Import-export business can be a lucrative venture for those who are willing to put in the time and effort to learn the ropes. However, the world of international trade can be complex and confusing, especially for beginners. In this article, we’ll go over some of the key terms you need to know if you’re starting an import-export business. 1. Tariff A tariff is a tax that a government imposes on imported or exported goods. Tariffs are used to protect domestic industries and generate revenue for the government. When you’re importing or exporting goods, you’ll need to be aware of the tariffs that apply to your products in the countries you’re trading with. 2. Customs clearance Customs clearance is the process of getting your goods through customs when they enter or leave a country. This involves submitting the necessary paperwork and paying any applicable fees, such as tariffs and taxes. Customs clearance can be a complex and time-consuming process, so it’s important to work with a reliable customs broker who can help you navigate the process. 3. Bill of lading A bill of lading is a legal document that serves as proof of shipment and ownership of goods. It contains details such as the name of the buyer and seller, the description of the goods, and the shipping route. A bill of lading is required for most international shipments. 4. Certificate of origin A certificate of origin is a document that certifies the country in which the goods were produced. This document is important for customs purposes, as it helps to determine the applicable tariffs and duties. 5. Free trade agreement A free trade agreement is an agreement between two or more countries to eliminate or reduce trade barriers, such as tariffs and quotas. Free trade agreements can make it easier and less expensive to import and export goods between the participating countries. 6. Incoterms Incoterms are a set of standardized trade terms that define the responsibilities of buyers and sellers in international transactions. They cover important aspects such as delivery, risk, and costs. It’s important to understand and use the correct Incoterms when conducting international trade. 7. Import duty An import duty is a tax that a country imposes on imported goods. The amount of the duty can vary depending on the type of goods and the country of origin. Import duties can have a significant impact on the cost of goods and the profitability of an import-export business. 8. Export license An export license is a document that authorizes the export of certain goods. Some goods require an export license due to their strategic or sensitive nature. It’s important to be aware of the export licensing requirements for the goods you’re exporting. 9. Harmonized System (HS) code The Harmonized System (HS) code is a standardized system of numerical codes used to classify goods for customs purposes. The HS code is used to determine the applicable tariffs and duties for imported and exported goods. 10. Letter of credit A letter of credit is a financial instrument that guarantees payment to the seller in a transaction. It provides assurance to the seller that they will be paid, and to the buyer that the goods will be delivered as agreed. Conclusion Starting an import-export business can be a challenging but rewarding venture. By understanding the key terms and concepts related to international trade, you can navigate the complex world of customs, tariffs, and regulations with more confidence. Whether you’re importing or exporting, it’s important to work with knowledgeable professionals who can help you avoid costly mistakes and ensure a successful transaction. VRDA PRIME OVERSEAS PVT LTD helps Import/Export companies by providing onboarding services.

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The key drivers behind growth in exports have been higher shipments of engineering goods, petroleum products, gems and Jewellery and textiles and garments. A sharp rise in demand from the US, UAE and China have led to an increase in demand for engineering goods this fiscal, according to the Engineering Exports Promotion Council. Engineering goods exports rose 58.8 per cent over that in August 2020. Petroleum product exports rose 139.8 per cent, bolstered both by a recovery in demand for mobility and a sharp uptick in the price of crude oil and petroleum products compared to the year ago period. Exports of gems and jewellery rose 88 per cent on the back of renewed demand compared to the year-ago period. While total exports during the first five months have risen by 23 per cent compared to April-August in FY20, non-oil and non-jewellery exports have risen by only 3.3 per cent, indicating that higher crude oil prices and a recovery in demand for gems and jewellery have played a significant role in pushing up the overall value of exports.

For an exporter, shipping goods or providing services to an overseas buyer and then receiving payment for it is separated by a significant period of waiting. During this period, what does the exporter do about his working capital needs? He doesn’t wait out the credit period, that’s for sure. Instead, he might opt for trade finance. Trade finance is a collective term for a wide range of financial tools – cash, credit, investments, etc – available to exporters and importers to facilitate trade. Among the various trade finance tools available, post-shipment credit is popular among exporters. In this piece, we will discuss the various types of post-shipment credit available, where you can avail of them, and how they will help you.     What is post-shipment credit? The Reserve Bank of India (RBI) defines post-shipment credit as: “Any loan or advance granted or any other credit provided by a bank to an exporter of goods/services from India from the date of extending credit after shipment of goods/rendering of services to the date of realisation of export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on the security of any duty drawback allowed by the government from time to time.” In simpler terms, this is how post-shipment credit works: ‍ Why do you need post-shipment credit? ‍ Types of post-shipment credit 1. Export bills purchased/discounted/negotiated In the first two instances, the exporter submits the bill of lading or airway bill, commercial invoice, packing list, certificate of origin, purchase order and other necessary export documents with the bank. The bank extends post-shipment credit at a concessional interest rate by purchasing or discounting these bills. In the third option (export bills negotiated), finance is provided under a letter of credit – a document issued by the importer’s bank (called an issuing bank) as a promise to pay the exporter an agreed upon sum of money. Post-shipment credit under a letter of credit is considered more secure as the issuing bank guarantees payment to the lending bank.    2. Advances against bills for collection Instead of submitting export bills for discount or purchase, the exporter may arrange for them to be sent to the overseas buyer for collection of payment. In such a scenario, the bank grants the exporter an advance against a portion of the collection bills. When payment is received from the importer, it is credited as post-shipment credit. Exporters use this option when there are discrepancies in bills drawn under the letter of credit.        3. Advances against duty drawback receivable from government In India, duty drawback is a government scheme that supports exports by offering exporters a rebate on customs and excise duties charged on imported or excisable material used in the production of goods meant for export. It is disbursed by the customs department on submission of export documents. Banks offer credit against such duty drawback receivable from the government after confirming the exporter’s eligibility. The lending bank must also be authorised to receive the claim amount from the concerned government authority.    4. Advance against export on consignment basis Banks also extend post-shipment credit against exports made on consignment basis – which means the exporter ships the goods to an agent, who sells the goods and makes remittances to the exporter as and when the goods are sold. The exporter receives payment only for the quantity that gets sold. Precious and semi-precious stones, tea, coffee, and wool are examples of goods exported on consignment basis. To avail of post-shipment credit against such exports, the exporter must provide an undertaking that the sales proceeds will be delivered by a specified date. The advance is adjusted against the proceeds realised later.                 5. Advance against undrawn balance In some cases, exporters leave a small portion of the invoice value undrawn for final adjustments towards differences in exchange rates, consignment weight, quality factors, and so on. This undrawn balance is usually 10 percent of the total invoice value. Banks offer advances against undrawn balances provided the exporter gives an undertaking that they will make good on the balance amount within six months of the payment due date or date of shipment, whichever is earlier. The lender also takes into account the importer’s track record before making such an advance. Who can get post-shipment credit? ‍ Where can you get it from? It isn’t just banks that offer post-shipment credit, or any other kind of trade finance. You can also approach a non-banking financial corporation (NBFC) or foreign trade lender for it: ‍ What documents are required for post-shipment credit? You will be expected to submit shipping documents that serve as evidence that the goods have been shipped for export. These include: Apart from these documents, the lender might demand additional documents depending on the type of post-shipment credit availed.  ‍ Important tips A few things to watch out for when availing of post-shipment credit: That said, post-shipment credit is an effective, collateral-free way for exporters to manage their working capital and grow their business. It is a key support system that helps India’s exporters play in the global market.