How to start exporting to the USA from India?
India and the USA – the two largest democracies of the world are the two biggest economies too. As of 2019, the two countries occupy the second and third positions on the list of 25 largest economies by GDP (PPP).
India and the USA as bilateral trade partners
For decades, India and the USA have been active trade partners. More recently, the boost in bilateral relations between these two countries, spearheaded by their state-heads, have further opened up newer avenues to do business. India was the USA’s 9th largest goods trading partner with $87.5 billion in total (two way) goods trade during 2018.
India was the 10th largest supplier of goods imports and the 13th largest goods export market for the U.S. in 2018. The U.S. export to India accounted for $33.1 billion in 2018, up 87.3% from 2008, which included products like precious metal and stones, mineral fuels, aerospace, machinery, and optical and medical instruments, etc. On the other hand, India exported goods worth $54.4 billion in the same year, up 111.7% from 2008, which comprised of precious metal and stones, pharmaceuticals, mineral fuels, agro products, machinery, and miscellaneous textile articles, etc.
The U.S. goods trade deficit with India was $21.3 billion in 2018.
India to USA import/export requirements
Both India and the USA have stringent policies and regulations for imports and exports. Hence, it is advisable for businesses in India, looking to export to or import from the U.S., to get familiar with the various rules of the U.S. Customs and Border Protection (CBP) first. Let’s now find out what measures are mandatory for a new Indian exporter willing to trade with the USA.
Issuance of Importer-Exporter Code
For the first time exporters, a onetime registration procedure is necessary to obtain an Importer-Exporter Code (IEC) Number from the concerned government department in India. This number is based on your PAN. For this, you need to apply at www.dgft.gov.in upon payment of an application fee of Rs. 500/- through net Banking or credit/debit card along with requisite documents, mentioned in the application form. You can get more information on this here.
Issuance of RCMC
Next, to avail authorization to import/export or any other benefit or concession or services/ guidance under the Foreign Trade Policy 2015-20, the exporters are required to obtain a Registration cum membership certificate (RCMC) granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.
One may also need to note that, both India and the U.S. have an elaborate list of restricted items which are regulated by a particular government agency. An exporter may need a separate license from that agency to export such goods.
ECGC to cover risks
After an exporter finds a buyer and is ready to do business, he must cover payment risks, which is common in International trade because of buyer/country insolvency, by an appropriate policy from Export Credit Guarantee Corporation Ltd (ECGC). In cases where the customer isn’t making an advance payment or opening a Letter of Credit, the exporter should procure a credit limit on the foreign buyer from ECGC to protect himself from the risk of non-payment.
An exporter must secure a PAN-based Business Identification Number (BIN) from the Customs before the filing of shipping bill for clearance of export goods, as well as opening a current account in the designated bank for the credit of any drawback amount. He needs to prepare different shipping bills for the export of duty-free goods, dutiable goods and export under drawback, etc. The shipping bills are processed mostly without any human intervention, by the system, based on the declarations made by the exporters. Later, once the Appraiser Dock (export) orders, a Customs Officer draws and tests a few samples and feeds the particulars along with details of the testing agency in the ICES/E system.
Mandatory documents for import/export
- Bill of Lading/Airway Bill
- Commercial Invoice Cum Packing List
- Shipping Bill/Bill of Export/Bill of Entry (for imports)
Within 21 days from the dispatch of the shipment, it is mandatory to submit the following documents to the foreign bank for arranging payment:
- Letter of Credit (if the shipment is under L/C)
- Bill of Exchange
- Packing List
- Airway Bill/Bill of Lading
- Declaration under Foreign Exchange
- Certificate of Origin/GSP
- Inspection Certificate (wherever necessary)
- Any other document as required in the L/C or by the buyer or statutorily.