Exoport and Import of Handicrafts Essays

Exoport and Import of Handicrafts Essays Exoport and Import of Handicrafts Essay Exoport and Import of Handicrafts Essay I would like to express my special thanks of gratitude to my Economics teacher Ms Swati who gave us the golden opportunity to do this wonderful project on the Policies and Procedures involved in the Export and Import of Handicrafts. It was a great experience to work together in a team and do Research on the actual procedures and documents required for a start.We would also like to thank her for her continuous Support throughout the Creation of this project.Mpingo wood from Tanzania/Mozambique convert it into Handicrafts in Gujarat and Export it to the European Market and The USA. Our main focus is consistent in the customer satisfaction. We have high-quality, on time delivery and competitive price track records with our clients in getting order till order is fulfilled and mainly focus on delivering the order as per the buyer requirements,: We also accept special design orders from our clients to meet any kind of their specific needs. We assure a consistent shi pping of products within a few days of order placement as we have a large labour force and centre located in Gujarat- Kandhla.We work hard to achieve the gamiest level of client satisfaction by continuous up gradation of latest design handicraft items. Our labour Force is a combination of locals from Africa (Makonde Tribe) and India (Labour from Saharanpur). Vision:To be one of the largest Handicraft exporter in India. Expansion Plans:To supple handicrafts in India and Other Asian Markets also. To get in the Manufacturing of Piano, Furniture and Flooring. To get into the market of home accessories. Page | 3 ABOUT THE WOODMpingo is renowned for its beautiful dark coloured heartwood which in the best timber is inky black, but ranges from dark brown to even an indigo-purple tint. It is considered to be the finest of all turnery timbers, cutting most exactly and finishing to a brilliantly polished lustrous surface1. The best quality timber can fetch up to $18,000 per cubic metre. The wo od is also incredibly hard and durable. So hard, in fact, that it blunts axes, and as a result the tree is seldom cut for firewood and is sometimes left standing in fields. It is difficult to saw or plane and cannot be screwed or nailed without first drilling.The Makonde, whose tribal lands straddle the Tanzania-Mozambique border, are particularly renowned for their Mpingo carving. The wood has the ability to survive fire. The carvers have settled in particular in Makonde villages around Dar es Salaam and in the Northern Provinces of Niassa (Mozambique). Carvings are made from an entire piece of the trunk and are therefore limited by the thickness of the trunk. 2 Only the heartwood is used. This is so hard that insects and other vermin cannot attack it. Compared with our own craftsmen, the Tanzanian carver is in the special position that his customers are natives of other parts of the world.He has little direct contact with his public, who make their purchases against the background of a different culture from his. The largest consumers of Mpingo are instrument makers in France, England and Germany and the members of carving co-operatives in Africa, who sell their work world-wide. 3 1 2 (African Blackwood) (Tanzanian Affairs) 3 (African Blackwood Conservation Project) Page | 4 USES OF THE WOOD For making Musical instruments. For making Furniture. For making Handicrafts and toys. PROCESS Firstly the trees are cut down Into Logs. Then the main part that is the Blackwood is drilled out of the log.With the use of drills and other traditional Instruments that the local Africans have been using the Blackwood is carved into suitable shapes as per the market requirements and the special demands of the consumer. For the visuals of the whole Process please refer to the Site: makonde-carvings. info/makonde/carvers. html (Makonde Artists of Dar Es Salaam, Tanzania) Page | 5 TANZANIA/MOZAMBIQUE – IMPORTING NATIONS The reason for choosing Tanzania/Mozambique as impor ting Nations for the processed Timber (Blackwood or Mpingo) is that they are one of the largest Exporter for the wood apart from Kenya.In Kenya, Mpingo is considered to be seriously threatened. There is growing concern among instrument manufacturers that the supplies of high quality wood are becoming limited. Although Mpingo is not likely to become biologically extinct, it is at high risk of becoming locally and commercially extinct. Good Relations between the countries *Trade between India and Tanzania amounted in 2009 – 2010, 31 billion dollars, and India is Tanzanias second largest investor. And also the matter of fact of us having contacts there are also a major reason of choosing them as a suitable Nation for Import of the wood.Page | 6 INDIA – MANUFACTURING NATION Choosing India as A manufacturing Nation has many reasons attached to it. India is one of the important suppliers of handicrafts to the world market. The Indian handicrafts industry is highly labour int ensive cottage based industry and decentralized, being spread all over the country in rural and urban areas. There are various Concessions and Schemes available for the Export of Handicrafts. The availability of labour at a much cheaper cost as compared to other Handcrafts Hub. India especially SAHARANPUR has adequate mount of Skilled labour for the Handicraft Production. Our Target Markets US and Europe have a good relation with INDIA. The rising economy and the Increasing trade relations with the European and Asian Nations, will help us expanding our business in future with other Nations and also flooding the Indian Market with our Products. During April-January 201213, the handicraft exports have grown 22 per cent to $ 2. 3 billion compared to the same period last fiscal. This fiscals $3. 3 billion target for the export of handicrafts is likely to be met on account of growing demand.Indian handicraft industry has shown a substantial growth since 1998-99. Indian handicraft exports tapped a 39. 3 percent growth in January 2013 as exports grew from US$ 178 million in January 2012 to US$ 248 million. 4 4 (Handicraft exports meet $3. 3 billion target for 2012-13, Economic Times) Page | 7 THE USA AND EUROPEAN UNION – EXPORTING NATIONS It is clear from the picture above that The USA and Europe have been the biggest importer for Indian Handicrafts. A rise in demand from the US and European markets has pushed Indias handicrafts exports up by around 22 per cent to USD 369 million in August, 2010.Indias handicraft exports for the corresponding month of August, 2009 stood at USD 303 million Commenting on the matter Export Promotion Council for Handicrafts (EPCH), Chairman Mr Raj Malhotra said, The growth is attributed to Christmas orders, mainly from US and European markets. Further it is worth noting that the US and EU market together account for nearly 70 per cent of the countrys handicraft exports. The export of handicrafts registered a growth of 21. 71 per c ent during the April-August, 2010 period at USD 960 million as compared to the corresponding period a year-ago.Owing to recovery in demand from the US market, India’s handicraft exports surged 13 percent to US$ 256. 8 million in April this year, as against April 2012’s US$ 227. 16 million, Export Promotion Council for Handicrafts (EPCH) data shows. 5 The amount of festivals celebrated in The USA and Europe are the major reason for targeting that market. Also Handicrafts are considered very Prestigious in the Countries which have led to a huge increase In the Demand. 5 (US-AID Handicrafts Market Demand Analysis) Page | 8 PROCEDURE FOR IMPORT 1. ) Getting Import license a.Applying to the controller of imports for getting necessary permission. b. Attaching the following documents with the form:i. ii. Receipt which shows that import license fee has been paid. Certificate from a Chartered Accountant showing the total value of goods to be imported. iii. Verification Certific ate for income tax. c. An import license may be general or specific. A general license allows imports from any country. But specific license allows imports from specific country only. d. Obtaining import quota certificate from the concerned authority.It mentions the maximum quantity of goods which can be imported. 2. ) Earning of foreign exchange Before placing any order, we have to apply to the Exchange Control Department (ECD) of RBI (Indias Central Bank) for the release of requisite foreign exchange. Forwarding the application through our bank. 3. ) Placing the Order Placing the order in the specific Country for the Raw Material- Mpingo wood. 4. ) Despatching letter of credit After getting the confirmation from the supplier regarding the supply of goods, we will requests the bank to issue a Letter of credit in favour of supplier. . ) Appointing C and F Agents Since we are new in the market, in the initial stages we will appoint Carry and Forward agents to take care of the shipmen t. 6. ) Receipt of shipment device Receiving the Shipment Device from the Exporter and tracking the shipment time to time. Page | 9 7. ) Receipts of documents Our bank will receive all the documents from the exporters bank. The documents include bill of exchange, a copy of bill of lading, certificate of origin, commercial invoice, consular invoice, packing list, and other relevant documents. Make Payment to the Bank. 8. Bill of entry a. This is a document required in case of import of goods. A Bill of Entry is the document testifying the fact that goods of the stated value and description in specified quantity are entering into the country from abroad. b. The customs office supplies this form which is prepared in triplicate. Three different colours are used to prepare bill of entry. One copy is retained by custom department, other is retained by port trust and the third will be kept by us. 9. ) Delivery order The clearing agents obtains the delivery order from the office of the ship ping company.The shipping company gives the delivery order only after payment of freight, if any. 10. ) Clearing of goods a. The clearing agent will pay the necessary dock or port trust dues and obtains the port Trust Receipt in two copies. 6 b. He will then approach the Customs House and presents one copy of Port Trust Receipt, and two copies of Bill of. Entry to the customs authorities. c. The customs officer will endorse the Bill of Entry Forms and one copy of Bill of Entry will be handed back. We will then be liable to pay the customs duty and clears the goods. 10. ) Payment to clearing and forwarding agent We will pay the C and F agent. 1. ) Payment to exporter We will ask the exporter to draw a bill of exchange. We will accept the Bill and make a Payment to the Exporter. 6 (Procedure to import goods in India) Page | 10 PROCEDURES FOR EXPORT 1. ) Receiving an order To get registered with various authorities like RBI, income tax authorities, etc. In addition, appoint agents or d istributors for collection of orders from foreign countries. 2. ) Obtaining License and Quota After obtaining order, we will have to secure export license from the government. For this, we will apply to the Export Trade Control Authority and obtain the valid license. . ) Letter of Credit Demanding for LOC, in case it is not attached with the order. 4. ) Fixing exchange rate Since the exchange rate fluctuates from time to time we will fix the Exchange rate with the Importer before the order is processed so that it doesn’t lead to any chaos. 5. ) Foreign exchange formalities Undergoing certain foreign exchange formalities as laid down under exchange control regulations. According to FERA (Foreign Exchange Regulation Act of India) every exporter has to furnish a declaration in the form prescribed for this purpose.The declaration states:a. Foreign exchange earned by way of exports will be disposed in the manner and within the period specified by RBI. b. Negotiations of shipping d ocuments will be through authorised dealers in foreign exchange. c. The payment for goods exported will be collected only through approved method. Page | 11 6. ) Preparation for executing the order Making the necessary arrangements for executing the order. In this respect we will perform the following activities:a. Packing and marking of the goods as per the specifications of the importer. b.Arranging the pre-shipment inspection by the Export Inspection Agency and getting the inspection certificate from it. c. Securing insurance policy from the Export Credit Guarantee Corporation (ECGC) to get protection against the credit risks. d. Obtaining a suitable marine insurance policy, consular invoice and certificate of origin, if required. e. Appointing a forwarding agent for handling the customs and forwarding activities. 7. ) Formalities done by forwarding agent The Forwarding Agent completes the following formalities:a. He obtains the Customs Permit from the Customs Department for expo rting goods. . The Forwarding Agent discloses the details of the goods such as their nature, size, quantity, weight, etc. to the shipping company. c. The Forwarding Agent prepares a Shipping Bill. d. The Forwarding Agent prepares two copies of the dock challans and pays the dock dues. e. The Captain of the ship gets the goods loaded on the ship on the basis of the Shipping Order in the presence of customer officers. f. When the goods are loaded on the ship, the Mate (Vice Captain or the Captain) issues a receipt, called Mates or Captains Receipt. 8. Bill of Landing We will approach the shipping company, presents the Mates Receipt and in exchange receives a document called Bill of Lading. It is an official receipt given by the shipping company as an acknowledgement of the receipt of goods to be transported to the port of destination. It is also a contract for the carriage of goods. It gives full description of goods loaded on the ship, name of the port of destination, etc. Page | 12 9. ) Shipment advice to importer We send Shipment Advice to the importer informing him about the dispatch of the goods.He sends a copy of packing list, commercial invoice and a non-negotiable copy of the Bill of Lading, along with the Advice Note. 10. ) Presentation of documents to the bank We will confirm that we have secured a complete set of the shipping documents namely, the Bill of Lading, Marine Insurance Policy, Certificate of Origin, the Consular Invoice and the Commercial Invoice. Then we will draws a Bill of Exchange on the basis of the commercial invoice. Such a bill may be a D/P (Documents against payment) bill or D/A (Documents against Acceptance) bill.Then we will hand over the documentary bill to our bank. 11. ) Realisation of export proceeds For realisation of export proceeds, we will undergo certain banking formalities and receive the payment in foreign currency by bill of exchange or by bank draft. 7 7 (Procedure to export goods from India) Page | 13 CONCESSIONS AN D EXEMPTIONS There are certain schemes which our company Africa Sanaa is eligible for and which therefore benefit the company as whole and the nation itself by encouraging more exports leading to the betterment of balance of payments.Moreover with such schemes, the handicrafts market specifically in India will finally be able to come out of the decline stage of it and will come back to the market with variety of products with new designs and even leading to multi-city trade which will further in long-term lead to better relations among the countries. The schemes are as follows: 1) EPCG Scheme, FTP (2009-14): has allowed zero duty import of capital goods for handicrafts. India enjoys a comparative advantage and the zero capital goods import facility should go a long way and thus benefit both, the nation and the company itself. ) All handicrafts exports would be treated as special focus products and entitled to higher incentives. In addition to above, 2% bonus benefits under Focus Pro duct Scheme for handicrafts exports and applicable duty drawback on exports of goods are eligible for registered exporters. 3) Registration with the EOU’s: As per the case in June 3rd 2009 â€Å"The handicraft exporters in Moradabad, Jaipur, Jodhpur, Udaipur, Saharanpur and Narsapur are not given fiscal and other benefits as that of EOUs, even though they do business with the outer countries.In this regard, an official from the Export Promotion Council for Handicrafts (EPCH) said that the handicraft exporters should be considered as EOUs as the handicraft units are totally export oriented, who don’t sell any of their products in the domestic market. †8 Therefore, according to Foreign Trade Policy 2009-14, Our Company would like to get registered under the EOU unit so as to prevent getting HIT by the recession as other companies did in the above listed cities. Getting registered under the EOU will therefore help us penetrate the international market without any t hreats and high costs. (Press Information Bureau, Government of India) Page | 14 This information was given by the Minister of State in the Ministry Of Textiles, Smt. Panabaaka Lakshmi in a written reply in the Lok Sabha. 9 CONTAINER DETAILS Dimensions of a 20ft container 10 Inside dimensions (L x W x H) 20ft Standard Container Door opening (W x H) Max payload Capacity 5895 x 2350 x 2392 mm 2340 x 2292 mm 28230 kgs 33 m? Dimensions of a 20ft container 11 Diameter of 1 Log is 1 FT. Length of 1 LOG is 7FT. Total No of logs that the container can hold = 3*8*8 =192 logs 9 Press Information Bureau, Government of India) (Container Specification) 11 (20 ft Container Size: High Cube and Standard Dry) 10 Page | 15 COST ANALYSIS 7ft = Tshs. 130,000 1ft = Solution 110,000 = Tshs. 15714 7 100ft = Tshs. 1,571,400 In terms of Rs. the exchange value is as follows: 1rs = Tshs. 26. 7 = Tshs. 1,571,400 The value of 100ft Mpingo wood in terms of INR is equivalent to Rs. 58,853. Since we are importin g it for Export we won’t have to pay Custom Duty as per the EPCG scheme. Per foot Raw Material cost- 588. 53 SHIPPING CHARGE for 192 Logs is 750 $ = 45000(approx. ), i. e Per log cost = 234. 75 Rs Labour cost/ft = 210 Rs. Total cost of 192 logs = 790,272 Insurance Charge = 2% of 790,272= 15,805 Rs. TOTAL COST INVOLVED PER FT= 210+234+588+12= 1044rs. Page | 16 Selling Price per FT = 1600 RS (Minimum) Profit Per Ft = 1600-1044= 556 RS. TOTAL FOB VALUE= TOTAL EX FACTORY PRICE+ TOTAL OTHER COSTS Total EX factory Price= Production Cost + Profit 790272+282240+200448 =1,272,960=21,216 $ Other Costs= Shipment Charges =750$ Total FOB value= 21966$ Page | 17 CONCLUSION We would like to conclude that we have created a tri- country trade, in which we will be importing the skilled labour and the raw materials i. e.Mpingo wood from Tanzania or Mozambique, Manufacturing it in India in the form of Handicrafts with the help of African Labour and Labour from Saharanpur near the Kandhla Port so to save the Transportation cost and then Exporting the Finished goods to The USA and Europe. We believe that this is the best Time to capture the Handicraft Market as it is booming at a very faster rate all over the globe and especially The USA and Europe and also the matter of fact that the Indian Govt. is supporting the Handicraft Industry in through various Concessions and Exemptions. Page | 18 BIBLIOGRAPHY 20 ft Container Size: High Cube and Standard Dry. n. d.