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How to export and import: India
Learn about the taxes, forms and the business sense needed to start an import and export business involving India.
Do you speak Hindi? Do you have connections in Bangalore? Have you lived in Chennai? Maybe you simply love the country of India. In the import/export industry, you can use your individual competitive advantages to serve as a matchmaker for companies in India — matching product manufacturers with markets that want and need to purchase the goods they produce. Imports and exports are a competitive, challenging business.
What's in this guide?
- Types of import/export businesses
- Startup costs
- Narrowing your market
- Registering your business
- Charging for your services
- Which business model should you choose?
- International billing and payments
- Compare international money transfer options for import and export to India
- Shipping the goods
- Risks and how to avoid them
- Bottom line
- Frequently asked questions
Types of import/export businesses
There are three basic types of import/export businesses. Starting out, it’s a good idea to pursue the one that interests you most.
Export management company
Let’s say a company in India wants to export clothing. That’s where an export management company (EMC) can help.
An EMC handles all of the details for the company to ship goods overseas. This could include hiring distributors, creating marketing materials and preparing shipping logistics.
Export trading company
An export trading company (ETC) finds out what foreign buyers want and then locates domestic companies that can export the goods. Exporting from India is governed by the Department of Commerce, which details strict guidelines to exporting on their online portal.
Import/export merchant (or free agent)
Import/export merchants buy merchandise from a manufacturer — foreign or domestic — then resell that merchandise around the world. There’s heavier risk involved in being a free agent — but with fewer middlemen, the potential for higher profits as well.
How to set up a business entity in India
You can start your own import/export business with little upfront costs.
At a minimum, you need a phone and a reliable Internet connection. You’ll also want to invest in business cards, a website and a fax machine. And it doesn’t hurt to hire somebody for your branding, including a unique business logo.
In reality though you’ll need a lot more than this to get going. A lot of companies that enter the import/export business in India are already operating elsewhere, so crucial skills and resources include:
- In-depth knowledge or connections with companies in the United States looking to buy goods from India.
- In-depth knowledge or connections with companies in India looking to export their goods to the US.
- Start-up capital to travel to businesses, manufacturers and potential clients to discuss deals and products.
Narrowing your market
Once you’ve decided on the type of import/export business you want to run and calculated your startup costs, it’s time to narrow your market focus.
By niching down, you can focus your attention on a market you can serve best. Think about:
- Customers you want to serve.
- Areas of the world you’ll target.
- Types of goods you’ll offer.
Take your time to dig deep with your research. The extra time you spend finding profitable niches will pay off in the long run.
Your target customer will be someone who wants to trade globally. They’ll either want to sell goods overseas or buy goods from international sources.
Beyond that, you can choose any type of customer you wish. Maybe you’ll cater to companies that sell India’s No. 1 export, precious metals. Or mechanical pumps. Or clothing.
If you can identify a need, you can target a group of companies as customers.
India’s top 10 exports
According to worldstopexports.com, India’s top 10 exports in 2018 included:
- Mineral fuels including oil: US$48.3 billion (14.9% of total exports)
- Gems, precious metals: $40.1 billion (12.4%)
- Machinery including computers: $20.4 billion (6.3%)
- Vehicles: $18.2 billion (5.6%)
- Organic chemicals: $17.7 billion (5.5%)
- Pharmaceuticals: $14.3 billion (4.4%)
- Electrical machinery, equipment: $11.8 billion (3.6%)
- Iron, steel: $10 billion (3.1%)
- Cotton: $8.1 billion (2.5%)
- Clothing, accessories (not knit or crochet): $8.1 billion (2.5%)
India’s top 10 imports
According to worldstopexports.com, India’s top 10 imports in 2018 included:
- Mineral fuels including oil: US$168.6 billion (33.2% of total imports)
- Gems, precious metals: $65 billion (12.8%)
- Electrical machinery, equipment: $52.4 billion (10.3%)
- Machinery including computers: $43.2 billion (8.5%)
- Organic chemicals: $22.6 billion (4.4%)
- Plastics, plastic articles: $15.2 billion (3%)
- Iron, steel: $12 billion (2.4%)
- Animal/vegetable fats, oils, waxes: $10.2 billion (2%)
- Optical, technical, medical apparatus: $9.5 billion (1.9%)
- Inorganic chemicals: $7.3 billion (1.4%)
Registering your business
To register your import/export business, you need to fill out the US Department of State’s SNAP-R company registration.
After you submit your information, the Department of State will send you an email about how to get a company identification number (CIN). A CIN is used for tax purposes and for registering with the US Department of Commerce.
Import and export licenses
Typically, the US Customs and Border Protection (CBP) doesn’t require a license to import goods to or export goods from the United States. However, other government agencies or departments or local governments may require them.
If you’re exporting goods, you can find out which licenses may be required by asking your local port of entry.
A note about importing goods into India
In the past few years, India has simplified its import procedures, allowing for goods to be freely imported without restrictions or a license.
Contact a professional to learn more about registration, tariffs and any restrictions that could affect your business.
Picking the right type of business structure
Forming an LLC has specific benefits for importing and exporting, so we’ll discuss it detail. However, the US has four business structures to choose from depending on your needs, use the finder.com business structure guide to figure out which is best for your import/export business.
You don’t have to incorporate in the United States in order to start an import/export business.
However, incorporating or creating an LLC can provide key benefits, including:
|Separation of personal and business assets.||Creating a corporation or a limited liability company (LLC) can help you protect your personal assets. For example, you’ll have less personal liability for business debts.|
|Expense deduction.||Through a corporation or LLC, you can deduct business expenses before income is forwarded to you.|
|Enhanced credibility.||Clients often prefer working with incorporated businesses, seeing them as more legitimate.|
Charging for your services
Import/export business typically charge based on commission or retainer.
With a commission structure, you’re paid a percentage of any trade deal you close — usually around 10%. For example, if you sell a manufacturer’s smartphone for $300, you’ll make a $30 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.
On a retainer model, your client pays you a monthly fee to be on call when they need your services.
To find the right amount for your retainer, consider your costs — these may include labor, supplies and overhead.
An alternative model
Which business model should you choose?
A rule of thumb is to pick a commission model if you think a product will be easy to sell. If you think a product will be difficult to sell, however, price your business based on a retainer.
The thinking is based on this: If you’ll sell a lot of product, you want to be paid based on performance. On the other hand, if you believe sales will be slow, using a retainer model could ensure that you’ll be paid even in the downtime.
Finally, if you’re confident in your ability to sell products you acquire, you don’t have to negotiate a payment structure with manufacturers. All you’ll have to negotiate is how much you’ll buy product for and then find a way to profit from the merchandise.
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Compare international money transfer options for import and export to India
Shipping the goods
You need to send and receive goods from other countries, so you’ll need to arrange shipping details.
First, contact a freight forwarder — a company that helps you transport goods safely and efficiently. They will help you handle the logistics of completing shipping documents, finding cargo space and securing cargo insurance.
Find a freight forwarder by looking in state-specific business directories.
After you’ve hired a freight forwarder, read our shipping guides to learn how to ship merchandise.
Risks and how to avoid them
Unpredictable shipping logistics
Needless to say, your success hinges on whether you can ship goods safely and efficiently. If you’re exporting goods, for example, you’re responsible for ensuring they leave your local port and arrive at the correct destination on time.
You’ll also need to account for anything else that could go wrong, such as damage to the cargo. Staying organized and partnering with a reputable freight forwarder will help you ship goods without a hitch.
Not knowing enough about markets
It’s a good idea to thoroughly research a market before entering into this business, though even that may not be enough.
Consider hiring experts who understand the tastes and cultures of your specific markets. You’ll need to sell products that resonate in countries you’re unfamiliar with.
Running into problems at the border
Customs rules aren’t uniform throughout the world. Instead, you’ll encounter a mass of different regulations while transporting goods. To avoid drowning in a swamp of border regulations, hire experts in customs law and trade compliance.
The import/export business is for people who love building relationships in other countries. But it also requires an organized mind that can handle logistics.
If you have those qualities, take the plunge into creating a thriving import/export business.
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