Import–Export Business in India

A Practical, Compliance-Focused Guide for Beginners and MSMEs

IMPORTANT DISCLAIMER (READ FIRST)

This guide is for educational purposes only.
It is not legal, tax, investment, or professional advice.
International trade involves financial risk, regulatory risk, and operational risk.
Trade policies, GST rules, customs regulations, export incentives, and DGFT
notifications change frequently.
Before taking any business or compliance decision, you should:
Consult a Chartered Accountant (CA) for tax, GST, and accounting matters.
Consult a licensed customs broker / CHA for customs classification, duties,
and clearance.
Consult a qualified legal professional for contracts, disputes, and regulatory
interpretation.
By using this document, you agree that:
You are solely responsible for verifying current laws, schemes, and procedures.
The author and publisher are not liable for any loss, penalty, delay, or damage
arising from use of this material.

How to Use This Guide

Written for absolute beginners in India.
Focuses on practical understanding of import–export (EXIM) and the Indian
regulatory ecosystem.
Uses simple English with occasional light Hinglish for clarity.
Covers:
Concepts and terminology
Legal and regulatory framework
Documentation and logistics
Pricing, risk, and government schemes
Step-by-step roadmap and checklists
Treat this as a starting framework, not a substitute for professional advice.

Each major section is structured so that it can be read independently, but reading in order
gives the best “zero to operational clarity” flow.
SECTION 1: WHAT IMPORT–EXPORT ACTUALLY IS
1.1 Basic Definitions
Import
Import means bringing goods or services into India from a place outside India.
For goods, import is regulated mainly under the Customs Act, 1962, Customs Tariff
Act, 1975 , and the Foreign Trade Policy (FTP).
Under GST / IGST, import of goods is treated as an inter-state supply and attracts
IGST along with customs duty.[source:17][source:20]
Export

Export means taking goods or services from India to a place outside India.
Under GST, exports are generally treated as zero-rated supplies, which means:
GST is not charged to the foreign buyer, and
The exporter may be eligible to claim refund of input taxes paid on
inputs/inputs services used for exports, subject to conditions.[source:17]
[source:20]
Key Point (Simple Hinglish):
Import = samaan bahar se India mein lana.
Export = samaan India se bahar bhejna.

1.2 Role of Trader vs Manufacturer

In Indian EXIM, you often hear “merchant exporter” and “manufacturer exporter”:

Manufacturer
Produces goods in India (factory or manufacturing premises).
May export directly or sell to merchant exporters.
Trader / Merchant
Does not manufacture; primarily buys and sells.
May buy from Indian manufacturers and export, or import and sell in India.
Why this matters:
Certain export incentives and schemes may be linked to manufacturer status or to
actual exporter of record.
Documentation (like Certificate of Origin, packing list, and GST treatment) can
differ depending on whether you are selling to an Indian party or to a foreign buyer.
Risk exposure is different: manufacturers have production risk, traders have more
market and credit risk.

1.3 Import–Export vs Domestic Trading

 Domestic Trade
Aspect Import–Export Trade
(within India)
Jurisdicti Indian states, Multiple jurisdictions (India +
on domestic GST law foreign country laws)
GST Customs duties + IGST on imports;
Taxes
(CGST/SGST/IGST) zero-rated exports
Docume Tax invoice, e-way Shipping bill, bill of lading,
ntation bill, etc. certificate of origin, etc.
Currenc
Mostly INR Foreign currencies (USD, EUR, etc.)
y
Local demand, Country risk, FX risk, logistics risk,
Risks
credit risk compliance risk
Interme Transporters, Freight forwarders, customs
diaries distributors brokers, International banks
Regulati Domestic trading Customs law, FTP, DGFT regulations,
ons laws foreign exchange regulations

A person experienced in domestic trading still needs to learn specific EXIM processes,
documents, and compliance; it is not just “selling to another state”.

1.4 Common Myths vs Reality in India

Myth 1: “Export business is easy paisa, high profit, low risk.”
Reality:
Margins vary by sector and are often thin due to global competition.
Risks include payment defaults, delays, quality disputes, regulatory issues,
and FX losses.
A serious exporter must focus on compliance, quality, and risk
management, not “quick money”.

Myth 2: “If you have one foreign buyer, you are set for life.”
Reality:
Buyers can shift to other suppliers due to price, quality, or geopolitical factors.
Dependency on a single buyer is risky; diversification is important.
Myth 3: “IEC se sab ho jayega – just get IEC and export will start.”

Reality:
IEC (Importer Exporter Code) is only a basic license/identifier, not a business
model.
You still need:
 Product knowledge
Market research
Proper costing and pricing
Logistics and documentation capabilities
Contract and compliance awareness
Myth 4: “Government incentives will make the business profitable.”

Reality:
Incentives like RoDTEP are supporting mechanisms, not guaranteed income.
[source:33][source:36][source:39]
Policies can be revised, paused, or withdrawn; WTO decisions have already
led to changes from MEIS to RoDTEP.
Your core model must be viable even without incentives.
Myth 5: “If my CHA and freight forwarder manage things, I don’t need to understand
compliance.”
Reality:
Ultimately, you, the exporter/importer of record, are responsible in the eyes of
customs and other authorities.
Mis-declaration of HS code, value, or origin can lead to penalties,
investigations, or seizure.
You must at least understand basic regulations and checks.

SECTION 2: INDIA’S EXPORT & IMPORT ECOSYSTEM

2.1 India’s Major Export Sectors (Indicative)
India’s export basket includes a wide range of goods and services. Some major broad
categories:
Pharmaceuticals & chemicals – bulk drugs, formulations, APIs[source:3][source:24]
Engineering goods – machinery, auto components, industrial products
Textiles & garments – cotton yarn, fabrics, apparel, home textiles
Agricultural & food products – rice, spices, tea, coffee, marine products
Gems & jewellery
IT and business services (services exports)
Leather & footwear
Automobiles and vehicle parts
Handicrafts and handicraft-based products

For MSMEs, typical entry sectors include:

Garments and textiles
Leather accessories
Processed foods and spices
Handicrafts & home décor
Engineering sub-components
Note: Export potential and regulation differ by product. Always check:
 HS code classification
Any product-specific restrictions or quality standards (e.g., food, pharma)
Importing country’s standards (e.g., CE marking, FDA for certain products)

2.2 Import Dependency Areas

India imports heavily in certain sectors, such as:
Crude oil and petroleum products
Gold and precious metals
Electronics and components (semiconductors, mobile phone parts)
Chemicals and industrial raw materials
Machinery and capital goods

For MSMEs, common imports include:

Raw materials for manufacturing (chemicals, metals)
Components and spare parts
Capital machinery
Certain consumer goods for trading
Understanding import dependency helps in identifying:

Potential import substitution opportunities

Supply chain risk, especially for critical inputs.

2.3 Government Role in Trade

Key institutions and their roles:
DGFT (Directorate General of Foreign Trade)
Frames and implements the Foreign Trade Policy (FTP).
Issues IEC, notifies RoDTEP rates, regulates certain export/import conditions.
[source:16][source:19][source:42]
CBIC / Customs
Administers Customs Act and Customs Tariff Act.
Handles customs clearance, duty collection, enforcement, and HS
classification.[source:15][source:18]
GST / IGST authorities
Administer GST law for import and export of goods/services.[source:17]
[source:20]
RBI and Authorised Dealer (AD) Banks
Regulate foreign exchange under FEMA.
Oversee inward/outward remittances, export proceeds realization, and trade
financing.
Export Promotion Councils (EPCs)
Sector-specific bodies that support exporters, issue certain certificates, and
disseminate information.
2.4 MSME Participation in Exports
MSMEs contribute a significant share of India’s exports and foreign exchange
earnings.[source:27][source:30]
Government policies and schemes (e.g., RoDTEP, interest equalisation, export
credit insurance) often target MSMEs.
MSMEs face challenges in:
Accessing information
Managing currency risk
Meeting quality and compliance standards
Financing working capital
For MSMEs, a disciplined and compliance-focused approach is critical to survive and
grow in export markets.

SECTION 3: BUSINESS MODELS IN IMPORT–EXPORT

3.1 Merchant Exporter
Definition:
A merchant exporter is an entity that buys goods from Indian manufacturers and
exports them to foreign buyers, without doing its own manufacturing.
Operational Model (Simple Flow):

1. Identify Indian supplier(s).

2. Negotiate price, quality, packing, and delivery terms.
3. Identify foreign buyer and agree on terms (price, Incoterms, payment).
4. Buy goods from supplier (with or without GST, depending on structure and schemes).
5. Export goods – you are the exporter of record on shipping documents.
Pros:
No need for your own manufacturing unit.
Lower initial capital investment in plant and machinery.
Flexibility to change products and sectors.
Faster entry into export market.

Cons:
Dependence on supplier for quality, timelines, and consistency.
Lower margins compared to manufacturer-exporters if many middlemen.
Harder to build product differentiation.
Capital Needs:

Working capital for:

Buying goods from supplier
Freight and logistics
Certifications, packaging, and insurance
Bank limits or trade finance may be needed for larger volumes.
Risk Level:
 Medium–High, depending on:
Buyer credit risk
Supplier performance
Market fluctuations

3.2 Manufacturer Exporter

Definition:
A manufacturer exporter produces goods in its own facility and exports directly under its
own name.
Pros:

Better control over quality and production timelines.

Ability to develop proprietary products and brands.
Access to some manufacturer-linked schemes and sometimes better banking
support.
Potentially better margins in the long term.
Cons:
Higher capital requirements (plant, machinery, labour).
Need to manage both production and export marketing.
Regulatory compliance burden for factory operations (labour, environmental, etc.).

Capital Needs:
Investment in factory, machinery, quality systems.
Working capital for raw materials and production cycles.
Risk Level:

High fixed cost risk; however, control over product can reduce some market risks.

3.3 Trading House Model

A “trading house” generally refers to a larger, more organised trading company that may:
Handle multiple products, sectors, and geographies.
Work as an aggregator between Indian MSME manufacturers and multiple foreign
buyers.
Offer services like:
Market access
Financing facilitation
Bulk procurement

Pros:
Economies of scale in logistics and marketing.
Ability to diversify across products and markets.
Strong negotiating power with suppliers and buyers.
Cons:
 Requires strong systems for compliance, FX management, and multi-country
operations.
High management complexity.
Capital Needs:

Larger working capital for bulk operations.

Investment in staff, systems, and global presence.
Risk Level:
Diversified risks but high operational complexity.

3.4 Commission-Based Export (Export Agent / Commission Agent)

Definition:
You act as an intermediary between foreign buyers and Indian suppliers. You do not buy
or sell the goods yourself; instead, you earn a commission on successful orders.

Typical Structure:
Foreign buyer places order directly with Indian supplier.
You facilitate:
Introductions
Negotiations
Communication
Sometimes quality checks and follow-up
You earn pre-agreed commission (e.g., 2–5% of order value), usually paid by:
The supplier, or
The buyer, depending on agreement.
Pros:

Lower capital requirement (no inventory).

Can be started with limited funds if you have strong networks.
Cons and Legal Considerations:
Commission recovery can be difficult if not documented properly.
Tax and FEMA implications on commission received in foreign currency need to be
understood with a CA.
You may still face certain reputational risks if deals go wrong.

Risk Level:
Financial capital risk is lower, but reputation risk and payment risk on
commission can be significant.
3.5 Business Model Comparison Table

Own Capital Main

Model Manufact Intensit Revenue Key Risks
uring y Type
Merchant Trading Supplier risk,
No Medium
Exporter margin buyer default
Manufactu Manufactu
Production +
rer Yes High ring +
market risk
Exporter export
Trading Multi-country,
Trading No/Yes
High margin, compliance
House (mixed)
services risk
Commissio Commission
Commissio
n-Based No Low recovery, legal
n on orders
Agent risks

Practical Tip (Hinglish):

Shuruat mein, many MSMEs enter as merchant exporters or manufacturer exporters in
a narrow product range. Commission model can be an entry point but must be structured
carefully with proper contracts and advice.

SECTION 4: LEGAL & REGULATORY FRAMEWORK (VERY

DEEP)
4.1 Importer Exporter Code (IEC) – Step by Step
What is IEC?
IEC (Importer Exporter Code) is a 10-digit identification number issued by DGFT.
It is required for most import/export activities by businesses and individuals in India.
[source:16][source:19][source:22]
When is IEC required?

For import of goods into India (customs clearance & remittances).

For export of goods and services to receive export proceeds and avail incentives.
When IEC may not be required (exceptions – subject to current DGFT rules):
Very specific categories notified by DGFT (e.g., certain government departments).
You must verify current FTP and DGFT notifications with a professional.
4.1.1 IEC Application – High-Level Requirements
PAN of the applicant (proprietor/company/LLP/firm).
Valid mobile number and email ID.
Bank account details (current account in the name of the entity is generally
expected).
Supporting documents as per DGFT guidelines (which can change).
Note: As of recent practice, application is fully online on DGFT portal; fee is around ₹500
but always check the latest amount.[source:16][source:22]

4.1.2 IEC Application – Indicative Step-by-Step (Online)

This is an educational summary. The actual steps and fields may change with portal
updates. Always refer to DGFT’s latest instructions or consult a professional.
1. Register on DGFT Portal
Visit DGFT’s official website.
Register using your PAN, email, and mobile number.
Validate via OTPs and create login credentials.[source:13][source:16]
2. Login and Select IEC Application
Go to “Services” → IEC Profile Management / Apply for IEC” (label may
vary).
Choose option to apply for new IEC.
3. Fill Entity Details
Name of entity as per PAN.
Type of entity (proprietorship, partnership, Private Ltd, LLP, etc.).
Registered office address.
4. Fill Branch/Additional Details (if applicable)
Details of other branches/locations, if any.
5. Fill Bank Details
Bank name, branch, IFSC, account number.
Upload cancelled cheque/ bank certificate as required.
6. Upload Documents
PAN, address proof, and other documents as specified by DGFT.
7. Fee Payment
Pay the prescribed fee (e.g., ₹500) online.
8. Verify and e-Sign
Verify details carefully.
e-Sign using Aadhaar OTP or DSC, as permitted.
9. Application Submission & IEC Issue
On approval, IEC is issued electronically and sent to registered email, and is
usually downloadable from the portal.[source:16][source:19][source:22]

4.1.3 IEC Validity and Annual Update

IEC is generally valid for the lifetime of the entity, i.e., no periodic renewal fees.
[source:22]
However, annual online confirmation/update of details is mandatory (usually
between April–June). Non-updation can lead to deactivation of IEC.[source:16]

Practical Caution:
Failure to update IEC on time can block your ability to file certain documents or claim
benefits. Have an internal compliance calendar or use your CA to track this.

4.2 Role of DGFT

DGFT functions include:
Issuing IEC and maintaining exporter–importer profiles.
Notifying and updating Foreign Trade Policy (FTP) and Handbook of Procedures.
Managing schemes like RoDTEP and publishing associated rate schedules.[source:33]
[source:42]
Issuing trade notices and public notices relating to export-import policy.
For any exporter/importer, DGFT’s frameworks are as critical as customs and GST laws.

4.3 GST in Export/Import (Conceptual Overview)

GST laws are complex and subject to frequent changes. Always verify with your CA
or GST consultant.

4.3.1 Imports under GST

Imports of goods are treated as inter-state supply and attract IGST, in addition to
customs duties.[source:17][source:20]
IGST on imports is generally paid at the time of clearance along with customs duty.
IGST paid on imports may be available as input tax credit (ITC) subject to
conditions (registration, filing of returns, etc.).

4.3.2 Exports under GST: Zero-Rated Supplies

Exports of goods and services from India are generally zero-rated under GST.
[source:14][source:17][source:20]
Two broad routes:
1. Export without payment of GST under Bond/Letter of Undertaking (LUT)
and claim refund of unutilised ITC.
2. Export on payment of IGST and claim refund of IGST paid.
The choice depends on:
Working capital situation
Product category
CA’s advice

4.3.3 When GST Applies and When Zero-Rated

Imports: GST (IGST) applies at import.
Exports: Treated as zero-rated, but proper documentation and GST compliance are
essential to claim refunds or benefits.

Caution:
Wrong treatment of a supply as “export” when it does not meet conditions (e.g., place
of supply rules, realization of proceeds) can lead to denial of refund and demands.
Consult a CA to correctly determine tax positions.
4.4 PAN, Bank Account, and Other Basic Requirements
To run an EXIM business in India, you typically need:
Permanent Account Number (PAN) – in the name of the entity (or proprietor).
Current bank account – preferably in the entity’s name for routing export
proceeds/import payments.
IEC – from DGFT.
GST registration – if crossing threshold or as required by business model and for
seamless credit (consult CA).
Basic digital identity – email, mobile, access to government portals.
For higher volumes and more complex operations, you may also need:

Registration with EPCs

Sector-specific licences (e.g., FSSAI for food, drug licences for pharma, etc.).

SECTION 5: EXPORT DOCUMENTATION (VERY DETAILED)

Export documentation is central to:
Customs clearance
Banking (realisation of export proceeds, LC compliance)
Claiming export benefits (like RoDTEP)
Ensuring legal proof of shipment

5.1 Core Export Documents – Overview

1. Commercial Invoice
2. Packing List
3. Bill of Lading (B/L) or Air Waybill (AWB)
4. Shipping Bill / Bill of Export
5. Certificate of Origin (COO)
6. Insurance Policy / Certificate (where applicable)
7. Other certificates – inspection, quality, phytosanitary, etc., depending on product
and destination.

5.2 Commercial Invoice

Purpose:
It is the primary sale document between exporter and importer.
Used by:
Customs to assess value of goods.
Banks under Letter of Credit (LC) and documentary collections.

Key Contents (Typical):

Exporter’s name, address, and IEC.
Buyer’s name and address.
Invoice number and date.
Purchase order / contract reference.
 Description of goods (matching HS code and shipping bill).
Quantity and unit (e.g., pcs, kg, cartons).
Unit price and total value (in agreed currency).
Incoterm and named place (e.g., FOB Nhava Sheva).
Payment terms (e.g., 30% advance, 70% against documents; LC at sight).
Country of origin (if required).
Declaration clauses (as per trade practice or LC requirements).
Care Points:

Description must match other documents (packing list, shipping bill, LC).
Currency and value should align with contract and LC terms.
Mis-declaration of value can lead to penalty.

5.3 Packing List

Purpose:

Gives detailed packing and quantity information per package/carton.

Used by:
Customs
Transporters and warehouse teams
Buyers for checking received goods
Key Contents:
Exporter and buyer details.
Invoice reference.
Package-wise details:
Package number (e.g., Carton 1/20, 2/20, etc.)
Contents of each package
Gross and net weight
Dimensions/volume (for freight).

Practical Use:
Helps resolve disputes about “short shipment” or damages.
Essential for logistics planning (container filling, palletisation).

5.4 Bill of Lading (B/L) / Air Waybill (AWB)

Bill of Lading (Sea Freight):
Issued by the shipping line or its agent.
Acts as:
Receipt of goods
Document of title (depending on type – negotiable/non-negotiable)
Evidence of contract of carriage

Key Elements:
Shipper (exporter)
Consignee (buyer or bank)
 Notify party
Vessel name and voyage
Port of loading and discharge
Description, weight, package details
Number of originals (e.g., 3/3 originals)
Air Waybill (Air Freight):

Issued by the airline or its agent.

Typically non-negotiable; acts mainly as:
Receipt of goods
Contract of carriage

5.5 Shipping Bill / Bill of Export

Purpose:

Primary customs document for export clearance in India.

Filed through the EDI system by the exporter or customs broker.
Key Information:
Exporter details and IEC
Buyer details
HS code of goods
FOB value
Scheme under which export is made (e.g., RoDTEP etc. as applicable)
Port and shipping details

Importance:
Basis for:
Customs export examination and clearance
Statistical data
GST and rebate/refund claims
Export incentive claims (e.g., RoDTEP).

5.6 Certificate of Origin (COO)

Purpose:
Certifies the country in which goods are produced.
Required:
To claim preferential duty under FTAs by the importer in destination country.
For compliance with buyer/importing country requirements.

Types:
Preferential COO – under FTAs, issued by designated authorities when origin criteria
is met.
Non-preferential COO – issued by chambers of commerce, EPCs, etc., where no FTA
benefit is claimed.
5.7 Other Supporting Documents
Depending on product and destination, additional documents may include:
Inspection certificate
Quality certificates
Phytosanitary certificate (for plant products)
Health certificates (for food products)
Insurance certificate (especially under CIF/CIP terms)
Special certificates demanded in LC (e.g., fumigation certificate)
Key Point:
For LC shipments, every word in the LC should be matched in documentation, otherwise
banks can raise discrepancies and delay payment.[source:34][source:37][source:40]

SECTION 6: IMPORT DOCUMENTATION

6.1 Bill of Entry
Definition:

A Bill of Entry (BoE) is a legal document filed by the importer or customs broker to
clear imported goods for home consumption or warehousing.
Key Contents:
Importer’s details, IEC, GSTIN.
Supplier’s details.
Vessel/flight details and port of arrival.
HS code, description, quantity, and value of goods.
Country of origin.
Duty calculation (Basic Custom Duty, SWS, IGST, etc.).

Importance:
This document forms the basis for assessment of customs duty and clearance.
Incorrect HS code or valuation in BoE can lead to under/overpayment of duty and
potential penalties.[source:18]

6.2 Customs Clearance – Basic Flow (Imports)

1. Arrival of goods at Indian port.
2. Filing of Bill of Entry (often by CHA).
3. Assessment by customs – checking HS code, valuation, licensing, etc.
4. Examination or scanning of cargo (as decided by customs).
5. Payment of assessed duties and IGST.
6. Out-of-charge order and physical release of goods.
Practical Tip:
Always work with a reputable customs broker who understands your product and HS
classification. Still, final responsibility lies with you.
6.3 Duties & Taxes on Imports (Indicative)
Typical components may include (names and rates can change):
Basic Customs Duty (BCD) – under Customs Tariff Act.
Social Welfare Surcharge – on BCD.
IGST on imports – under IGST Act, generally levied on CIF value + applicable
customs duties.[source:15][source:20]
Additional cesses/duties – as notified.
Duty structures can be influenced by:

Product HS code
Country of origin and any trade agreement
Exemptions/notifications

6.4 HS Codes Explained (Overview)

HS (Harmonized System) Code:
International nomenclature for classifying goods, developed by the World Customs
Organization (WCO).
ITC (HS) Code in India:

India uses an 8-digit ITC(HS) code for customs and trade policy purposes.[source:15]
[source:18]
Structure:
First 4 digits – heading
First 6 digits – sub-heading (as per HS)
8 digits – tariff item (Indian extension)
Why HS classification is critical:
Determines customs duties, import policy (free/restricted/prohibited), and eligibility
for incentives.
Wrong classification can lead to:
Higher duty
Underpayment disputes
Anti-dumping duty exposure

Practical Action:
Always discuss HS classification with your CHA and CA, and where doubt exists, consider
advance rulings or professional opinions.

SECTION 7: CUSTOMS, DUTIES & COMPLIANCE

7.1 Customs Authorities & Powers
Customs authorities under the Customs Act, 1962 have broad powers to:
Examine goods and documents.
Question importers/exporters.
Confiscate goods and levy penalties in cases of mis-declaration, evasion, or
prohibited goods.
Key Idea:
Customs is not only a revenue collection agency, but also an enforcement and border
control authority.

7.2 Duty Structure – Conceptual View

For imports, customs duty is typically computed based on:
1. Classification (HS code)
2. Assessable value
Often derived from CIF value, subject to valuation rules.
3. Applicable rates
Basic customs duty, surcharges, IGST, etc.

For exports, most goods are not subject to export duty, but some specific products may
attract export duty as per Schedule II of the Customs Tariff Act.[source:15]

7.3 Anti-Dumping and Safeguard Duties

Anti-dumping duty is imposed when certain imports are shown to be dumped and
injuring domestic industry.
This can significantly increase the landed cost of imported goods.
HS code selection affects whether such duties apply.[source:18]

As an importer:
You must be aware if your product is under any anti-dumping measures.
As an exporter:

Be aware that foreign countries can impose anti-dumping duties on Indian exports.

7.4 Common Compliance Mistakes

Some typical mistakes seen among new traders:

Declaring wrong HS code to lower duty or due to lack of knowledge.

Under-invoicing or over-invoicing values without understanding legal implications.
Mis-declaration of country of origin to claim preference.
Incorrect usage of export incentives without eligibility.
Poor documentation leading to disputes or penalties.
7.5 Penalties
Penalties may arise for:
Mis-declaration of description, quantity, or value.
Attempted export/import of prohibited/restricted goods without proper licence.
Non-realisation of export proceeds within prescribed time (FEMA implications).
Serious Note:
Customs and enforcement actions can include seizure of goods, monetary penalties, and
other proceedings. Always prioritise compliance over short-term gain.

SECTION 8: LOGISTICS & SHIPPING

8.1 Role of Freight Forwarders
Freight Forwarder:

Intermediary who coordinates shipment from seller to buyer, including:

Booking cargo space
Consolidation
Documentation support
Coordination with shipping lines/airlines
A good freight forwarder helps optimise:
Freight cost
Transit time
Documentation and handling

8.2 Sea vs Air Shipping – Comparison

Parameter Sea Freight Air Freight

Cost per Generally lower for bulky
Higher
unit shipments
Speed Slower (weeks) Faster (days)
Bulk, non-urgent, heavy Urgent, high-value,
Suitability
cargo light cargo
Documentat
Bill of Lading Air Waybill
ion

Choice depends on product value, urgency, and buyer’s requirements.

8.3 Incoterms – High-Level Overview
Incoterms are standard trade terms published by the ICC. They define responsibilities of
buyer and seller regarding:
Transport costs
Risk transfer
Insurance
Customs formalities
Commonly used by Indian exporters/importers:

EXW – Ex Works
FOB – Free on Board
CIF – Cost, Insurance & Freight
CFR, FCA, DAP , DDP , etc.
Important: Incoterms define who does what in logistics, but they do not override laws
nor automatically address payment methods.

8.3.1 EXW (Ex Works)

Seller makes goods available at their premises.
Buyer bears costs and risks of:
Loading
Inland transport
Export customs
Main carriage and beyond
For new exporters, EXW may be difficult because foreign buyers control almost everything,
and certain Indian export compliance responsibilities may still legally remain with
exporter.

8.3.2 FOB (Free on Board)

Seller’s responsibility:
Export customs clearance in India
Deliver goods on board the nominated vessel at port of shipment
Risk transfers to buyer once goods are loaded on the vessel.

In Indian practice, FOB is widely used and often recommended for SMEs, balancing
control and responsibility.[source:35][source:38][source:41]

8.3.3 CIF (Cost, Insurance & Freight)

Seller arranges and pays for:
Main sea freight up to port of destination
Minimum insurance coverage for buyer’s risk
Risk, however, transfers at port of shipment, not destination.
New exporters may feel CIF is attractive but:
Hidden destination charges and complexities can arise.
You must manage freight and insurance, often without full control at destination.
[source:35][source:38][source:41]
8.4 Transit Timelines (Indicative)
Sea freight (Asia–Europe / Asia–US): typically 2–6 weeks depending on route and
transshipment.
Intra-Asia sea routes: shorter, sometimes 1–3 weeks.
Air freight: typically 2–7 days door-to-door, depending on customs and connectivity.
Actual timelines depend on:
Port congestion
Carrier schedules
Customs and clearance speed

SECTION 9: PAYMENT METHODS & BANKING

9.1 Advance Payment
Buyer pays fully or partly before shipment.
Lowest credit risk for exporter.
Common when:
Buyer is small or has limited credit.
Exporter’s bargaining power is strong.

Risks:
For buyer: risk that goods may not be shipped as promised.
For exporter: reputational risk if performance fails.

9.2 Letter of Credit (LC)

Definition:
A Letter of Credit is a commitment by the buyer’s bank to pay the exporter, provided all LC
terms are met and compliant documents are presented.[source:34][source:37][source:40]
Parties:
Applicant – importer (buyer)
Issuing bank – buyer’s bank
Beneficiary – exporter
Advising/Confirming bank – exporter’s bank

Simplified Process Flow (Educational):

1. Buyer and seller agree to use LC.
2. Buyer’s bank issues LC and sends it to exporter’s bank.
3. Exporter reviews LC terms carefully.
4. Exporter ships goods and gathers documents (invoice, B/L, COO, etc.).
5. Exporter presents documents to bank.
6. If documents comply, bank arranges payment.
Advantages:

Reduces payment risk for exporter if LC is from a reputable bank.

Disadvantages:
Documentation must match LC precisely; discrepancies can delay payment.
Banking charges can be significant.

9.3 Open Account / Documentary Collection

Open account: goods shipped and delivered before payment; high risk for exporter.
Documentary collection: banks handle documents but do not guarantee payment
the way an LC does.
SMEs should be cautious with open account unless buyer is trusted and risk is acceptable.

9.4 Bank Remittances & Forex Risks

Export proceeds generally come as foreign currency remittance into your bank.
Under FEMA, there are timelines for realisation of export proceeds; non-realisation
may need to be reported or justified to bank/RBI.
Foreign exchange risk arises because:
Invoice in USD/EUR etc.
Costs incurred partly in INR.
Rate movement between order and realisation affects effective margin.

Risk Management Options (to discuss with bank/CA):

Forward contracts
Natural hedging
Currency clauses in contracts

SECTION 10: FINDING BUYERS & SUPPLIERS

10.1 Trade Fairs and Exhibitions
Domestic and international fairs can help you:
Showcase products
Meet importers and distributors
Understand competitors and pricing
For MSMEs, government or EPCs sometimes support participation through subsidised
stalls or schemes (subject to availability and policy).

10.2 B2B Platforms

There are global B2B marketplaces where buyers search for suppliers (names not
listed here to avoid endorsement).
Practical approach:
Optimise product listings with accurate descriptions and HS codes.
Be cautious with any buyer who seems too eager without due diligence.
10.3 Direct Outreach
Identify target markets and buyers via:
Online research
Trade directories
EPC references
Approach via:
Email
Business networking platforms
Personal introductions

10.4 Buyer and Supplier Verification – Basic Checks

Check buyer’s:
Website, physical address, phone numbers
Company registration details (where possible)
References or previous trade history
For suppliers:
Factory visits or third-party inspection
Sample orders
Background checks via industry networks
Rule of Thumb:
Do not commit to large orders or generous credit terms without verifying counterparties.

SECTION 11: EXPORT PRICING & COSTING

11.1 FOB vs CIF Pricing – Conceptual
FOB Price – price of goods including:
Cost of production/procurement
Packing and internal logistics up to loading on vessel
Export customs clearance
CIF Price – FOB price plus:
Cost of main freight
Marine insurance
Depending on Incoterm used, you will quote accordingly.

11.2 Cost Components in Export Pricing

Typical cost build-up (illustrative):
1. Ex-factory cost (raw materials, labour, overhead) or purchase cost if merchant
exporter.
2. Packing suitable for export.
3. Inland transport to port/airport.
4. Customs broker charges.
5. Port/terminal handling charges (as per Incoterm responsibility).
6. Main freight and insurance (for CIF/CFR etc.).
7. Bank charges and finance cost.
 8. Miscellaneous documentation or certification costs.
9. Margin – the profit you expect.

11.3 Margin Calculation

Margin depends on:
Competition in target market
Buyer’s bargaining power
FX assumptions

Always calculate:
Contribution margin per unit
Sensitivity to exchange rate changes (e.g., ±5%).

11.4 Currency Risk in Pricing

Decide in which currency you will quote (USD, EUR, etc.).
Discuss hedging with bank if exposure is significant.
Build realistic buffer to manage volatility, but avoid overpricing that makes you
uncompetitive.

SECTION 12: GOVERNMENT SCHEMES & INCENTIVES

12.1 Overview
India has used various schemes to support exporters, including:
Past schemes like MEIS, which have been phased out after WTO challenges.
[source:36][source:32]
Current focus on RoDTEP (Remission of Duties and Taxes on Exported Products),
which aims to refund embedded taxes not otherwise refunded.[source:33][source:39]
[source:42]
Interest equalisation and credit support schemes to lower cost of export finance for
MSMEs.[source:25]

12.2 RoDTEP – Basic Idea (Conceptual)

Objective: neutralise embedded duties and taxes in exported goods, in a WTO-
compliant way.
Benefit: granted as e-scrips which can be used to pay certain duties, as per
government mechanism.[source:33][source:36][source:39]
Coverage: thousands of HS lines; exact coverage and rates are notified and updated
by DGFT/CBIC.[source:42]
12.3 Eligibility Basics (Indicative)
Exporter must fall under eligible categories and HS lines notified.
Export must be realised and compliant with all rules.
Conditions and exclusions apply (e.g., certain exports or categories may be
excluded).

12.4 Why Incentives Should Not Be the Base Plan

Incentive rates and coverage can change (e.g., shift from MEIS to RoDTEP, temporary
suspensions, modifications).[source:33][source:36][source:39]
Incentive administrations can face delays in notifications or credits.
Over-dependence on incentives can make your business vulnerable to policy
changes.
Practical Guidance:
Design your business so that core pricing and margins are viable without incentives.
Treat incentives as bonus support, not guaranteed income.

SECTION 13: RISKS & REALITY CHECK

13.1 Payment Default Risk
Buyer may delay or fail to pay.
Mitigation:
Use LC for new buyers or high-value orders.
Use credit insurance schemes (where suitable; discuss with bank/insurer).
Limit open account credit to trusted buyers and within controlled limits.

13.2 Compliance Failures

Wrong HS code
Mis-declaration of value or origin
Failure to realise export proceeds in time
Non-compliance with GST return filing and refund procedures
Consequences:

Penalties, interest, delays, and possibly reputational damage.

13.3 Logistics Delays

Port congestion
Roll-over of containers
Documentation errors
Customs inspection delays
Plan buffer time in your contracts and communicate realistic timelines to buyers.
13.4 Fraud & Fake Buyers
Fake inquiries asking for sensitive information.
Advance-fee scams or unrealistic orders.
Buyers insisting on unusual routes or third-party payments.
Never be pressured into shortcuts. Verify counterparties before large commitments.

SECTION 14: COMMON SCAMS & MISLEADING CLAIMS

14.1 Fake Export Courses and “Easy Money” Claims
Warning signs:
Promises of “₹X lakh per month guaranteed”.
Assurances that compliance is “just formality”, no risk.
Claims of “secret loopholes” in customs/GST.

A responsible export setup will never guarantee income and will emphasise compliance.

14.2 Fake Buyer Emails

Email domains not matching company website.
Requests to ship to a third country without clear reason.
Requests for advance commission or unusual fees.
Always verify using:
Independent contact information
Company registries (where accessible)
Cross-check with trade references

14.3 Red Flags for Beginners

Buyer unwilling to share basic company details.
Excessive urgency with large orders.
Requests for you to route payments through third parties.

When in doubt, consult:

Your bank’s trade desk
EPC or industry colleagues
Legal professional if necessary

SECTION 15: STEP-BY-STEP STARTER ROADMAP

15.1 First 30 Days – Orientation Stage (Indicative Framework)
Week 1–2: Understanding & Product Clarity
Finalise product category (or narrow portfolio).
Identify broad HS codes and basic regulatory requirements (food, pharma, etc.).
Do basic market scan: which countries import such products.
Week 2–3: Compliance Setup

Formalise business structure with CA (proprietorship/LLP/company).

Obtain PAN-based IEC through DGFT portal.
Obtain GST registration if required.
Open export-friendly current account with an AD bank.
Week 3–4: Ecosystem Mapping
Shortlist freight forwarders and customs brokers experienced in your product.
Connect with relevant EPC or industry associations.
Start building initial marketing materials (product specs, images, basic pricing
ranges).

15.2 First Shipment Preparation – High-Level Steps

1. Confirm Export Order
Written contract or Purchase Order.
Clear payment terms (advance/LC) and Incoterms.
2. Costing & Pricing
Calculate FOB/CIF costs with your forwarder/CHA.
Factor in bank charges and FX risk.
3. Documentation Planning
Ensure you can produce:
Commercial invoice, packing list
Certificate of Origin
Required product certificates (e.g., FSSAI-related, inspection)
4. Logistics Coordination
Book shipment with forwarder.
Confirm documentation deadlines.
5. Customs & Shipping
File shipping bill through CHA.
Ensure goods are examined and loaded.
Obtain B/L or AWB.
6. Post-Shipment
Present documents to bank (especially in LC cases).
Track realisation of export proceeds.
Maintain records for GST and incentive claims.
15.3 Compliance Checklist (High-Level)
IEC active, annually updated.
GST returns filed on time.
Export proceeds realised within prescribed period.
HS classification reviewed with CHA/CA.
All major contracts reviewed at least once with a legal professional for risk
allocation.

SECTION 16: CHECKLISTS & FRAMEWORKS

16.1 Legal & Registration Checklist
[ ] Business entity incorporated / registered.
[ ] PAN obtained (entity or proprietor).
[ ] Current account opened with AD bank.
[ ] IEC obtained and details verified.
[ ] GST registration obtained / confirmed where applicable.
[ ] Sector-specific licences (e.g., FSSAI, drug licence) obtained where required.

16.2 Export Documentation Checklist (Per Shipment)

[ ] Confirmed Purchase Order / Contract.
[ ] Commercial Invoice (checked against LC, if any).
[ ] Packing List (aligned with invoice).
[ ] Shipping Bill copy.
[ ] Bill of Lading / Air Waybill.
[ ] Certificate of Origin (if required).
[ ] Insurance policy/certificate (for CIF/CIP).
[ ] Any inspection/health/phytosanitary certificates.
[ ] Bank instructions for collection/LC negotiation.

16.3 Import Documentation Checklist

[ ] Purchase contract or pro-forma invoice.
[ ] Commercial invoice from supplier.
[ ] Packing list.
[ ] Bill of Lading / Air Waybill.
[ ] Bill of Entry filed by CHA.
[ ] Duty/IGST payment challans.
[ ] Product-specific certificates (if required).

SECTION 17: FREQUENTLY ASKED QUESTIONS (LONG)

Below are illustrative FAQs that many beginners in India have. These are educational views
and not a substitute for professional advice.
17.1 Beginner Doubts
Q1: I am a complete beginner. What is the minimum I need to start export from India?
A clear product idea
A legal business structure
IEC from DGFT
Bank account and basic GST understanding
Access to a reliable CHA and freight forwarder
Q2: Do I need a factory to export?

No. You can be a merchant exporter and source from Indian manufacturers.
Q3: Can a freelancer or individual export services?
Yes, but consult a CA for GST, FEMA, and invoicing requirements; IEC may still be
relevant for specific benefits.[source:13][source:22]

17.2 Legal & Compliance Doubts

Q4: Do I always need GST registration for exporting goods?
GST law has thresholds and specific provisions.
For zero-rated supplies and input tax credit/refund, GST registration is often required.
Always confirm with a CA based on your turnover and activity.[source:14]
[source:17][source:20]
Q5: If my buyer does not pay, can I still claim export incentives?

Many schemes require realisation of export proceeds.

Delays or non-realisation can affect eligibility.
Discuss specific situations with bank and CA; legal remedies may be needed.
Q6: Is it legal to under-invoice to reduce customs duty?
Under-invoicing is a serious violation and can lead to penalties, confiscation, and
other enforcement actions.
Actual transaction value and applicable rules must be followed.

17.3 Cost & Risk Doubts

Q7: Why does my CHA insist on a particular HS code that has higher duty?

Correct HS classification is based on product characteristics and tariff rules, not on

desired duty rate.
A lower-duty code that is incorrect can cause bigger problems later.
Seek a second professional opinion (another CHA or a CA) if in doubt.
Q8: Why does my bank charge so many fees on LC transactions?
Banks charge for:
LC opening
Advising
Confirmation (if requested)
 Amendment
Negotiation
Clarify all charges upfront with your bank’s trade desk.
Q9: How do I reduce FX risk?

Discuss hedging products with your bank.

Avoid speculative risk; focus on risk mitigation.

17.4 Operational Doubts

Q10: Can I sell to one country but ship to another?
Triangular trade is possible but can be complex in terms of customs, documentation,
and tax.
Always consult a CA and possibly legal counsel before such arrangements.
Q11: Can I change buyer name or destination after goods shipped?

Changes after shipment can create serious documentary and compliance issues.
It may be possible in some scenarios but only with proper documentation and
bank/customs guidance.
Q12: How long should I keep records?
Retention periods depend on GST, customs, and FEMA rules. Many professionals
suggest keeping records at least 8 years or as advised by your CA.

SECTION 18: FINAL DISCLAIMERS (MANDATORY)

1. Educational Purpose Only
This guide is prepared solely for educational and informational purposes for
readers interested in understanding the basics of import–export business in
India.
2. No Guaranteed Income or Profit
International trade outcomes depend on numerous factors including market
conditions, buyer behaviour, product quality, compliance, and
macroeconomic factors.
No income, profit, or success is guaranteed or implied in this document.
3. Policies and Laws Change
Trade policies, GST rules, customs regulations, foreign trade policy, and export
incentive schemes (including RoDTEP) are subject to frequent changes via
notifications, circulars, and amendments.[source:33][source:36][source:39]
[source:42]
The information presented here may become partially or fully outdated.
4. Compliance Responsibility
Readers are responsible for:
Verifying the latest legal requirements, notifications, and scheme
conditions.
Ensuring correct HS classification, valuation, documentation, and
returns.
Non-compliance can lead to penalties, interest, and other consequences.
 5. Professional Advice Strongly Recommended
Before implementing any strategy or transaction discussed here, you should
consult:
A Chartered Accountant (CA) for GST, income tax, and accounting
treatment.
A licensed customs broker / CHA for HS classification, customs
procedures, and duty calculations.
A qualified legal professional for contracts, dispute resolution, and
regulatory interpretation.
6. No Liability
The author and publisher assume no responsibility or liability for any errors,
omissions, or results obtained from the use of this information.
Any reliance you place on the information is strictly at your own risk.

References
[1] Taxmann, “Customs Tariff Act and HSN Classification – Rules and Structure,” 2025.
[source:15][source:18]
[2] Taxmann, “Import and Export under IGST Act – Valuation | GST Implications,” 2025.
[source:20]
[3] AuthBridge, “Demystifying GST for Importers & Exporters in India,” 2025.[source:17]
[4] IndiaFilings, “Imports and Exports under GST,” 2024.[source:14]
[5] ClearTax, “IEC (Import Export Code) – How to Apply for It, Benefits,” 2025.[source:22]
[6] EximPe, “How to Apply for IEC Code Online in India (2025 Guide),” 2025.[source:16]
[7] Volza, “Getting Your Import-Export Code (IEC) in 2025: All You Must Know,” 2025.
[source:19]
[8] DGFT, “Rates under RoDTEP – Appendix 4R/4RE,” 2024.[source:42]
[9] India Briefing, “Export Incentives Under RoDTEP Scheme Revived,” 2025.[source:33]
[10] ClearTax, “RoDTEP Scheme: Rates, Guidelines, Eligibility, Features,” 2025.[source:39]
[11] ShipGlobal, “From MEIS to RoDTEP: All That You Need to Know,” 2025.[source:36]
[12] Granthaalayah / ShodhKosh, “Role of Indian Government Policies in Supporting SMEs
Against Exchange Rate Risks,” 2023.[source:25]
[13] IJFMR, “Examining the Role of India’s Micro, Small, and Medium Enterprise Sector in
Exports and Foreign Exchange Reserves,” 2023.[source:27]
[14] Thomson Reuters, “Classification of Goods and Compliance Requirements in India
International Trade,” 2018.[source:18]
[15] Cogoport / CargoPeople / similar industry sources, “Incoterms for China–India Trade”
and “Understanding Incoterms (FOB, CIF, DDP) for Indian Exporters,” 2025.[source:35]
[source:38][source:41]
[16] Drip Capital / Credlix / [Link], “Letter of Credit – Process and Documents,” 2020–
2024.[source:34][source:37][source:40]

End of Guide