Top tips: How to be import-export ready - The Noel D'Cunha Sunday Column
Print in India is all about importing machines as well as growing the business. But inking these deals can be tricky. Print CEOs can increase their chances of untangling the import-export rules and regulations by doing their homework. In the Sunday Column, Sudhakar Kasture, import-export consultant, simplifies the impact of import-export and how you can get the best out of your print business, Business
29 Apr 2016 | 3792 Views | By Noel D'Cunha
Noel D’Cunha (NMD): Can you demystify what involves print exports from India?
Sudhakar Kasture(SK): There’s a problem with what you identify as print export. There is 100% concentration on books, periodicals and newspapers, but otherwise print is part and parcel of lot of other activities. For example: If you are having the pharmaceutical / FMCG goods you need printing and packaging both that too in multiple ways (labels/sachets /inner-outer layers/primary secondary packaging/boxes/ cartons etc) - we can be the source for entire world.
NMD: Which are the identifiable export areas for print?
SK: There are four areas how it can be easily identified – one, is import of capital goods and spares at zero duty under EPCG Scheme; second – import of inputs at zero duty under Advance Authorisation; third – incentivisation under MEIS and e-commerce; and fourth, Interest Subvention for SMEs.
NMD: Coming back to the export policies, the first is the EPCG scheme…
SK: Yes, under the EPCG scheme you do not pay any duty, so your cash outflow is reduced. For example, if you import machinery worth Rs one-crore, you roughly pay about Rs 29-lakh as duties. When you import machinery under EPCG scheme, you do not pay any duty, however you will have to undertake export obligation equivalent to six times to duty saved amount to be completed in six years.
NMD: Import of inputs at zero duty under Advance Authorisation. Can you tell us about this?
SK: Under Advance Authorisation scheme, import of inputs is allowed without payment of customs duty for export production. The export obligation should be completed in quantity and value terms within 18 months. The inputs imported against advance authorisation are subject to actual user condition.
NMD: What is incentivisation under MEIS and e-commerce?
SK: Merchandise export from India is a scheme which offers duty credit ranging from 2% to 5%, depending on which product is exported to which country. There are broadly three country groups – developed countries, emerging markets, and all other countries.
The incentivisation is done based on eight digit HS codes wherever government felt the need for extending such support for increasing exports. The duty credit scrips issued under MEIS can be utilised for payment of customs duty, excise duty and service tax. Wherever they can’t be utilised by the exporter, he is allowed to transfer it to other eligible entities.
This scheme is also available for export of books and periodicals through ecommerce mode.
NMD: There were scenarios that the printers were not getting the 3% advantage (MEIS). Is it necessary that they should fight for it?
SK: You can definitely represent specific product-based on merits for inclusion through the export promotion council.
NMD: And the fourth, the interest equalisation scheme?
SK: Interest equalisation scheme is primarily for reduction in interest cost and would be available for the period of five years. The entire MSME sector would enjoy the lower interest rate which will ultimately reduce the cost of credit and will make export products more competitive. All the MSME manufacturers are entitled to a 3% interest equalisation irrespective of the product, if you have packing credit in INR at pre-shipment or post-shipment stage. If you have already availed pre-shipment packing credit in INR after April 2015, then you will get 3% refund. If you are supposed to avail then the bank will charge you 3% less interest. So this is to support the entire MSME industry.
NMD: What impact does this have on the return-on-investment (ROI)?
SK: If I look at all these as a package, it supports my export activity. And when I import capital goods under EPCG scheme, my obligation is limited to the value and not limited to the production. Under the interest equalisation policy, my interest cost is reduced. So probably, my export commitment gets over in 10% of my production and I am selling 90% in the domestic market. Therefore, it is advantageous in both ways. Further, the raw material imported for export production will be without payment of duty against Advance Authorisation and therefore, it reduces my production cost. Considering both of these ROI would be eventually better.
NMD: For the EPCG and MEIS and the duty-free - Does a printer need to have any kind of an import and export licenses?
SK: No. There are only two things in addition to having manufacturing set-ups that print companies need to do. One, get an import and export code (IEC), which is issued by the DGFT online. And two, he needs to get registered with the export promotion council. Both put together should not take more than 15 days of time. EPCG and Advance Authorisation are to be applied as and when required.
NMD: What are the kinds of paperwork that the printers need to do?
SK: Whatever needs to be done by any exporter in India is required to be done by the printer. Documents are specifically explained against each scheme elaborately. Most of the documentation with DGFT is now online.
NMD: There are about 10 lakh registered import and export code numbers in India, of which only 3.50-lakh are active. Is this an impressive number? How does one promote exports?
SK: No, not at all. It should be in millions. The E-commerce mode will help increase the number of exporters, particularly smaller ones. The younger generation is tech savvy and therefore online transactions would not be a problem for them. We can increase exports substantially if we can create more exporters.
NMD: Where are the export opportunities?
SK: All across the globe. When we talk about research, we talk about finding the opportunities and the market and this can also be found by indirect methods. When a global company has accepted our packaging in India and which has the presence in multiple countries then there is an opportunity.
You are manufacturing and you are selling in India to an MNC. Practically, it means that the product quality is accepted. If the product quality is accepted, what is the problem in expanding it to other markets outside India?
NMD: It is said that in India producing anything takes longer and it costs more. Is it true?
SK: In one of the workshop, an American said, “The cost of labour in China has risen from USD 600 to USD 800.” Compared to this scenario, we have labour at USD 300. Our cost of the labour is low, considering the international standards. As far as time is concerned, yes we need to do a lot.
SK: In one of the workshop, an American said, “The cost of labour in China has risen from USD 600 to USD 800.” Compared to this scenario, we have labour at USD 300. Our cost of the labour is low, considering the international standards. As far as time is concerned, yes we need to do a lot.
NMD: The social media and the e-commerce are now impacting the communication, do the print companies need to tweak their operations to suit the overseas clients?
SK: Yes. You cannot force people to like what you produce. In fact you need to produce what the consumer likes. This automatically means you need a better dialogue and social media gives you an opportunity.
NMD: Import and export policy is generally balanced. Is it? Particularly FTAs?
SK: No, it cannot be balanced. Wherever I have the potential I should try to market it more. Increasing exports is non-negotiable which must be borne in mind. FTA’s need to be studied in depth to find market access,as exemption in duty in partner countries increases the competitiveness of Indian goods.
NMD: Who tells the government?
SK: The industry body should tell the government to do the needful. At the end of the day, the industry has to support. Negotiation is the job of the Ministry of Commerce but the basis for negotiation has to be created by the industry supported by justified and proper data.
The industry should ask for two things: one - ease of doing business; and two – the reduction in the transaction cost. The transaction cost is currently estimated to be 12-15% related to exports. The shipping cost, credits cost and so on.
It is not getting reduced because of the difference in the thinking of various ministries. I hope the coordination issues will be sorted out. The problem with the export industry is that they keep on asking more incentives, whereas the focus should be on the negotiations of the FTAs, so that duties and transaction costs can be reduced to make the product competitive.
NMD: Your advice to the printing industry to get ready to the exports of the printed products?
SK: Concentrate on pre-manufacturing and post-manufacturing services. There should not be dependency on the concept of incentivisation. On the contrary, we should study more and more FTAs, where our products are subjected to duty-free treatment at the hands of the importer because of the bi-lateral and the multi-lateral treaties between various governments. One should be little more adventurous – start looking at market research and exploring new markets.
We need to remember that with every other country eyeing India; our domestic markets will not remain the same. We need to increase our footprint overseas.n
GOVERNMENT OF INDIA'S EXPORT INITIATIVES
What is e-commerce mode?
It’s just finalising order using the online medium, that is, the orders are finalised using the e-commerce platform, but the delivery takes place through manual mode either through post or courier. The products are delivered directly to the individual, not to a shop. There is entitlement of 5% of the FOB value when these products are exported through e-commerce.
The novel and newest part are that books and periodicals are covered under the e-commerce initiative.
This initiative was started from 1st April 2015.
What’s the rationale behind this initiative?
Today we have roughly 2.2mn NRIs abroad. One of them, say, an NRI from Kerala residing in Graneda wants to procure a Malayalam book or needs an invitation cards or brochures printed in Malayalam, what options does he have? Today, he goes to Amazon and buys the product through e-commerce.
The e-commerce mode, gives a buyer a choice of buying from Cochin and the produce delivered to the desired destination, just like the way Amazon does.
There’s a close connect between the overseas Indian communities, and an opportunity of business. This is something the e-commerce mode plans to tap.
Currently, this scheme is extended to exports done through Mumbai, Chennai and New Delhi. It will be expanded subsequently.
Which categories of products are covered under the e-commerce mode and what’s the value that one can export under this initiative?
The categories which are covered include books and periodicals, fashion garments, leather footwear, etc limited to a maximum FOB value of Rs 25,000 per consignment.
However there is no limitation on number of consignments.
Self-publishing can also be a way out of this. I may have my own website, so I do my business, I tie-up with a bank for the payment gateway and go ahead.
If you have friends abroad, you can start exporting books to them using e-commerce.
If you look at the upper value of the scheme, any single person can get into this business. The idea is to expand the base of such exporters and this is most beneficial for SME industries, and I will go one step further, to MSME sector as well.
How does this work, in terms of the incentive?
The 5% incentive is purely for encouraging the ecommerce operations. This entitlement is in the form of duty credit and can be used for payment of custom/excise duty or service tax.
Suppose you send goods worth Rs 25,000 FOB. The 5% of the amount is Rs 1,250. This entitlement of Rs 1,250 can be utilised for payment of customs duties, excise or service tax, as per your choice. It can be utilised like cash. For example, you are importing something for which you have to pay customs duty, you can debit this scrip.
EIGHT TOP TIPS TO BE EXPORT-READY
- Understanding HS Codes
- Comparative study of import and export statistics based on 8-digit HS code
- Identifying potential market
- Identifying networks for penetration
- Participating in international trade fairs
- Achieving competitiveness by appropriately using various Export Promotion Schemes
- Nurturing potential relationships
- Committing whole heartedly to excellence in quality, delivery and communication