Export Business Basics Made Easy Step By Step | Any Origin | Free Udemy Course

Hi friend. Welcome to this foundation course in the area of global business and exports management. The aim of this course is to provide a basic knowledge of the entire process of exporting. The contents of this course are created to help you learn all about this domain irrespective of the country of your origin and country of exports. However certain examples of exports from India are used to illustrate the points. The examples are easily replicable to other countries. The course plan you can download from the resources section of this lecture.

Answer all that is right (only one answer is correct- Single choice quiz)

Hello friends, in this section. My idea is to share with you one very interesting case study that I have developed for this course This case study is based on real events, although the exact details of the people involved and the company involved are not shared.

The idea is for educational purposes. So this case study will give you a fairly good idea about how certain simple ideas can get converted into big business and what is involved in the journey to make those ideas successful. What are the difficulties that are generally faced by global business professionals? So all those things are covered in this case study.

So I'll be showing you this case study in the form of a story. The story of this person, Mr. Krishna Reddy, who hails from India, working in France. So how he got the idea of a new business and how converted his idea into a very big global company.

So this case study that I have titled is- Bringing Indian service industry to the world. This case study is about one Mr. Krishna Rao, who hails from Bangalore. He's an IIT-IIM graduate and got a job placement in the technology department of an MNC, French MNC, headquartered in Paris, France.

He was located in Paris, France. And although he had very different ideas about his career, he took the opportunity because he found it very interesting to get some experience in an overseas location where he had never ventured, he never went outside India any time in his life.

So this was a great opportunity to learn about the world and how business is done globally. He was quite impressed, actually, with the global entrepreneurs. He really wanted to become a global entrepreneur, and he found this opportunity as a gateway for learning about his future career.

An Indian middle-class person with IIT - IIM graduation, he joined this MNC company that is into electric business based in Paris, France. So while being in Paris, France, it was a totally new experience for him and he always wanted to remain in touch with his Indian roots.

He found that there are a lot of Indian families who are living in France and neighboring countries and through WhatsApp groups, he was very much in touch with many, many families who are migrants working in not only France but in other countries.

And he wanted to be communicative with them. He wanted to visit them. And luckily, his job in the technology, new technology department of the company required him to travel to different European countries on work. During his free time on his trips, he remained in touch with Indian families in different countries and attended the events, any events, or any family functions wherever he was invited.

So he readily accepted those offers and he used to visit those families in various countries wherever he went. He had friends. He also had some relatives in different countries working there.

He was very social by nature. This social nature came from his father and his grandfather back in India, who gave him the instinct of remaining social and who taught him the power of being a social animal among the Indian communities. So he was very much interested to attend. He really liked to attend events and functions wherever he was invited. What he realized in one of the events he was attending in France, in one of the Indian families, he realized how expensive it was for an Indian family to organize even small events because those events were to be India-like and the merchandise and the services for those events were India-like were not available or they were very expensive if they were available in France or in other European countries.

He realized that there is definitely there is a demand for organizing such events at cheaper prices and it is really very expensive even at the European salaries. These Indian families were not able to afford to organize such events, but they really wanted to organize such events.

That is what he realized. And he got the idea of providing such services in Europe or maybe even on a world scale. He wanted to provide these services using the latest technologies and the latest products that were available not only from India but from other countries like China.

So he always had this entrepreneurial instinct. He wanted to be a global entrepreneur. After hearing so many success stories of global entrepreneurs from India in one of the global meets organized at IIM, Ahmedabad, where he was doing his MBA. So he always wanted to be a global entrepreneur, and this job was for him, just a gateway to realizing his dream.

So what? He realized that. Many of these services and merchandise could be made available at the fraction of the price if done in a very organized manner and sourced from India and China. And some of these services could be easily provided using the latest digital tools and new technologies. And he was really very much upbeat about it.

Beginner's luck is a phenomenon where a novice or inexperienced person has an unusually high degree of success in a particular activity or endeavor, especially during their initial attempts. This can refer to a variety of activities, such as gambling, sports, investing, or even creative pursuits like writing or painting.

The idea behind beginner's luck is that because someone is new to an activity, they may approach it with a fresh perspective and lack of preconceived notions or habits that could limit their success. This can sometimes result in unexpected and favorable outcomes, leading to the impression that the person has a natural talent or affinity for the activity.

It's worth noting that while beginner's luck can be a real and sometimes exciting experience, it's important to not rely solely on it. As a beginner becomes more experienced, their initial success may level out, and they will need to develop new skills and strategies to continue improving and achieving their goals.

In this lecture, Dr. Jain is sharing the initial response that Krishna received and about the beginner's luck that blessed him to make his venture a reality.

Starting a business can be a rewarding but challenging journey, and many startups face similar difficulties along the way. Some of the common business challenges faced by startups include:

Lack of capital: Many startups struggle to secure enough funding to get their businesses off the ground and keep them running.

Competition: Startups often face intense competition from established players in their market, making it difficult to stand out and attract customers.

Hiring and retaining talent: Finding and retaining the right employees can be a major challenge for startups, especially those with limited resources.

Cash flow management: Startups often have limited cash reserves, making it difficult to manage their cash flow and ensure that they have enough money to meet their obligations.

Product-market fit: Finding the right balance between developing a product that customers want and creating something that can be sold at a profit can be a major challenge for startups.

Scaling the business: As startups grow, they may struggle to scale their operations and keep up with increasing demand for their products or services.

Marketing and brand awareness: Building a strong brand and getting the word out about a startup's products or services can be a major challenge, especially for those with limited marketing budgets.

These are just a few of the many challenges that startups may face, and overcoming them requires a combination of creativity, hard work, and persistence. It's important for startup founders to be aware of these challenges and to be prepared to adapt and pivot as needed in order to succeed.

Let me give you a brief synopsis of international trade and the history of international trade. From time immemorial, trade was happening. International trade was happening among the people from different continents on this planet. Mostly what we know and what evidence we have, the trade was through the exchange of goods, the so-called barter trade. That was the kind of trade that was happening for a very, very long time.

And in between, in different eras, some kinds of intermediate commodities were used to exchange goods. Similar to what we now use as paper currency, That time those commodities were used, which included some kind of rare metals, rare agricultural commodities or even some types of stones, rare stones, and some methods were used for exchanging goods. So many items were tried and these were largely successful in its times. These must be popular. We have the evidence. We have the complete history. We can even write a complete book on these different eras of international trade when different types of methods were used to do international trade. Somewhat different from what we do today.

In the Middle Ages, when the European era started, international trade, what we saw as modern international trade included exchanging goods through some kind of official currency or some precious metals like gold, wherein the intermediaries were also involved in many cases, to facilitate the movement of goods from one continent to another continent or country to country. The so-called banks came into the picture and the modern type of international trade emerged and took shape. Therefore we can say that what we know today started taking some kind of shape at this time. Many political analysts, philosophers, and economists observed the phenomena. They gave their ideas, so they took cues from the way trade was being done at those times. At the same time, the traders took cues from those ideas to increase their profits and expand their businesses. So that is what was happening for many, many decades, even centuries.

These ideas emerged from time to time, mostly by economists in the form of some kind of classical theories or modern theories. Some of these theories became very, very popular. In my subsequent blog post, I will in a very short text, discuss some of these theories, classical theories as well as some modern theories that are very, very popular among the traders, as well as the administrators of the countries who are involved in foreign trade.

These popular ideas I will share these with you soon. Keep Reading.

In the next video, I will be explaining the most popular classic and historical theories that explained why countries resorted to international trade and why so much human interest in trading so long distances.

Friends, if we talk about what is the historical perspective of certain theories and explanations, which tells us that why, since time immemorial, international trade was happening around the world, why countries traded with each other and how it benefited them, How it benefited them to improve their economies. Why people were motivated to do international trade, in spite of the fact that international trading is a difficult proposition, requiring long-distance movements, which is difficult for humankind.

Travel long distances either by land route or by sea and in the present times by air. So friends it is important to understand that what were the explanation which were given?

And what was the rationale, which was given for international trading? So, if we talk about the ancient trade, it is commonly understood that the world was trading with each other, since very, very long time ago. In the known history, ancient history, it is said that two countries were major player in international trade.

Those were the countries which now represent the present regions of India and China. We talk of movement of goods through the surface that were called silk routes, and later on through sea routes. So, the dominant player at that time because of their large size, because of their strong GDP, India and China were supposed to be the major players in those times. But friends, it is very little known that, in the ancient time, the most dominant civilization for international trade was not India and China. It was the Phoenicians, an ancient Semitic Thallasocratic civilization, which was situated on the western coastal part of the Fertile Crescent centered on the coastline of what is we now know as modern Lebanon. That was a region. And friends that was the region where a lot of agriculture happened. It was a very fertile land. And in ancient trade, the major commodity of international trade was related to agriculture. So, this so called Phoenicians, they were the most dominant player in international trade on those things. Friends, let us talk about some of the common theories of trade or the explanation of international trade, which were given from time to time by different thinkers and economists.

Friends in modern history, one of the earliest modern theory of international trade was called theory of mercantilism. So, Friends, this theory of mercantilism was related to the thinking that the countries which will export more and import less will increase their state power. It was friends due to this theory that, it is argued, that the era of colonialism started. And one very good example of this is the colonialism by Britishers of India. So, when East India Company came to the Indian continent, they set up their bases to increase their exports to India and import only the raw materials or commodities in such a way that they benefited from this theory of mercantilism. And the power of Britain increases and because of this reason only after spending several decades of their base in India, in 1858, the British Raj was declared on India and the backing of political bigwigs of Britain was very, very clear to this theory of mercantilism. But friends later on, Adam Smith gave another theory which was called the theory of absolute advantage.

According to this theory, Adam Smith, who is regarded as the father of economics, proposed that, countries do not need to resort to theory of mercantilism. Rather they should focus on the absolute advantages which those countries enjoy. It means that they are able to produce certain things better than anybody else. And they can produce more with the similar resources. And if they do so, they will be able to export those items or goods or services to other countries. And obviously, they will benefit. And Adam Smith also proposed that most of these countries have certain absolute advantage in something and if they will trade with each other, everybody will benefit

So, friends that was a kind of demise of the theory of mercantilism. So, the ideas changed from theory of mercantilism to theory of absolute advantage, which was proposed by Adam Smith. Later on another economist, Ricardo proposed that even if countries have absolute advantage in several items, they need not focus on producing all those items. Rather, they should focus on producing those items in which they have a comparative advantage, which means they may be having absolute advantage in multiple items, but they will comparatively have better absolute advantage in certain items than others. So, according to this theory, it was proposed that if those countries exports and focus in the production and export of certain items only, where they have very strong comparative advantages, the advantages of international trade among all the countries will further improve. So, this theory very clearly indicated that international trade will benefit all the countries.

So, it is not required that by force a certain country to create a situation where they export more and they import less. Then Friends, another theory that is called product life cycle theory was also proposed, which tried to explain the reasons of international trade. According to product life cycle theory, every product has an introduction phase, a growth phase, a maturity stage and a decline stage and there is a fixed time frame within which these stages come - introduction, growth, maturity, and decline. So, it was proposed that by introducing the same product at a later date in other countries will cause a new product life cycle. Which will have a new introduction, at a later stage. It will have a new growth, it will have new maturity and it will have new decline. So, friends what will happen is that the time period will get elongated. Which means the overall length of the product lifecycle of a product will increase. So, it's a very very strong motivation, friends, for resorting to international trade of certain goods and services. Another theory which tried to explain the intra- industry international trade.

And it is called the country similarity theory. So, friends as per the country similarity theory, it was proposed that certain countries with a similar level of economic development would find it comfortable to use goods and services which are produced in those countries which are having the similar level of economic development. Because if they have similar level of economic development, the needs and tastes of the customers are likely to be of similar technological level, of similar nature. So, what will happen is that, the intra-industry trade will increase, among those countries. Friends later on another theory which is called - strategic advantage theory was proposed.

Under this, it was proposed that very big corporations so-called multinational companies, large companies which manufacture in big way, they have their major product lines. So what they do due to competition, they try to seek strategic advantages, like first-mover advantages, or by resorting to patents, copyrights and forcing the customers to buy their patented products and copyrighted products and services. So, friends, what happens that to gather these strategic advantages and by having these patents, technology, information, or having the first-mover advantage, these companies find it very, very comfortable to make profits by expanding to overseas markets. Because those patents, those copyrights, and the fact that they had the first mover advantages will apply in other countries also.

So companies would like to maximize their profits of the strategic advantages which they enjoy. So this was another theory, which was proposed. Then freinds, there was another theory which is called pull and push forces theory. What is the rationale of this theory is that it says that due to certain internal factors, country factors and international factors, there will be some pull or push forces, which will force or enable companies to expand into international markets. So, friends to give you an example, if a certain company has a very comfortable internal environment and specific capabilities, talents and resources, they will over the time look for international expansion using those specific enablers, internal enablers, certain capabilities, certain competencies, which the company enjoys, which others cannot do.

So, this kind of specific advantages which this company enjoys will force the company to expand into international market. Similarly friends due to country factors like small size of the market or very strong domestic competition or unfavorable government policies, companies will be forced to seek and explore the markets in other countries which are large, which are located better, which has got strong consumer demand. Where the regulatory and operational environment is very favorable. So, friends, these countries factors can push several companies to either exit from those countries or limit their operation in those countries and, then seek international markets. So, to give you an example, friends in this push and pull forces theory, if you look at country like Switzerland, which, which is a developed country and which, which is famous for products like watches, chocolates and many financial services.

So, friends, Switzerland as a country is a very small country and it has got very limited captive market. So, the business operations in Switzerland cannot enjoy economies of scale, because of the small size of customer base. So, the companies in Switzerland, they always look for international markets and some of the most successful companies in Switzerland, they actually, depend on revenue more from outside Switzerland, than in Switzerland., Friends, another theory, which is called Porter's diamond theory was proposed.

According to this theory, there are multiple factors which exist in a particular industry domain, in a particular country or region, which enables certain industries and companies to derive strategic and comparative advantages vis a vis others and vis a vis other countries. This strategic and comparative advantage is derived from multiple factors, which enable these companies to export their goods in international market.

In the next video, I will be discussing the most popular modern theory which most accurately explains the current reasons for international trade. This theory is called the Diamond theory. This theory was proposed by Michael Porter. This theory is also called - National Competitiveness Theory.

So, friends, if we look at this diamond theory, the multiple factors. Which have very strong bearing on the possibility of deriving a competitive and strategic advantage. One is the demand factor. So, if the demand of a particular product or service is very high in that country. The chances are that the industry will enjoy some kind of strategic advantage over others. Similarly, factors like factor conditions. Like man, machine, and material. If they are favorable. If those factors like man, machine and material which are factor conditions and they are favorable in a particular market. They will definitely help the country, industry and companies to derive strategic advantage vis a vis others. Then friends, another factor is the availability of related and supporting industries. Because the large operations of very large companies which produce goods in very large quantities to benefit from economies of scale, requires outsourcing of several intermediate products, raw materials, services to be outsourced from smaller manufacturers and service providers. So, large companies, large industries, very large manufacturing units require a very strong base of related and supporting industries in that particular country or region.

So, friends, this becomes another very important major factor of diamond theory which helps in the deriving strategic advantage. Then, the fourth very important factor which is explained as per the diamond theory is the nature of the rivalry, the structure of rivalry, the level of competition in that particular market for that product. So, friends if these four factors which are demand conditions, factors conditions, availability of support industries, and the nature of rivalry and competition for a particular industry and product in that market are favorable.

As per Porter's diamond theory, it will help in creating an environment which will give strategic and competitive advantages for that industry and for that country, it is also called national competitive advantage. But friends, these four factors which are connected with each other, also requires the support of chance which is the luck factor and the government policies. If the government policies are not favorable, all these advantages which are derived from the four major factors will not be achievable.

Similarly if the luck and chance factor is not there all the good intention of governments and the availability of all factor conditions, demand conditions, strong competition and related and supporting industries will go in vain. So, chances like if the country is facing long periods of war with neighbors or long periods of internal strife, civil wars, strikes. So, friends if we take the example of small car the manufacturing industry in India as an example, to explain this diamond theory. We find that the The Indian market has a very strong competition in the manufacturing of small cars because of high demand in the Indian market for these cars.

And So far the government policies has been very favorable in the manufacturing of the automobiles. The availability of related and supporting industries in India is very good. Similarly, factor conditions, man, machines, material are favorable for the manufacturing of small cars and the luck for Indians and Indian market is so far so good. So, friends in this example, what we have seen that, India, due to this strong benefit from the idea of diamond model of porter, where the four major factors and the two peripheral factors which are interconnected with each other makes a very strong diamond. So India's for example, India's competitive diamond in small car manufacturing is very strong, very large, very lucrative. It is very much favorable. So, friends because of this, India is one of the largest manufacturer of small cars manufacturing and India is a able to export small cars in many many countries.

Choose only one answer that is best.

The foreign trade policy of any country is affected by several external and internal factors. The role of WTO is important in framing and alignment of foreign trade policy of democratic countries. Internal factors like per ca pita GDP, unemployment, and internal political factors have their own role to play in framing the foreign trade policy.

To become a successful exporter, it is very, very important that you have a fairly good idea about what is a foreign trade policy of a country, how it affects the process of exporting, how it helps exporters, how it serves the different objectives, which it has for the country and for the exporting community as well as for the importing community. So, in short foreign trade policy helps exporters to understand the concept of exporting. So, it is very, very important for exporters to have a fairly good knowledge of the respective trade policy of their country.

So, friends, who are basically involved in the making of the foreign policy and implementation of the policy. So, who are the players who implement or who make the foreign trade policies. So, in general, the foreign trade policy of a country is made by the respective governments. So, main player in the making and implementation of foreign policies are the government and they do it with the help of the central banks in those countries.

Like for example, in India, we have Reserve Bank of India, which is the central bank of India. Then the actual formulation of the policy is done by the Ministry involved in different countries, different ministries work on foreign trade policy of their country. In India for example, Ministry of Commerce is the main ministry which is entrusted with the job of formulating the foreign policy. But, of course, Ministery of Commerce takes advice and help from other ministries also.

Then friends, in each country, the foreign trade policy is made, which is implemented and regulated by certain bodies, which may be called as directorates or controllers. For example, Controllers of Export and Import. For example, in India, there used to be a Controller of Export and Import but presently, it has been re designated as Director General of Foreign trade. Earlier the Chief Controller of Export and Import is now re designated as Director General of Foreign Trade.

So, every country has their own Directorate, Controllers, who control the export and import transactions. They make policies and they make sure that those policies are implemented, people abide by the rules and regulations of those policies. So, that is the role of the Controllers or the Directorates.

Now friends, it is important to understand that what are the factors which affect policy making? So, these factors sometimes dictate the formation of the policy, foreign trade policy amendments, modifications etc. from time to time. Not only in India, but all the countries there are certain factors. Most of these factors are either external factors or internal factors. So, the governments while formulating the foreign trade policies are affected by the external factors and their internal factors, which shape up the foreign trade policy making and even implementation and further amendments and the notifications or the corrections. So, they are affected by changing external and internal factors and environment.

One of the biggest external environment factors for the foreign trade policies of most of the country is the World Trade Organization. Friends World Trade Organization is the main international body which regulates the flow of goods, internationally. The main objective of World Trade Organization is that there are less trade barriers the world over and the flow of goods is smooth, well managed. And for that reason, WTO has a strong say in the foreign trade policy making in all the member countries.

So, as per the understanding, all countries who are member of World Trade Organization, they have to submit their original foreign trade policies, which they are currently implementing and any modifications, any amendments, which they make later on. They have to notify within a reasonable time to World Trade Organization and World Trade Organization has a designated department which keeps track of these foreign trade policies of the member countries. Then friends, another external factor, which is very important is the the Free Trade Agreements, which countries have with other countries. So, these free trade agreements, can be between two countries, or it can be between several countries in a region, which is also called REC- Regional Economic Cooperation or there could be some trade partnerships.

Very good example of such, for such Free Trade Agreement is European Union. So, European Union has the free trade agreement, which is one of the most successful free trade agreement in the world among 28 countries of Europe. So, these kinds of agreements also dictate the Foreign Trade Policy making and further amendments.

Then Friends, geopolitical environment, which is continuously changing both on the regional front, as well as on the global front. So, for example, if we look at the geopolitical environment, which is drastically changing in recent time around India is the relationship between India and China. Because of the deteriorating situation of the relationship between India and China, because of the border skirmishes between India and China, what is happening is that Indian Government is very quickly making modifications in foreign trade policy to make sure that any wrongdoings are not done by the neighbor country, which is China, with India.

So, there can be several changing geopolitical regional environmental factors, which can have a major impact on the foreign trade policy making as well as amendments. Similarly, Friends, due to the Coronavirus also, a lot of geopolitical environment changes is happening in different parts of the world. And because of these change in the geopolitical environment, not only between India and China, but in the case of many regional equations between different countries, the geopolitical environment, regional geopolitical environment is changing very fast. And because of this, a lot of reviews, and amendments are happening in foreign trade policies of several countries at present, because of this situation. Then friends, the internal factors also play a very dominant role in the foreign trade policy making, as well as further modifications in those foreign trade policies of respective governments.

So, there can be some immediate pressing issues, which are there in the case of particular country, in the context. For example, I just gave you example of a very major pressing issue with India, which is the aggressive and bullying tactics of its neighbor, China, as well as Pakistan on other side of India. So, it has become a very major pressing issue for India, and it will definitely have an impact in the near future on the foreign trade policy making and amendments.

Similarly, friends, the economic status also have a strong bearing on the foreign trade policy making. If the unemployment rate in a country is very, very high, obviously it will have an impact on foreign trade policy making where the objective will also be - how to generate employment? So foreign trade policy will have a lot of incentives for investment in India, in the sectors of exports. And also for developing special economic zones, Free Trade Zones, so that the employment opportunities for the people of the country increases. So, the economic status of any country, also plays a very, very important role on foreign trade policy making and its maintenance.

Then friends, internal political environment of a country also plays a very important role in the foreign policy making. For example, if you compare the political environment in China and in India, they are drastically different. If we compare the political environment in India and in China, you will find a lot of differences in the political environment because of the differences in the ideologies, political ideology of China and political ideology of India.

Which is quite different. And if we compare these two countries, two large economies, you will see that internal and political environment in both cases is quite different. And because of this difference, there is a lot of difference in the foreign trade policies of China and India. Similarly, the changing political environment in any country also have a strong bearing on the changes which are happening in the foreign policy of that country.

Friends, let us now try to understand what are the main objectives of making foreign trade policies of different countries. One very important objective of making foreign trade policy of any government is to strengthen the rule of law. So rules and regulations, which governs the external trade of a country, overseas payments, international investments. So, those rules and regulations are defined and clarified in foreign trade policies, because they have a direct impact on the economic, political and demographic structure of a country.

So these rules and regulations definitely vary from country to country, and those differences are seen in the foreign policy of different countries. The second objective of any foreign policy of any country is to provide information and to explain the procedures and documentation required for carrying out external trade and investments. So this kind of information and this kind of procedures which may relate to the act of exporting or act of importing

1. how to deal with the government?

2. how to deal with these central banks?

3. how to deal with the controller of export and import or the director general of export and import?

4. And what are the compliance required?

5. What what are the obligations of exporters? and

6. what are the obligations of importers and how to deal with the banks?

7. What is the role of banks in the act of exporting and the act of importing?

So this kind of information procedures, customs related information, customs related procedures, clearing of goods and the use of port facilities for sending your goods by air or by sea. So this kind of information and procedures friends are the main idea behind the formulation of foreign trade policies, which gives a lot of explanation of the kind of information which exporter must know and the procedures which exporters and the importers must know.

Then Friends third objective of any foreign trade policy in any of the countries is to broadcast and announce to the general public and the business community the various schemes, incentives and support which government of that particular country provides to exporters, as well as to the importers to facilitate external trade of the country and to benefit the economy from such overseas trade and also to manage foreign exchange for the country.

So these schemes, incentives, programs and support is very well defined, clarified, listed in most of the foreign Trade policies of different countries. Then Friends, fourth very important objective of making foreign trade policies, is to list out what is prohibited for export, what is prohibited for imports.

What are the different types of restrictions which are applied to certain goods for export and certain goods for imports. So friends to convey this list of goods and services which are prohibited or which are restricted, foreign trade policies are very, very important. And it very clearly defines what are the things which an exporter can export and what other things which an exporter cannot export.

Similarly, what other things which am importer can import and what other things which an importer cannot import. So these things are very clearly mentioned in foreign trade policies. Then friends fifth objective of any foreign trade policy is to announce the various customs duties, tariffs and non tariff barriers, which are the respective government applies on goods and services for external trade.

So these duties, tariffs, non tariff barriers. are very well explained and defined in foreign policies, and from time to time, amendments are made to these rates of customs duties, tariff structure, the method of import, various non tariff barriers which are applied on certain products by the respective government.

So these things are notified by the governments through the amendments and notifications of their respective foreign trade policies. Friends then last but not least is one of the major objectives of foreign trade policy is to be able to manage the foreign exchange of a country. Because, as I had explained to you earlier, in an earlier lesson, that the foreign exchange is very, very important for the economy of a country.

And all the governments, they keep an eye on the flow of foreign exchange into the country and outside the country. So such foreign exchange management requires special acts and rules and regulations, which are normally called as Foreign Exchange Management Acts. For example, in India, we have the Foreign Exchange Management Act 1999, which is enforced with time to time modifications and rectification. This act still applies to all the foreign exchange transactions and payments. And Friends, the main objective of these foreign exchange management acts are two major objectives.

The first is facilitating the external trade and overseas payments. So this becomes one of the major objectives out of these two objectives. And the second objective is the development of foreign exchange market in the domestic context of any country. Because a very dynamic, resilient, and a progressive financial market is required in every country in line with the international financial market, which governs the international agreements. Then Friends, let us try to understand that what is the general impact of such policies which are related to the foreign trade, external trade and the foreign exchange management?

So Friends, if these policies are liberal, open, modern, proactive, inclusive, it helps the economy of a country very much. If you take the example of India, the trade policy, foreign policy of India before 1991 was very narrow-minded. It was very restrictive. It was very stern and strict.

And the result was that before 1991, the Indian economy suffered a lot. But after 1991, the government of India came out with the liberation, privatization, and globalization and which was reflected in the new foreign trade policy, which was ratified in the year 1991. And since then, India has not looked back. Its economy has grown. Its food production has increased. The scarcity of employment, the scarcity of food, the scarcity of consumer goods has been totally wiped out.

The living standards, the GDP per ca pita, and the life of consumers in India has improved a lot after this ratification of new foreign trade policy, which was very conducive to both exports as well as imports. And the approach was for the development of the trade rather than restriction of the trade. So friends, if the trade policies of respective governments are open, it has a very positive impact on the external trade of that country. And the overall different types of foreign trade policy in different countries with different hues and colors and with different types of approaches to external trade, the result is the higher or lower international trade barriers, which is the domain of World Trade Organization.

So WTO want to bring down International trade barriers, both tariff as well as non tariff barriers. So if the policies of different countries are made open, the objective of the World Trade Organization is to bring down the international trade barriers. And this objective can be achieved by having good foreign trade policies in line with the regional as well as internal environment of respective countries, internal status of the respective countries, internal situation of the respective countries. And World Trade Organization encourages governments to address their internal affairs also when they form foreign policy.

But at the same time they make sure, WTO make sure that the policies are open, liberal and globalized. And then friends, the nature of these foreign trade policies of different countries also have a very strong bearing on the investment scenario and the flow of investments from one country to another country. So these policies can have barriers to international investments. As I explained to you in the example, recent example of the skirmishes and a standoff between India and China border standoff.

And because of this, the government of India has also put in certain investment barriers with regard to the Chinese firms in India. So due to certain current events, due to certain immediate breaking events which are happening at the country level and the regional level, there can be certain amendments, modifications in the foreign trade policies, which have a strong bearing on the investment scenario of that region.

Indian Trade Portal offers the most organized resources to update yourself on India's foreign trade policy. It has several sections on the policy including policy provisions, policy statements, policy highlights, schemes, incentives, tariffs, etc. As an example of the ways of accessing the FTP related information online, the next lecture will serve as a template for exporters from across the world.

OK, now friends, I will show you as an example that how you can get hold of all the text documents and the notifications and the changes which are made by taking an example of the initiative by the government of India, which is in the form of an Indian trade portal. So, friends, we are here at the website of India Trade portal and in this website, which I had explained to you earlier also, we have very interesting information that can be obtained from this particular portal, and that is with respect to the foreign trade policy of India.

So this we will take an example. Most of the countries have such kind of online portals, where the exporting and importing communities of those countries can go and download and see the different provisions and amendments, notifications, addendum, and access to those policies and the export promotion schemes.

So this information is available on India trade portal on the sidebar. And there is a button called Foreign Policy Export Promotion Schemes. So, friends, if we look at this particular section of this website, which is called India Trade Portal, and we click here, we will see that the various policy documents, highlights and the description of different types of export promotion schemes are available on this website.

So

• it has got policy documents.

• It has got the procedure documents.

• It has got the amendments and appendices of foreign policies.

• It has got the policy statement and

• it has the highlights of the foreign policy,

which is the current policy, whatever is the current policy of the government of India with regard to foreign trade. So those highlights are also there. So anybody can just go here, click the button and they can get hold of all the documents, all the information which is available on India's Foreign Trade policy.

So this Friends this portal is very, very useful. The information available on this portal is absolutely free. And if you are a member of the Federation of Indian Exporters organization, you have better access to this website. You can go to a certain portion of this website where you can get some privileged information with respect to foreign trade policy of India. But the majority of the important policy documents, procedure documents or schemes, and appendices are available free of cost for download on this.

Choose only one answer which is best

In the next few lectures, I will discuss where a would-be exporter can go to gather market intelligence like what to export? where to export?, Latest import inquiries, policies, and procedures that are related to certain import markets.

If we talk about the common export routes that we discussed in the earlier slide or the export methods, we can have generally two types of routes. One is the digital route, that is the eCommerce Route And the second category of the routes is offline routes. That is the physical routes.

So in e-commerce, you can go through online marketplaces, well-established, very popular, and big communities are there. Already these platforms are very popular internationally. Marketplaces like Amazon Global Selling or Etsy.com or Rakuten. So many so many platforms are there. You can use these platforms to enter international markets. Every platform has its own rules and guidelines and methods of conducting business. So you have to learn those methods. So one of the courses I have in this VJ Global MBA Course Series on Udemy, the title of which is Successfully set up your export digital business online. So in that, I have explained how to use these online marketplaces, and how to become successful through online marketplaces so you can take this route.

The other route is to create your own shopping portals, international shopping portals wherein the international buyers can come and they can place orders directly through your websites so you can create your own shopping portal, which is captive to your organization, especially customized to your requirements through outside agencies, web portals development agencies.

You can do that also, but you can also use some of the free services, like, for example, if you are an exporter from India, there is one website that is sponsored by FIEO that is the Federation of Indian Export Organization in association with global linkers. So global linkers dot com.

If you go there, you will find that if you create your account, you can set up your own portal for free of cost as an Indian exporter. That is an eCommerce portal, complete with a payment gateway and many, many features. So you can create your own shopping portal also. So these are generally two methods that are used in the e-commerce route of exporting.

This is one way. The second category of routes is the offline routes include two methods of exporting. One is the direct method, that is the direct exports, and the second is the indirect exports. So obviously in direct exports, you have better profits, your growth is more in direct exports. You are in touch with the foreign buyers.

But this method is more costly in nature and involves more risk. In the indirect method, you go through the already established exporters, and merchant exporters to sell your goods overseas and your risk business risk are less in indirect export, but profitability is low and growth may also be low in this category of offline routes.

So I will talk more about direct exports and indirect exports in subsequent slides. So you will have an idea that what all options you have in direct exporting and indirect exports. So talking about the direct export methods, and direct export routes, you can go for the direct shipments to the importers, So well established exporters you have to discover in the potential export markets whole process is involved.

As I had discussed to you with different steps, are there for making your export plan and making your initial export marketing plan. Country specific plan, country plan, Country Note So using those steps you discover different importers, direct importers who are importing in bulk quantity, in wholesale quantities.

So these importers may be the big wholesalers in those markets. They may be the buying arms of big supermarkets or hypermarket chains, and retail chains. So different types of importers you will be encountering and you have to understand their requirement and feed them with the shipments, direct shipments to these importers with the. different terms and conditions.

So you sign contract with them and export those goods. The second way of, very common way of direct export is appointing an overseas commission agent who does all the running around for you. And generally, he or she sells your goods to the wholesalers, overseas wholesalers generally, and generate medium to large orders on your behalf. So the role of the agent is just to act as the bridge between you and the potential buyers in those markets, and it takes some commission.

So this can be another method of exporting. The third method, which may suit you depending on what goods you are exporting to the international market, you can set up your own company abroad. So this company becomes the local company in that country, or maybe a branch office of your company, your home country company, branch office can be also there.

And you set up this company abroad and you have your own staff and your marketing team who will be marketing your goods in your own brand. So when you do that, you are in direct touch with the distribution chains. So depending on the country that you have chosen the destination. Different markets have different distribution channels, so you need to understand those distribution channels with the help of your initial marketing plan. Country marketing plan, Country Note, that I discussed with you, and using that you go deeper into the market.

You sell your goods through your own company, through your own marketing team. The fourth very common method of direct export is having a strategic partnership or joint venture in the destination market. So by having those joint ventures or strategic partnerships, you add some extra value. If there are complementary strengths in the partners' overseas partners, it may speed up your entry market entry.

It may speed up your export volumes. It may reduce some of your costs in the overseas market because you are sharing your business with the partner, but it will mean that you share your profits also with the joint venture partner or the strategic partner, whatever you have in the international market.

You will have to share your profits with them. So these are different methods that are available. Very common methods of direct exports, although there can be more ways of doing direct exports. So we have only covered very popular methods in this particular lecture. So in the direct exports, as I had mentioned earlier also, you have a better potential for profits, you have more growth and you have a better learning curve because you are directly in touch with the customers and the market and the distribution channels.

And since you are in direct touch with the distribution channels, you have better learning about the market and you keep on updating your country note, and initial marketing plan, it becomes more and more refined. You have complete data, added data, and updated data as you go forward, and that adds to your learning about the market, about the requirement of the customers there.

So your knowledge about the market becomes very well. For example, if you start exporting your goods to the Japanese market, which is a very, very unique market with a unique culture and unique needs of the customers.

So when you go forward in the Japanese market, you would learn a lot. You learn from the market and with time. If you become an expert in this market, the Japanese market, the returns can be very, very high because it's a very sophisticated and rich market. So these are the things that happen when you do direct exports.

There are many, many other benefits of direct exports also, these learnings which you make in the overseas market, you can replicate some of this knowledge in your own home country market to improve your home country market situation also, some companies do that also.

But indirect exports, you have more risks and more initial costs that are involved. And generally, it takes time to start your business and to break even and reach the point when your business. Is doing well, it takes time. In the indirect export methods, very common methods are exporting your goods through merchant exporters in your own home country, or exporting through buying houses or exporting through government trading companies.

Some marketing companies, maybe there which are run by the local governments so you can export through those agencies or government departments so there can be some canalized agencies also, in many countries, governments have the analyzed agencies for example, in India, we have organizations like STC which is the State Trading Corporation or MMTC- Metals and Minerals Trading Corporation.

So such kind of organizations do canalized exports. So some of the items are reserved for exports through those government agencies. So in such a case, if there are some canalized agencies, if you want to export those goods, you can only export through channelized agencies of the local governments. So those avenues are also available.

It is not necessary that the items would be canalized only. Some of the government trading companies have very strong customer bases overseas and on the strength of that also they can provide you with big orders for your products. So that possibility is also there.

So if you are looking for quick business and quick profits, so this option may be also useful to you. It depends on what is your area of exports, your area of expertise, and what product you want to export. So it will depend on that.

Then the fourth very common method of exporting is called deemed export. So generally this word deemed export is specific to some of the countries. Like, for example, it is very common in India wherein there are two types of zones where the exporting communities are based.

One zone is called DTA, which is the domestic tariff area, which means the area that is a very normal area wherein the production happens for the local markets also and for the export also. But there are some special economic zones which are there in those countries like for example, in India or in China, in these special economic zones, the companies are there which are producing goods for export only.

That is the 100% export-oriented units. So these units, have special privileges and special facilities like these zones have controlled access by the DTA players and it is protected by customs.

They are customs-bonded areas. So customs facilities are available in the zone itself and any goods that are imported for exports attract zero rates of import duties.

And value addition can happen in these special economic zones and the goods can be exported much faster and more efficiently. So the companies that are based in DTA, that is the domestic tariff area, if they sell any goods to the companies in the special economic zones as inputs for exports, it is called the deemed exports.

And in some countries, some export benefits are also available to the deemed exporters. For example, in India, there are certain facilities and benefits that are available for DTA units selling goods to SEZs or 100% export-oriented units. That is called the deemed exports.

So this is another method of indirect export. So what happens in such indirect exports?

The profits are less definitely and growth is also less because you are not in direct touch with the overseas market and the customers. You have a lower learning curve because again, you are not in direct touch with the end users or the importers overseas. So you are learning about the overseas market is much less, however, in deemed export or in any other route of indirect export, your risks are less because you are dealing with a buyer that is located in the same country under the umbrella of the same laws and regulations, and it is easy to enforce any legal action in case of any disputes.

Arbitration can be done in the same country, so the risks involved are much less. These are some of the pros and cons of the different methods of exporting, and these are some of the common routes, common export routes.

Now that we have some idea about what we want to export. And we have got some information. Some background is there. Some research is there. A little bit about any new idea which you have in your mind. So, you want to refine your idea. You want to get more information about your idea. And you think that you find, you need certain sources of information, where you can get authentic information. You don't have to pay for it. So, that is very, very important. So, question is where to get the information, further information. Which are the places we should go? And what kind of and what kind of information can be obtained? So friends, in this lesson, we will learn that what are the different options available, to get further information. Once you have some idea of what you want to export.

How you want to export a little bit. Some ideas are there with you. So, okay friends, we have got the idea what is next? So, we have to see what is next. So, friends, there are places which do give information and it is available free of cost. Because, if you remember friends, I told you that every government want foreign exchange. And if the foreign exchange is required by the Government's, will always like to help people who want to export because foreign exchange can be majorly earned through exports only.

There are no other big sources of foreign exchange for earning FX. And to run the economy. Govts. do require for FX. So, FX earning is very, very important and that's why The government of India always helps exporters to get the FX. So, the first place in India for example, we take the example of India to go to get information is FIEO, Federation of Indian Exporters Organization which has it's head office is in Delhi and it has certain branches in different big cities.

So, you can go to FIEO and you can become member or even if you are not a member, you say that you want to export your items and you want to learn about exports, they are definitely going to help you. So, FIEO is the first stop where you can go. Then second organization very important organization which helps giving information about exports is EPC. The different EPCs for different items, or product categories. What is the EPC? EPC is an export promotion organization. So, these Export Promotion organizations, friends, help you get certain information or refine your ideas if you want to export something, they will guide you, you can take appointment with their development officer and you can go there. And later on you can become a member also of EPCs.

Once you become a member you will get more information and more assistance. Then, another place to go is FICCI Friends, FICCI is the Federation of Indian Chamber of Commerce and industries. So, FICCI is a very dynamic organization headquartered in Delhi, and it has offices in other cities also. So, it is another place where you can get very good information. Then another place to go for information is CII - Confederation of Indian Industries, although their main role is in the domestic business, but they do give information about exports. And they also take people as delegations to different countries for the development of exports. So, CII is another area where you can get information.

There is another organization which is called ITPO- Indian trade promotion organization. Although their main role is to organize trade fairs and exhibitions in different countries, as well as in India, to promote the domestic business as well as to promote international business. But they do give information to exporters. They have a very modern library, which contains different reports on exports of different commodities and products and they do provide a lot of information. Then, similarly there is Indian Institute of Foreign Trade, which is located in Delhi and they have a very good library and they do have several options for getting information.

Then there is another organization that is based in Calcutta that is Directorate General of Commercial Information and Statistics. So, the purpose of this organization is to maintain the export and import data of India as well as of the different countries of the world. So, they maintain commodity wise data, they maintain country wise data. So, they have the latest data which they maintain. Then there is another organization that is called National Small industries Corporation. Their main goal is to promote Small and Medium Enterprises in India. But they do help exporters to get information and to refine their exports ideas.

Then, friends, you can also approach the Trade Commissions, Trade Attache, Trade Commissioners of respective countries which are located in the diplomatic commissions, embassies, consulates, high commissions, which are located in India. And you can approach them and they can also give good information about their country. And they can give you some Trade Statistics also about them. But friend, by far the best place to get information is Indian Trade Portal. This is the online free service by the Indian Government and it helps exporters to get quick information at the click of the button.

And very good information can be obtained from Indian Trade portal. So, this is the homepage of India trade portal. So, I will take you to this portal and I will show you how you can get very good information from this portal. And you can also do your research to find out which are the countries and what are the goods which you can, which you can export to these countries as well as the services which you can export to these countries.

So, Friends, if we talk about the examples of the top five sources of business intelligence, market information, product information, and international trade information, if we look at these top five sources. So some of the most important sources include starting with the United Nations Statistical Yearbook. So what is this, United Nations Statistical Yearbook? It is a repository of data from almost 220 countries. So it covers a large range of countries and provides statistical data, international trade information, and international trade data. And the information, which is the international trade information, is both on the products as well as the nations. So these 220 nations, are covered in this United Nations statistical yearbook. So this is the special feature. And it is one of the most authentic sources of information.

The second, very, very important tool, a resource that is available online for getting international trade statistics and figures is the ITC trade map. ITC is International Trade Center, International Trade Center, Trade Map. If you type Trade Map on Google, you will reach this website and certain categories of the ITC HS Code around six digits. You get free information, free statistics, and beyond that, going for eight digits or ten digits data or more specific data about the products you are looking for. You have to go for the paid service for this, and the trade statistics for international business development are available. Product wise, country wise, trade volumes are available monthly, quarterly and yearly trade data is there for both import and export value volumes, growth rates, and market shares.

All this information is available on the ITC trade map. Then third, very authentic and a top source of information. International trade information is the OECD Surveys Series. So this series is a series of annual surveys based on original research and interviews. So original work has been done on this, but it covers only 24 member countries. But the data is available throughout the world. So the information, because it is original in nature, is very, very useful for all the countries, although 24 member countries are there. So data is more focused on those 24 member countries. But this is a very, very useful and important source. Very detailed information is available in qualitative terms as well as in quantitative terms. Then fourth, a very important source of information in the world today that is available on international trade is the data provided by WITS. WITS is the arm of the World Bank.

Now, this World Bank arm provides access to information on external trade from the United Nations trade COMTRADE data and United Nations Conference on Trade and Development. That is UNCTAD TRAINS Data. As well as the WTO, IDB and CTS databases. All these databases are very complicated in nature, so WITS provides you with a very comprehensive and user-friendly manner. All the access to the information on external trade from all these three very, very important international sources of data, very useful It is. Then finally, the ORU library, which is a digital library of many, many areas and topics.

It also has global business information pages there where links to several authentic web sources focusing on the country profiles, cultural information, and international data and statistics are available. So this particular link, if you go there, you will find a very good set of sources links where you can go and collect very authentic data. Most updated data. So this ORU library, you should visit. Keep watching

In the next video, I will take you on a guided tour to India Trade Portal, a really commendable service by GOI, to provide hard-to-find market intelligence on export markets. Similar trade portals are provided by local governments across the world for boosting exports from their countries.

Now coming back to the Indian trade portal. So, let us come back to the Indian trade portal which is a very an interesting portal where you can get a lot of information related to exports and imports both. So, you can get information regarding exports as well as for imports. So, so first of all friends, it is important to understand that how this portal works and what facilities are there on this portal. So, let me tell you friends that this portal is very smart portal and you can actually get very good information on this. So, you have to see it in, first you have to understand this homepage of this portal.

So, here you have the top menu, top bar menu here, home, about, trade agreements, top 25 countries, foreign buyers, resources, what's new, contact, help, languages. So, whatever the language you want you can have it English or Hindi. And Friends you also have here subscribe now button. So, you can subscribe also. So, Friends here, you can find the button here subscribe now. So, by hitting this button, you can subscribe to the information which is sent by this portal. And this information can be related to customs or any new notification regarding exports or imports or any new information by any country if they change their regulations and procedures for exporting.

So these kinds of. So these kinds of information is sent directly to the subscribers of this portal. So, this is a very, very good. So, this is a very good service by Indian trade portal because they keep you updated with new notifications. Now Friends you have home here. You have about trade agreements, top 25 countries, foreign buyers, it also helps the foreign buyers to get information about India and it tells about the resources, what is new happening here, how to contact the people who run this portal and how to use this portal help and the languages in which you can see the information here. So you have all this information is here. Then this is the top bar. So this is a top bar menu. Then you can go to the sidebar menu.

In the sidebar menu. So, in this sidebar menu, what you can get is, you can apply for the Certificate of Origin. You can apply for Certificate of Origin here, the ordinary certificate of origin. So, you have two types of Certificate of Origin, one is the preferential certificate of origin and second is the non-preferential. So, non-preferential is also called ordinary COO. Certificate of origin. So, you can apply for this ordinary certificate of origin from here. Then, it also tells you some information about how to export procedures and steps. So, you can use this information available here also. And here you can get some information about the Exports & Imports Policy of India.

Now, here we have another button, which talks about the GST procedures and the policies related to GST for the exporters. Then Friends you have certain notifications here, which are related to the changes in the regulations by different countries and if they are asking for some comments from the exporters. So, these alerts are supplied to the subscribers, if they want to give any comments and if they face any difficulty or they want to file their complaint regarding any new measure by any country, so, that kind of information is available here.

Then, there is another button which talks about the international tenders which are available in the market. So, those notifications can be seen from here about the international tenders. Then there is a button for frequently asked questions. So it will tell about exports, it will tell about some of the questions you may have about Indian trade portal. So those FAQs are given here.

Now here there is another button which talks about the tariffs, the export incentives and drawback and equalization rates, subvention schemes of India. Of Indian Government and what is the eligibility conditions. And how, what is the procedures of claiming these incentives. So, this kind of information is given here. Now, there is a very interesting button and very important button, which I will be explaining to you more about the trade statistics. What is this Trade statistics? Friends, this is the most important part of this website.

Here you can get the import and export data of a majority of the countries which are members of the World Trade Organization. So, the data of 87 of these countries, both exports as well as imports is very well organized and tabulated in Indian trade portal. And you can access that information through this portal. So, this is very important, I will show you how to use that. Now, this is a. There is another button which talks about the general foreign trade policy which is the current policy and which schemes for export promotions are available as notified by Indian Government. So, this information can be get from here.

Then Friends there is another button here, which talks about the role of banks and what are the regulations which are related to banks and which are related to exporters. So, this information is also there. So, friends, what I have tried to tell you is that, that you have this information in Indian trade portal in the top bar as well as on the sidebar. So, this information can be obtained from the respective buttons and you can find out the information regarding that. Now, another very important part of this website is this area. This is the area which talks about the specific products and services which are listed in ITC HS Code. So, ITC HS code means international trade classifications- Harmonized

System code you can see here and if you have the code number of your product or service you can write it down here and you can get all the data regarding those products. So, you can get, you can get information which are related to tariff rates of customs, you can get information about any SPS -TBT alerts regarding your product, which means the countries which are having changes in the regulations for SPS-TBT, those information is there. About GST. About MEIS scheme, drawback, interest subvention scheme, export-import policy conditions for the specific products. So whatever your product. So suppose you do not know what is your product code, then you can write the name here of that product.

And you can search that product. So, I will show you later how to use this part. So, these two important parts are very important. One is this and second is the 'trade statistics', which is number two. So, these two areas of these two points are very important, especially for new exporters. And I will explain to you that how to use this? Now here, Friends, just below this area, you have the latest news and upcoming events of FIEO or other organizations which are related to exports and imports from India. So, that latest news and events are listed here. And you can check that those things

Single choice questions. Answer only what is best.

So Mr. Neerav is now interested to understand chenille rugs, Chenille dhurries, or Chenille carpets, whatever you call it. So he wants to know what is the initial understanding, What are the initial ideas about understanding the position of the export scenario of Chenille dhurries in the international market?

So where does he start? His main agenda is to understand first where to start. That is his first question. The second question is that so as an Indian exporter, which is the website to start with, where to start getting the data? That is the second question. The third question is from the customs point of view, how does he classify his product? So he already knows this thing that the best classification to start with is the ITC HS classification, which is the international trade classification harmonized system that is the HS code.

So in India, this ITC is called Indian trade classification, but it is similar to international trade classification. The important agenda is to understand what exactly is the HS code, at least eight digit code. So about ten-digit code or 12-digit code that is very, very specific. So he is not really too much concerned now. Right now he's concerned about the eight-digit code.

He understands the value of this eight-digit code, the HS code. He wants to start probably here and wants to know the Indian website that can help to start with. What is the Indian government policy, whether export is allowed, and what are the benefits that are available for exporting chenille rugs from India?

What support he can get from the Indian government? What exactly is the foreign trade policy with respect to Chenille Rugs? These are the questions that are coming to his mind.

Also, he wants to know which are the main top ten countries or five countries where the Chenille dhurries are exported. So he's also trying to understand that. He starts Mr. Neerav starts with the Indian trade portal. So from his training, whatever export training he had got, he knows that to start the process he should start with the Indian trade portal as an Indian exporter. So he starts with the Indian trade portal. He goes to the Indian trade portal.

First published in 1936, INCOTERMS® has since then, been revised to adapt to ever-changing new developments and advancements in transportation and documents delivery systems in the international trade. The current version in use is INCOTERMS 2020. INCOTERMS provide a sort of contractual binding in short and simple language. These contractual delivery conditions are to be incorporated in contracts among various parties of an international trade transaction.

INCOTERMS 2020 facilitate the contracting parties:

1. To complete a sale of goods to the entire satisfaction of each party belonging to a contract.

2. To establish the basic terms of transportation and delivery of goods, in a short and simple format

3. To indicate each contracting party's costs, risks, and obligations with regard to the delivery of goods mentioned in the contract as follows:

a) At what stage does the seller complete the delivery of the said goods?

b) How does one party ensure that the opposite party has met that standard of conduct, which was desired at the time of signing the contract?

c) At what stage of the transaction process, is the risk of loss or damage to the goods is transferred from one party to another, if applicable?

d) What documents/notices each party is required to give to each other with respect to the transportation and transfer of the title of the goods?

e) How will transport costs be distributed among the contracting parties?

f) Which of the parties to the contract need to take care of required licenses and permissions and government-imposed formalities to complete the deliveries of the goods?

g) What are the ‘delivery terms’ and what all is required as proof of delivery is completed?

h) What are the modes and terms of carriage?

Hello, friends, welcome back to the course. So friends, before moving forward in the course, it is very, very important to have a fairly good idea of the international commercial terms, so-called in INCOTERMS in short, and the latest version of INCOTERMS, friends is INCOTERMS 2020. And before that, the earlier version was called in INCOTERMS 2010. So, friends, we will talk about both 2020 as well as 2010 because both are still applicable.

Depending on the contract between the buyer and the seller, they can have a reference to either INCOTERMS 2010 or 2020. But yes, latest version is 2020. So, friends, we will refer to both the version because there is not major difference between 2010 and 2020. There are minor changes which I will explain to you and the reason why these changes have been brought about. So INCOTERMS 2020, which is the latest version became effective from January 1st 2020. Friends, as you already know, the International Chamber of Commerce, based in Paris, France, is the main private organization which is behind creating the uniform customs and practices for documentary, that is the UCP, which is used for the international of L/C.

Similarly, I.C.C. Paris, France also brings out this publication that is the INCOTERMS that is the international commercial terms, from time to time. And it publishes this document to bring about the uniform customs and practices for the delivery terms. That means, the the point of delivery as well as the transfer of risk. When does the transfer of this happens from the seller to the buyer?

So, the benefit of the INCOTERMS is, whatever version it may be, the benefit is that the dispute between the buyer and seller can be minimized. If there is a very clear cut understanding of a particular delivery term, suitable to the situation, suitable to the contract, suitable to the product which is being exported, and the countries, the port of loading and the port of discharge, several different external and internal conditions are there which forces a particular point of delivery and the point of transfer of risk from case to case basis.

So depending on the case, depending on the contract, depending on the understanding between the buyer and seller, they can agree on certain delivery items, which is explained by these several terms usually, which is 11 terms, which is there in 2010 and 2020 INCOTERMS. These 11 times are there, out of which seven terms refers to any mode of delivery, while four terms refers to the Sea & Inland Water transportation. So, friends, the benefit of having these 11 terms, which are there in 2010 and 2020, is that once a particular term is agreed in the contract between the seller and the buyer, the explanation is there of who bears the cost up to what point, whether it is seller or the buyer, and who takes out the insurance, who claims the insurance, who pays for the insurance and who pays for the freight.

That is the main freight.

That is the ocean freight.

Who is responsible at what agreed terms?

Who will bear the responsibility?

who will bear the cost and the risk? will be explained, will be divided between the seller and the buyer, according to the delivery terms agreed between the seller & buyer and these delivery terms are mostly agreed between the seller of the buyer from these INCOTERMS 2010 & 2020. Now, as I have just mentioned to you, that I.C.C. publishes INCOTERMS since 1936. And almost every 10 years, new version is published by I.C.C., which is a private organization, very successful organization in this field.

And of course, the earlier INCOTERMS was 2010. 2020 came into effect from 1st Jan 2020, I just explained to you. And the international traders can still use INCOTERMS 2010 and specify the version in the letter of credit or whatever the contact is there between the buyer and seller, whatever the agreement is there. So friends, before going into INCOTERMS 2020, it's very important to understand INCOTERMS 2010 because in 2020 is absolutely based on and is founded on 2010 only, with some changes. So if you are able to understand what is INCOTERMS 2010 and what changes have taken place in INCOTERMS 2020, the whole concept will be very clear to you.

INCOTERMS 2020 are traditionally grouped in four different categories.

The introduction for each clause contains indications for possible options of the trade terms to operate differently, as per the wishes and negotiation of each contracting party. The four groups are as below:

Group E:

In these terms, the seller makes the goods available to the buyer at its own premises only. The ‘E’ terms include EXW (Ex Works).

Group F:

In these terms, the seller is supposed to make available and deliver the goods to a so-called first carrier which is normally appointed by the buyer.

The ‘F’ terms include – FAS, FOB, FCA

Group C:

In these terms, the seller has to enter into a contract at his costs for the main carriage.

The ‘C’ terms include– CFR, CIF, CPT, CIP

Group D:

In these terms, the seller has to bear both the costs as well as the risks needed to bring the goods to the place of destination. The ‘D’ Terms include – DDU, DAP, and DDP

Now, coming back to the latest INCOTERMS, International Commercial terms, which is published by I.C.C. France, we are talking of INCOTERMS 2020, which is the latest version and which became effective from 1st January 2020. So if we look at the different terms, which are still 11 terms, very similar to the terms, which are there INCOTERMS 2010, and if we try to look at the point of delivery, what are the points of delivery and what are the points where the risk transfers from the seller to the buyer.

So here again, we have the different points, the seller's factory, first carrier, alongside the ship at the port, port of loading, carrier, destination port, Alongside the ship, once the goods are unloaded, discharged, then the carrier in the buyer's country, the agreed place to deliver the goods, if there is any agreed place. So, you can see here, if we compare with, what was the case in INCOTERMS 2010, the terminal was there. But if you look at the INCOTERMS 2020, you do not see any terminal.

So there is no terminal. So that concept of terminal, which was confusing actually, has been removed in INCOTERMS 2020. So what has happened that instead of terminal, It is just the agreed place. And the last point is the buyer's warehouse. So, as you can see here, that there is not any major changes which have been brought in INCOTERMS 2020. So if we look at the Ex Works Term, that is the E term. So the agreed place, which can be the factory gate or it can be some place near to the factory of the seller, where the first courier will pick up the goods.

So still the responsibility of the seller remains till the point of that agreed place. And the risk gets transferred at the very point which is agreed between the seller and the buyer, which is the factory gate, or somewhere near the factory where the first carrier will pick the goods. So the risk is being transferred at that point itself, very similar to what was there in the case of INCOTERMS 2010.

Same is the case of the FCA term, which is the free carrier. So the point where the first carrier picks the goods and not only picks the goods, the loading of the goods is done by the seller, as you can see here, the goods are loaded on the first carrier. Till that point, the obligation of the seller is there. And beyond that point, the buyer's obligation starts. Very similar to what was there in INCOTERMS 2010. Same is the case of the free alongside, which is the point here at the port, which is alongside the ship.

So till that point, the responsibility of the seller is there. And beyond that point, the responsibility gets transferred to the buyer and the risk also gets transferred to the buyer at that very point itself. Free on board, this is the most common and very popular INCOTERMS, which is the C terms, which is not place to place term.

So the FOB terms again is very similar. So once the goods are loaded on the ship, the obligation of the seller ceases, and the responsibility of the goods gets transferred along with the risk, to the buyer, at this point. Similarly, CFR term. Cost & Freight, which is very similar to FOB But the risks get transferred like in FOB, once the goods are loaded on the ship, but the obligation of the seller is till the point of the discharge of the goods at the destination. So why is it so despite the fact that risk gets transferred here in this, as you can see here the risk gets transferred on the point when the goods are loaded on the ship. But since the seller has to bear the cost of the ocean freight, absolutely similar to what was explained in INCOTERMS 2010. Similarly CIF, which is very similar to CFR only difference is that not only the ocean freight has to be borne by the seller, but also the insurance.

But the risk gets transferred at the very point once the goods are loaded on the ship. Now the place to place term, CPT, that is the cost paid to, the moment goods are picked up and loaded on the first carrier, the obligation of the seller is there, but the risk gets transferred to the buyer, at that very point itself.

The only obligation of the seller beyond that point is the cost of the carriage from the first point of the pickup, till the last point that is the place of destination. So that place of destination, till that point, the carriage has to be paid by the seller. Again, very similar to what was there in INCOTERMS 2010. So it has not drastically changed. And CIP, Carrier and Insurance paid to, which is very similar to CPT, except that, the insurance also has to be paid by the seller from the pickup point of the first carrier to the agreed place of destination while the risk gets transferred, at the very point, when the goods are loaded on the first carrier and similar to what was the case in the CPT. Now this new term has been introduced, which is called delivered at the place, the agreed place, unloaded. Now, this term has been replaced instead of DAT, that was there in the INCOTERMS 2010, as you can see here, that in INCOTERMS 2010, we had the term called DAT - delivered at Terminal. So that has been removed.

Instead of that, the new term has been introduced that is delivered at the place, because terminal has been removed from here. That is no terminal now here. So that confusion has been taken care of and DPU is delivered at the place, which means the place of destination, that is the agreed place, and till that point, the seller's obligation as well as the risk is intact. So the risk gets transferred at this point of place of destination, which is very similar to what was there in INCOTERMS 2010.

But this is a new term, where not only the goods are delivered at this point, the agreed point, but also the cost of unloading all the goods and the risk involved is of the seller. So this is absolutely new term, which has been introduced, and it's a very good change in the INCOTERMS 2020. And this is the main difference between the 2010 and the INCOTERMS 2020.

Now friends, The other delivery terms, that is the D term, which is the DAP- delivered at the place, which means, delivered at the warehouse of the buyer, at the place of the buyer, not the agreed place which is at the buyer's place. Till that point, the obligation and the cost and everything is of the seller and the risk is also of the seller.

Only when the goods are unloaded at the buyer's warehouse, the risk gets transferred to the buyer and the obligation gets transferred to the buyer, as you can see it. So again, it is absolutely same. This particular term, that is the D term, is absolutely same. It is also place to place term, like in INCOTERMS 2010, and it is the same term, which was there. And finally, the last term that is the 11th term in INCOTERMS 2020, which is delivered duty paid - DDP. And again, it is similar to what was there, the DDP, which was there in INCOTERMS 2010, which means delivered duty paid, which means the risk gets transferred to the buyer, once the goods are unloaded at the buyer's warehouse, So till the buyer's warehouse, the obligation is of the seller and after that the obligation gets transferred to the buyer and the risk also gets transferred to the buyer. And over and above, all the obligations of the seller, the obligation of paying the import duties, taxes and any cost associated with clearing of the goods is also to the seller.

And it is same as which was there in INCOTERMS 2010. Friends, in addition to the major change, which is the introduction of the new term, that is the DPU, which means- delivered at the place, unloaded, there are certain clarifications, new provisions in other terms which have been introduced to make them more robust, more clear, and which is likely to reduce a lot of conflicts which happen between the buyer and the seller. So such improvements have been done in the INCOTERMS 2020. So, friends, you can see in the resource section of this lecture, the complete document which tells about the INCOTERMS 2020 and the changes which have been brought in INCOTERMS 2020 over INCOTERMS 2010.

In the next video, Dr.Jain will discuss different methods of international payments. He will also discuss the level of risks involved in using different options of payment both for the exporter as well as for the importer. Generally, the options which are secure for one party are risky for the other party.

Another, very important area, for becoming a successful exporter, is to understand, how to get the international payments, because, getting international payment is a tricky affair, Which requires, reasonably good knowledge, about the different methods, and modes of payment, which are available to an exporter. Friends, I just want to tell you, that, especially in the initial stages, of exporting, it is always better, to involve banks, in the payment methods, because, otherwise, international payment is a very tricky business, and, it can be, a major problem, in the export process. Friends. First, it is important, to understand, that, what are the different types of modes, which are available, methods available, for international payments. The most easy method of payment, for any exporter, would be, the advance payment, which means, you're getting the full payment, at the very beginning, by the importer. But in most cases, it doesn't happen. Importer, if they give, advance payment, is least secure, and, you are most secure, but, no importer will agree on advanced payment, especially, if he doesn't know you.

So, he will definitely, not give advance payment. Then, another method, is the confirmed documentary credit, or, confirmed letter of credit. What is the meaning, of confirmed letter of credit? It is a letter of credit, issued by the Bank, of the importer, and confirmed by the Bank, of the exporter, in his home country. So, there is a double protection, in confirmed documentary credit, the letter of credit. Firstly, it is issued, by a good quality importer's bank. In most cases, it will be a good quality bank, which will issue, the letter of credit. And secondly, it is confirmed by your local bank, with whom, you already have a dealing. So, a bank confirmation means, banks being part of the letter of credit system, internationally, they know the intricacies of the letter of credit. They understand, which bank has opened the LC, which is the opening bank, which is the issuing bank. So, a confirmation, local confirmation, means, the assurance of getting payment, is very very high.

Then friends, another method of payment is documentary credit, which may not be confirmed. Which means, it has been, just opened by the the issuing bank, or, the bank of the importer, where, the beneficiary, is the exporter, and, it is not locally confirmed. But, what you can do, is that, you can do the due diligence, of the issuing bank. That is the bank, of the importer. With this due diligence, you can know, whether, it is a first-class bank, or not. And, the list of, top 1000 first class banks, is easily available, with your own banker. If you go to your banker. They will charge you a little bit, for giving this information and they will give you the list of 1000 top banks of the world. If the documentary credit, which may not be confirmed, locally confirmed, is issued by the first-class bank, from this list of 1000 top banks, then, normally there is no risk involved. So, even, this kind of payment is also reasonably secure, for the exporter, and it is also secure for the importer.

Because in the letter of credit, there is a list of documents, which have to be submitted, by the exporter. And, only when the exporter submits those documents, with the complete compliance, only then the payment will be released, to the exporter. So, in the case of documentary credit, the security of the exporter, and, the importer, is balanced. So, it is always advisable, that, during the initial stages of business, the exporter should go for either the normal documentary credit, or the confirmed documentary credit. So, that is very very important. Then, friends, at certain later stages, when you are conversant, with the export business. You are doing well, in your export business. If you are ready to take certain risks, and you want to reduce some bank costs. Which are associated with documentary credit, or confirmed documentary credit.

In that case, you can go for the documents collection. What is the meaning of the document collection, is, that all such documents, which are generally the conditions in the letter of credit, they need not be sent through the letter of credit, but rather, they are sent through the bank, banking channels. Which means, through bank of the exporter, and the bank of the importer, it is sent to the importer, for collection of the payment. So, what is the meaning of this, that the exporter submits all such documents, which are normally part of the letter of credit, and, which are normally called as commercial documents. These are given by the exporter, to the bank, for payment collection, to the exporter's bank. The exporter's bank give documents to the bank of the importer, and the bank of the importer will deliver those documents, to importer, only against payment.

It is called DP. DP means, document against payment. But there is also a possibility, that the bank of the importer may still give the document to the importer, against an assurance, that payment will be made after certain days. So, it could be 30 days it could be 15 days it could be more than 30 days. So, the the importer gives a sufficient assurance to the bank, that payment will be made after certain time. So, this is called, the documents against acceptance, which means, the acceptance by the importer, of the documents, against his assurance, that payment will be made. And of course, if you become, very much conversant, with the export business, and you are comfortable, with your list of selected buyers, you can go for an open account.

In the open account, you send the goods to the importer, without any assurance of the payment. And the importer receives the goods. And after a certain period, after the receipt of the goods, the importer may send you the payment, on an open account basis. This means, there is an account, open account, between the exporter, and the importer, and the exporter ships the goods to the importer. Importer receives the goods, and under the open account method, the importer will make payment, on the agreed frequency. It can be on a monthly basis. It can be on a quarterly basis or it can be on a annual basis.

So, Friends. In the open account, the importer is more secure, but the exporter is least secure. So, proper discretion is required, in the receiving of the International payments, by the exporter, from the importer, depending on the situation, depending on the experience, depending on the trust level between the exporter and the importer, and different types of payment methods can be used by the exporter, as well as by the importer. Friends, now, as I told you, that, in the initial stages of the business, it is always better to go for the documentary credit. Which means, the involvement of the banks.

So, involvement of the banks, requires a certain amount of costs. So, in such cases, what happens is that the bank acts as a protector of the payment. Banks also act as Escrow partner, because the money is with the bank, and it will be released, only when the exporter performs his responsibility of shipping the goods, in the prescribed manner.

So, if the performance of the the exporter is perfect, the under the letter of credit, the bank will release the payment. So, what happens in a, in the case of the documentary credit, the onus of payment is on the bank, not on the importer, because importer has already paid that money to the bank. And this money is lying with the bank, and against the documents, which are the preconditions of the documentary or the letter of credit. The exporter will receive the money.

Choose only one best answer

Pre-shipment commercial documents are the main documents that accompany the shipment and are the core documents demanded in the letter of credit. These are the main documents where the buyer has the interest to ensure timely delivery of goods that are as per the ordered quality.

Auxiliary documents are required for obtaining the commercial documents by the exporter. Regulatory documents fulfill the regulatory obligations of the exporter in the home country.

The main purpose of post-shipment documents is the realization of international payment through a letter of credit and to secure home country governmental incentives, if any. This is the last lecture of this course.

Now friends, let us talk about the post-shipment export documents as I had explained to you that these are the documents which are to be arranged by the exporter after the shipment has been effected. So, as I told you, very important document which is also the part of letter of credit is the shipment advice. Now, shipment advice is a prescribed format which contains information like the shipping company where the goods have been delivered, the name of the ship, the container number and other shipment details, which has to be mentioned in the shipment advice and immediately after the shipment one copy of shipment advice has to be sent to the buyer immediately through electronic means.

Also friends you need to obtain a non negotiable copy of bill of lading because the negotiable copy of the bill of lading is a pre-shipment document which is to be submitted to the bank and it will be already submitted to the bank. So you will have no copy of that with you. So, a non-negotiable copy of bill of lading is required to prove that the shipment has been effected then Friends one copy of commercial invoice is required for the shipment advice purpose also. And friends another thing this non negotiable copy of bill of lading has to be sent along with the shipment advice immediately after the shipment through electronic means and this non negotiable copy is also part of that only. Similarly commercial invoice is also part of that set of documents which are to be sent along with the shipment advise and also the packing list.

So, these copies along with non-negotiable copy of the bill of lading and the prescribed format of shipment advice is the requirement of the buyer which is after the shipment. So that buyer is well informed about the shipment. And friends after the shipment, all those pre shipment document which I just mentioned to you these documents has to be submitted to the negotiating bank for realizing the payment. And this we have already discussed. These were also Pre-Shipment document, but once the shipment has been made these documents which are now completely Ready with all compliance are treated as post-shipment documents and these are to be given to the negotiation bank for realizing the payment.
And then Friends The third category of the Post Shipment documents is the documents which are required for claiming the incentives for the exportation if any. So, for the purpose of excise department, it is the AR I form duplicate copy duplicate certified copy of AR I and AR II, non negotiable copy of bill of lading or shipping bill which I had already mentioned to you and for claiming the duty drawback or any other incentive you need drawback claim performa, certified copy of commercial invoice and non-negotiable copy of bill of lading.

So, this had already explained to you So, friends what is the purpose of post-shipment documents. The first purpose is the shipment advice to the buyer. Second purpose is the negotiation of the documents against the letter of credit for realizing the payment and third purpose is the claiming of the incentives

Choose only one answer which is the best

In the next video, I will discuss the basic understanding of the movement of goods by sea and air. I will also talk about different types of cargo ships and different modes of international transportation.

Choose only one answer which is best

Heartiest congratulations for completing this comprehensive course on exports setup skills. Do share about your new learning on social media including about the certificate received by you.

As a free bonus for completing this course, I am pleased to share a complete free complimentary copy of my eBook written especially for my students of this course. See the resources section of this lecture to download this complete ebook.

Do rate the course if not yet done It helps.

So, friends, I hope this, uh, course you've found as a very good starting point for starting your successful journey to become a successful exporter. So in this course, I included a lot of examples, case studies. I discussed about the international commercial terms, international contract, international payment systems, as well as a little bit on the export documentation and procedures, and also about the different international trade theories, which explain international trade and many, many other aspects I discussed in this course.

So friends, I'm sure that this course will be very, very useful to you in future also because I will keep updating new material in this course. And I will keep you posted with any new additions in this course and this course will be available to you for the lifetime. So if you like this course, please rate this course and give your feedback and share the course with your colleagues and contacts for their benefit.

Thank you so much.