide upon the product which is to be exported. If you're a manufacturer, then that decision is already taken care of, if not, then in depth knowledge about the product and sources of supply is a must. If you have varied sources of supply, you will have no problem in procurement and shipment. You can also analyze which products are exported to which country. This information is available in the IAC of EPB. Also monitoring global export trends and import requirements can guide you as to what product can be the next big thing in demand. This will also allow you to have the leverage of time when you start your export process and will probably give you a lead as compared to other exporters.

REGISTRATION FOR EXPORT

Previously it was mandatory to register a firm as an exporter for-five years with EPB. However registration procedures for both imports and exports have been abolished and now registration is not required for either export or import.

SELECTION OF MARKET

In view of scarce resources and shortage of experienced marketing personnel, the exporters should be selective and should concentrate on markets which could yield the best results. For this following factors need to be considered.

* The economic position of the country of residence as well as the country of import.
* Size of the Market and whether it is expanding or shrinking.
* Market growth in a given product.
* Unit price of the product. Whether it is more or less than other countries.
* Import regime in the importing country.
* Location of the market etc.

QUOTING A PRICE

In case of export, price determination is very important. For this, one has to examine several things including the following:

* What price structure to maintain in order to remain competitive globally?
* While calculating prices one has to think about all the costs including, packing, Insurance, credit, agent’s commission, octroi duties, documentation fee, marketing charges, transportation charges, export duties etc.
* In order to avoid exploitation, it is imperative for Pakistani exporters to be updated on the international prices of the said commodity.

SIGNING OF A CONTRACT

There are two modes for payment.

* Direct funds transfer: This funds transfer could be either before the shipment of goods or after, generally referred as Cash Against Documents (CAD).
* Letter of Credit (LC): The customer’s bank provides a ‘letter of credit’, which promises to pay the supplier as long as the terms are met. There are two types of LC, LC sight and LC Deferred payment. The payment may be paid immediately at sight or at a later date.

SIGNING OF A CONTRACT

After prices are accepted, a contract is signed with the firm for supply of goods which becomes binding on both the buyer & seller. A regular contract is a document, which normally contains:

* Name of the exporter.
* Name of the importer.
* Item of sale.
* Unit price.
* Total quantity
* Terms of delivery (FOB, C&F, CIF etc.) Incoterms deal with the questions related to the delivery of the products from the seller to the buyer. This includes the carriage of products, export and import clearance responsibilities, who pays for what and who has risk for the condition of the products at different locations within the transport process. Incoterms are always used with reference to a geographical location and do not deal with transfer of title.
* Mode of shipment (Sea, Air, Road).
* Currency in which the transaction will be made.
* Validity period of a contract & delivery period.
* Shipping marks if any.
* Arbitration clause.

TERMS OF DELIVERY

A contract is signed between the buyer and seller after acceptance of the offer. The contract includes terms and conditions under which goods are delivered.

Normally goods are delivered on FOB basis meaning free on Board at airport or seaport. The charges of the consignment are fully paid up to that point and the rest of the freight is paid by the buyer. Terms of delivery are not only important for quoting a price but it also makes clear as to who is responsible for the goods if anything goes wrong.

FINANCING FOR EXPORT

The exporter should accept order, which can be fulfilled easily. He should have the necessary finances or access to finances for effecting shipment and the capacity to wait till the sale proceeds are received. In this connection, term of payment plays an important role, as it should be timed to keep you solvent at the time of need. For export pre-shipment and post-shipment credits are available from the Government too.

PACKING

Packing should be sea, air and roadworthy. The container should be in a position to carry contents to the destination in perfect condition. For reduction in cost most economical packing material should be used. Pakistan Packing Institute can be a source of information for this.

TRANSPORT

Light and costly items are normally sent by air whereas as heavy items are shipped by sea. In each case the most economical mode should be used to reduce cost.

INSURANCE

Insurance is necessary to recover cost in case of loss. But where the exporters are sure that the chances of loss are minimum they do not insure consignment. Either ways, insurance is always recommended and appreciated.

DOCUMENTATION

The following documents are normally used in exports:

* E-Form (Through authorized Commercial Bank).
* Shipping Bill (Through authorized Clearing agents).
* B/L or AWB (Through clearing agents)
* Commercial Invoice.
* Packing List
* Certificate Country of origin (Through Chamber) or GSP (Through EPB).
* Textile quota Export license/visa document required for textile items under quota restraint.
* Pre-shipment certificate through EPB for certain textile item s for exports to management textile item.
* Export contract registration details

POST SHIPMENT DOCUMENTS

Exporters also have the facility to avail duty draw backs. The following documents are required for that purpose.?

* Textile quota Export license/visa document required for textile items under quota Restraint and 4th copy of shipping (through customs) bill to be used for rebates on bank/sales tax refund/textile quota.
* BCA (Bank Credit Advice) to be received from commercial banks after foreign exchange is received. The BCA is considered proof for the purpose of rebates, refinance scheme etc.

HOW TO CLAIM DUTY DRAWBACKS?

Duty Drawback is the most commonly availed incentive by exporters. It is the amount reimbursed by the government to exporters as compensation for Customs Duty collected at the time of import. For the purpose, FBR sets aside a certain percentage of customs duty collected on imported raw material for increasing export production. The following documents must be in order when Exporter files the claim for export rebate and submits the file to the customs rebate section

* I. Bank Credit Advice (B.C.A).
* Bill of Lading (First Original).
* Railway Receipt (Attested by the Railways).
* Customs Signed Invoice with Two Photocopies.
* Packing List.
* Exchange Rate Certificate
* Copy of Shipping Bill.
* Photo Copy of Form "E".
* IX. Laboratory Test Report. (if required)
* Photocopy of SRO. (relevant to exporter's product)
* Copy of Cross Border Certificate (In case of export through land route).
* Sales Tax Return of clearing agent of previous month (if claim launched through Clearing agent)

The above mentioned procedure describes an ideal export procedure. However, we as an exporting country are far far away from the ideal modes and practices. Nevertheless, it's always good to know one's legal standing before indulging in exports or imports.