What type of companies to start with for exports?

Well, here, I would like to share that apart from the type of company which you form for the exports. It is also important to choose the type of business you want to carry on. What are the meaning of that? Very important thing, that are you into manufacturing yourself and you want to be an exporter, you want to do export business. So what I was driving upon, very important thing is that apart from the type of company that you form, you have to have a fairly good idea that what type of business operations you want to do, what type of company want to form, in the sense that whether you are a manufacturer exporter or you are a merchant exporter? why I’m saying that you decide on this, because when you register in some of the authorities, which I would just talk about, you have to mention that whether you are a manufacturer exporter or you are a merchant exporter? But one thing I will tell you, even if you write as merchant exporter or as manufacturer exporter, anywhere, you can suddenly decide that in spite of your manufacturing, you want to sell the products of other people, as a merchant exporter, nobody stops you. So it is not like that you register yourself as a manufactured exporter. You cannot do merchant exporting. It is not so. So that flexibility is there. But generally to identify yourself or to profile yourself, it is better that you decide whether you want to identify yourself as a manufacturing exporter or as a merchant exporter. So the better idea is that whichever activity is predominant in your portfolio, you mentioned that.

If you are trading more in the exports by buying the products of other manufactures, then you should write yourself as a merchant exporter. Or if the majority of your revenue from exports come from such products which are manufactured by you, then you should write yourself as a manufacturer exporters. So this is very important. Then also there is a possibility that you find that your products are meant only for exports. Probably they cannot be sold in the domestic market, or you are creating some products which is only meant for export. In that case, it is better to go for your status as an export oriented unit, 100% export oriented unit. And if already you have some products which are selling in the domestic market, it is better to form one new company, separate company for any new additions, which is meant only for export and have a separate company because in the hundred percent export oriented units you have many income tax and taxation benefits which are not available to the companies in DTA, DTA means domestic tariff area. So it is better to have two separate companies dealing with the domestic products in DTA and another company which is dealing with the export products. So that is the case when you have a very significant revenue coming from the exports for certain items which are not likely to be sold in the Indian market, this situation will be better in that case. Otherwise, you can move in the mix mode also. So some of the products being sold in the domestic market by the same company and some of the goods being exported, you can do that. Your CA will handle this. So a CA, who is conversant with the dealing with the companies who are exporters as well as domestic traders or manufacturers, those kind of CAs will be very very useful.

Then I think you are aware of the concept of the special economic zone Export Zones, like you have in Delhi NCR in Noida and NEPZ, Noida Exports Processing Zone. The the companies which are operating from SEZ actually are similar to the 100% export oriented units because whatever they manufacture is meant for exports only. The extra benefit which you have SEZ vis a vis the 100% EOUs is that in this zone, if you start, you get some very special benefits. One of those benefits is the unlimited reduction in the value added. Because in general the 100% EOUs have to have very significant value addition to the goods which are imported duty free. You can import the goods, inputs for the export, duty free and the value addition criteria is generally 30 to 40%. Generally more than 40% in 100% EOUs. But there is no such condition in SEZ. So even if you do the 10% value addition or 15% value addition to your import products, you can do it and whatever you import is getting cleared in the zone itself. So you have the customs people who are stationed at the entry gate of the special economic zone. So your containers can be imported, the import containers can come to your own zone, which are sealed by the overseas customs and opened by the domestic customs. So then and there it can be cleared. So any problem that you have with the customs can be sorted out then and there. So lot of advantages are there. In fact, recently I trained the executives of one of the companies that is a French company. So I just got a feedback from the people, the very senior management people there. They were very, very happy with the facilities they have in NEPZ. And they are really doing very good business. They are into manufacturing of the mobile SIM actually and whatever they manufacture in India in Noida is all exported. So these kind of units are there in special economic zones and they are actually very happy doing business there. A lot of incentives, are there a lot of benefits and they are many, many schemes are there actually for the units which are operating from special economic zone. And it is really very, very successful. So you can consider setting up your company in SEZ.

Then friends, you have to be very, you know, very much aware of the fact that whether the significant turnover which is coming from the exports, is it for the export of merchandise items, goods item or the services because government has different treatment for export of the merchandise and the goods and services. So generally services enjoy better benefits for export because the services is increasingly becoming more and more important FX earner. So government of India has better schemes, better facilities and better incentives which are provided to services exporters. So you should be thinking about it that in your overall export marketing strategy, whether you want to choose a merchandise item for export or you are good in services, some kind of services, you are good and you are setting up your export business and services. So these are some of the type of entities you can think of yourself, either as a manufacturer or as a merchant or as a you, you a unit or a unit in special economic zone, or whether you are a marketplace exporter or other services export. 

So this is what I wanted to convey from this slide. If you have any question on this particular aspect, you can ask me.

Audience 1:

So I have a question regarding, as he said, you know, I’m aware that the government provides a lot of benefits, but the procedure is very tough, I guess, because, you know, I mean, we haven’t got started the process yet. Well, you know, because we are planning to set up a factory in in Delhi, India, especially in the Okhla area. That’s why I’m here in India. Right now. So that The process is very lengthy. That’s what I understand. I mean, it takes a lot of time to do to get it done. So is there a way we could expedite this process or what are the procedures?

Speaker:

There are two-three options I have. I mean, I can suggest you. One option is, is a cheaper option. I mean, you don’t have to spend too much of money is you know, if you get hold of the EPC Exports Promotion Council for your product, which you plan to set up in SEZ they have a special officer who specializes into the process of SEZ. Most of these EPC have the a particular officer who will guide you free of cost, to provide you all step by step information on how to set up your unit in SEZ. Any clearances which any government agencies to deal with. What kind of report has to be created? All those things will help you without charging anything. But for that you have to become the member of that EPC, so you have to register with them. So this is one option you have.

The second option you have. There is a organisation called Federation of Indian Export Organisation FIEO, which has their headquarter in Delhi. It is very, very active organization. They have different departments. There is one particular director and the department is there which deals with the special economic zones matters. So if you become a member of FIEO or you if you don’t become the member of FIEO, you can go there and you can talk to them. This is the second option.

There is third very useful option, but it may turn out to be monetary expenditure for you is that there are in Delhi certain proven consultants who carry out on your behalf the complete process of getting the clearances and getting the land. Actually land thing is a little bit tricky in the sense that you probably have to purchase the land if it is not being allotted by the government in a particular SEZ, you have to buy it from the market. You have to go to the you know, if some companies selling itself in some of the SEZ, you have to first get the land but before that you have to comply with the requirements of SEZ. These kind of consultant, You know, they do everything for you, so you have to negotiate with them. Their charges for each and every step. So this is my suggestion that you can go for that route also. So these few options are there.

And then finally you do have the option to go to DGFT Directorate-General for Foreign Trade, which actually implements the policy. The policy is framed by the Department of Commerce and under the Ministry of Commerce. So the it is implemented by DGFT, Director General of Foreign trade and you can go to the other office in Asaf Ali Road, Delhi which is near the New Delhi railway station. There is an office of DGFT. So there you can take an appointment and you can get the complete information, complete policy they will give you. about SEZ And I can tell you that these SEZ matters whatever the the processes are there, whatever is written, you know, they will go by any words. Generally. So they will not deviate unless there are certain notifications, some new notification. has come, which you will get. All the set you will get from the particular person who is the right person. in DGFT, you can do that. So personally you are right, absolutely you are right that there are complications. There are a little bit of a, you know, lengthy process. Yes, you’re right. But the feedback which I have got from some of the people I deal with in these places, so they say that the processes is lengthy, but the benefits are also very good. And the reason why it is lengthy and little bit complicated is because they want to see the serious players in the special economic zone. Probably this is my take.

There may maybe some other reasons also, but this is my take. And generally another thing, if you find something which is creating problem for you, some step is there which is not very clear to you and is becoming a barrier. As a prospective exporter, you can file the online complaint or online concern, not complaint. You can file the online concern with DGFT on their website that I am facing this problem in this process. So they will definitely take it up very fast. As per of my experience, they really do it very fast because the reason is that the Indian government do not want to take any chances when it comes to export business. So you can be rest assured on that part. And India has some of the things which are better than many of the countries. One example I will give you. Similar kind of a work, which is to be done in countries like Japan. It is very, very lengthy, very complicated, especially for foreigners. And even it is very costly in Middle East countries like UAE or Saudi Arabia. In UAE, you have Jebel Ali, which is a SEZ there. There the systems are much little bit better than India, but it is very, very costly. The process is very costly. So very prohibitive, especially for outsiders. So this is my experience. This is what I know.

If you can share with me in this process any particular difficulty that you are facing and probably I can answer. I will definitely.

Audience 1:

Sir, I mean, I know that there are many participants, so I don’t want to take their time away. But very quickly, very quickly, like for SEZ, because we had just we just completed two years of our company formation. So maybe that could be one of the issues. But in other countries, like, for example, I live in Singapore, I’m a permanent citizen of Singapore been in US I’m having no issues. Like I registered my company a year back and already the Singapore government. I had a meeting with the Ministry of Trade there and they’re giving me everything that I need. All they want is to create employment there. That’s the only thing that they see. They see the company has a potential and they they roll out the red carpet. But here in India, for example, I just give a small example like, well, when we started off although we are, we are a member of APEDA, FIEO. As I mentioned, when we started off, we were very gung ho about the European market. I have a lot of contacts in Europe, but I was I was I was baffled, in fact. And it’s still I mean, the process has not been solved. The problem has not been solved yet. So when we started out, it still I mean, we have been working on this issue for over a year and I have met everybody, right, from the CEO of FIEO. Everybody DGFT everybody out there talking. This is an issue. They are a part of the novel food category. How do we get it to removed? I even set up a meeting with the European Union. They didn’t turn up. So. Yeah, so. So I don’t know how to solve this issue. And that’s why I am planning to move out of India. I’m trying to move my headquarters out of India to Singapore to start with. Because what we do and we have invested a lot of money in terms of technology, in terms of many, many things, and still they’re not doing anything. Everybody’s aware of this issue, but I don’t know how to solve this issue.

Speaker:

Maybe you can guide me or my my take on this, because I can actually tell you a little bit about it because I’ve worked for 4 years in Singapore. I know the processes. Even that time when I was working there were very, very simple. You go to any office you need not enter. Actually, you can give your proposal at the gate itself. It will go to the right person automatically. So I know, I know of that time. Also, I know a little bit about the present time also. So definitely those kind of things do not exist in India till date unfortunately. India is trying to do it better. But there is one thing I want to share with you from the experiences of some of my clients that, you know, Singapore has no entry barriers of this type for any newcomers or ease of doing business is definitely very good and India still is not in that place, is trying to be in that place and there are problems.

The point is that in I mean, I am nobody to tell you on these things. You already know it. But, you know, in the international trade, you know, we have to sometimes change our approach from country to country like when you are in India, think like Indians, when you are in Europe, think like Europeans. And when you are in Singapore, definitely you will think like Singaporeans. And definitely I’m not saying that your difficulties which you are facing, you are not able to really run the business in India, maybe having some serious issues which I am not aware of, but generally I feel that it is really not very difficult to find out the solutions if the local people, some good, right people are involved in this. Well, who are definitely, you know, like they will have the Indian perspective, they have the Indian mindset. And my experience, I do not I’m not trying to replicate I’m not trying to preach you on your company, whether it will convert into a the company which will give you a lot of business from India. I do not know about it, but but I trying to say that from the experience of the others, if you are able to get the right people and get it running, what you are facing as a difficulty will become your benefit because it will become an entry barrier for others. If you are able to solve this problem and make it bring it in profit and run it, it will become your cash cow. This is my view and my the experience of the people who are doing business in Singapore, working in Europe and definitely I have worked with them. We also faced similar problems, but once it got running, that manufacturing unit is today’s the cash cow. This is the best performing unit. It is in India and the company has learnt itself on how to run it. So this this is my my view I think is know whether it fits to your requirements. But this is my view. I’m not preaching. I’m not preaching.

Audience 1:

I’m only but I think if I to your point, what I mean to say is that one of the products that the government is going out I mean, they are they say that they they are trying to provide all the benefits, all the support. I mean, I’ve spoken to everybody possible, you know, right from DGFT to FIEO even helped them to schedule a meeting with European Union and they are really interested. They want to find out about the product I can export to cosmetics companies, but I can’t export as an edible commodity in Europe. And Europe is a big market. I have got a lot of customers over there and so that’s a big issue and I’m still not able to solve. I mean, I’ve heard a lot of good I mean, I’ve got a lot of assurances from different people, but it’s been a year and a half, but nothing has been. And not only me now, other people are the players, all the major players that that you could think of, they have tried and they have all given up.

Audience 2:

It’s a certification issue right now.

Audience 1:

It’s not a certification. It’s just that the European Union for them is a new product, which came after 1965 to be categorized as novel food category. And they need more information, more research report, and that is provided with already provided to them for the European Union, but they want it from the Government. We have already started the process on our own in European Union, but it’s going to take 4 to 5 years. Maybe the government wants they can solve it in two months, but I don’t know what’s happening.

Speaker:

Or they have different boards, but nobody is to. It’s just about, you know, if there is a persistence and I’m pretty sure he has been doing it for a long time. And the moment he gets the clearance, he would have the first mover advantage as you said I would I would love to sort of help in whatever way you can. Sure. So you will deal with that. Your problem. You can share with me also, if you wish. And we can suggest some people, after making sure that somebody can deliver on that to you you have rightly said that some people must have given you assurances and still they cannot do it actually. So they generally in such cases what happens that in India we talk to the other companies, similar companies who are doing a similar job by some similar person who had been successful. So definitely we can get hold of that person. So generally this is the way you carry out in India. You get the person who has a proven track record in getting that job done and you get hold of that person and negotiate the price and the payment terms and then it maybe it should be possible. This is my view because because the products you are talking about is not a dual use. And It’s not a defense equipment. So I don’t think there is any major issue on this particular aspect. it should be doable. Despite the fact that your experience is different. So which I appreciate whatever efforts you already put in. So this is my take at for the moment I can say this one.

Audience:

Thank you, sir. Thank you.

Speaker:

So so these were the, you know, the things which I wanted to share about. And probably I think there are no other questions, so I can go for the next slide. Unless there is somebody have another question on this. I can pick up if you have any. So would you like to clarify We talked about SEZ and there are EPZs. What are the differences, if you could highlight and whether it is better to opt for SEZ or EPZ for specially the exporters? Yeah. Generally speaking, the major difference between SEZ and EPZ is the value addition criteria. Nothing much. Nowadays what is happening most of the EPZs has been rechristened as SEZ because the government is of the thought Either you have a unit in the DATE or you have in the special zone. So what is happening? most of the EPZs, unless these are unable to have all the facilities which a SEZ requires, GOI, has tried to convert all the heap reserves into especially green zones, for example, this Noida Special Export Processing zone was also an EPZ. But which was converted into SEZ. Similarly, you have in Gujarat also like Mundra Port is also SEZ. Mundra, that whole area of where they have the port. There are many many SEZs in India which earlier were EPZs. The main reason main point was that the facilities which are available SEZ and of those facilities whether the value addition criteria can be relaxed because in SEZ per se there is no limit for value addition which you can go for the value addition, there has to be some value addition. Basically that is the idea and that is the special feature of this zone. So this is my take on this. So some benefits. In other words, we now have a fairly good idea that what different status we can assume as a as our strategy or business.

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