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Import/export guide: India
If you’re a people person with an interest in India, an import/export business could be for you.
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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 skills to serve as a matchmaker for companies in India, matching product manufacturers with markets that want and need to purchase the goods they produce.
If businesses in India want to export their goods, you help them find buyers. And if they’re looking for specific merchandise, you help them find sellers. With dedication and this guide, you can become a part of the estimated $25.7 billion in goods and services traded between Australia and India.
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.
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.
What's the cost to start an import/export business?
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.
The biggest costs may come from travel expenses for conducting market research in India. Market research is an important part of starting up any company, but with an import/export business you'll want to know what's working well for your competitors and what products are popular.
Find out what you need to start and grow your own business
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 customer
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 precious metals, India’s number one export. 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
- Diamonds
- Oil
- Packaged medicaments
- Jewellery
- Cars
- Rice
- Bovine meat
- Crustaceans
- Vehicle parts
- Cotton
Source: The Observatory of Economic Complexity, 2016
Regulation, licences and permits
Imports
There's no general licence you're required to have for importing goods, but Australian Customs does require permits to clear your goods. Quarantine regulations are a big one and you'll need to apply for a permit if your goods fall under this category. This includes plant, mineral, animal and human products, and means you'll need to make time for quarantine.
A permit for these goods comes from the Biosecurity Import Conditions Systems (BICON) and you can search its database to see if your goods fall into this category. Try to do this well in advance, otherwise your goods may be re-exported or destroyed.
7 tips for Australian import/export businesses
Exports
Like with importing, you're not required to have a licence to export goods out of Australia, though you may need a permit.
Things that you can't export include certain weapons and heritage items. For other goods, like wine and brandy, you'll need to apply for a specific permit with the issuing agency. You can find more about specific goods and their restrictions on the Australian Border Force's website.
All goods you export will need to have an Export Declaration, which tells the DHA what the goods are and other details to do with the transaction. Once this declaration is lodged, you'll get a number (EDN). You'll be able to export your goods as soon as the Department has given approval to the Export Declaration you completed.
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 licence.
Contact a professional to learn more about registration, tariffs and any restrictions that could affect your business.
Charging for your services
Import/export businesses typically charge based on commission or retainer.
Commission structure
With a commission structure, you’re paid a percentage of any trade deal you close, which is 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.
Retainer model
On a retainer model, your client pays you a monthly fee for you to be on call when it needs your services.
To find the right amount for your retainer, consider your costs. These may include labour, supplies and overheads.
An alternative model
Beyond a commission or retainer structure, you can simply buy goods and sell them. In this case, your revenue will come from the profit you make from selling merchandise.
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, price your business based on a retainer.
The thinking is based on this: If you’ll sell a lot of the 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 a 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.
How to send money to India cheaply
Laws and legal documents when transferring large sums of money into India
Compare international money transfer options for import and export to India
Disclaimer: Exchange rates change often. Confirm the total cost with the provider before transferring money.
Shipping the goods
You need to send and receive goods from other countries, so you’ll need to arrange shipping details.
Contact a freight forwarder, which is a company that helps you transport goods safely and efficiently. It will help you handle the logistics of completing shipping documents, finding cargo space and securing cargo insurance.
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 organised 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.
Bottom line
The import/export business is for people who love building relationships in other countries. But it also requires an organised mind that can handle logistics.
If you have those qualities, take the plunge into creating a thriving import/export business.
Frequently asked questions
Image: Shutterstock
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