Notes on Export/Import, Trade Blocks, and Foreign

Exchange

1 Export/Import: Policy, Procedure, Documentation

1.1 Policy
Export and import policies are government regulations governing the trade of goods and
services across borders. In India, the Foreign Trade Policy (FTP) (e.g., FTP 2023)
outlines rules, incentives, and restrictions.
• Objectives: Promote exports, ensure trade balance, and protect domestic indus-
tries.
• Key Elements: Tariff structures, export incentives, import restrictions, and com-
pliance with WTO rules.
• Example: Duty Exemption Schemes, restrictions on sensitive goods (e.g., arms,
hazardous materials).
Image Placeholder: A flowchart of Indias Foreign Trade Policy framework, showing
key components like DGFT, export incentives, and import licensing.

1.2 Procedure
The export/import process involves multiple steps to ensure compliance with national
and international regulations.
• Export Procedure:
1. Obtain Importer-Exporter Code (IEC) from DGFT.
2. Register with Export Promotion Councils.
3. Secure contracts and prepare export documents.
4. Arrange logistics (shipping, insurance).
5. Clear customs and comply with foreign exchange regulations.
• Import Procedure:
1. Obtain IEC and import license (if required).
2. Place orders and arrange payment (e.g., Letter of Credit).
3. Clear customs, pay duties, and comply with regulations.
4. Arrange transportation and delivery.
Image Placeholder: A diagram illustrating the step-by-step export/import process,
with arrows showing the flow from IEC registration to customs clearance.

1.3 Documentation
Key documents ensure legal and smooth trade operations.

1
 • Export Documents:
– Commercial Invoice: Details of goods, value, and terms.
– Bill of Lading/Airway Bill: Transport contract.
– Packing List: Details of goods packaging.
– Certificate of Origin: Proves country of manufacture.
– Export License (if applicable).
• Import Documents:
– Import License (if required).
– Bill of Entry: For customs clearance.
– Insurance Certificate: Covers transit risks.
– Letter of Credit or payment proof.
Image Placeholder: A sample Commercial Invoice template with fields for exporter,
importer, goods description, and value.

2 Export Promotion
Export promotion involves government and institutional measures to boost a countrys
exports.
• Objectives: Increase foreign exchange earnings, enhance global competitiveness,
and support economic growth.
• Methods:
– Financial Incentives: Duty drawbacks, export subsidies, tax exemptions.
– Export Promotion Councils (EPCs): Provide market information and
support (e.g., FIEO in India).
– Trade Fairs and Exhibitions: Showcase products globally.
– Special Economic Zones (SEZs): Offer tax benefits and infrastructure.
– Schemes: Market Access Initiative (MAI), Export Promotion Capital Goods
(EPCG) Scheme.
• Example: Indias Merchandise Exports from India Scheme (MEIS) rewards ex-
porters with duty credit scrips.
Image Placeholder: A map highlighting Indias SEZs with annotations for key export
industries (e.g., IT, textiles).

2
3 Regional Trading Blocks
3.1 South Asian Association for Regional Cooperation (SAARC)
• Purpose: Promotes economic and regional cooperation among South Asian coun-
tries (India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Afghanistan, Mal-
dives).
• Established: 1985.
• Key Agreement: South Asian Free Trade Area (SAFTA) to reduce tariffs and
promote trade.
• Challenges: Political tensions and limited intra-regional trade (only 5% of total
trade).
• Website: https://www.saarc-sec.org

3.2 Asia-Pacific Economic Cooperation (APEC)

• Purpose: Promotes free trade and economic integration among 21 Pacific Rim
economies (e.g., USA, China, Japan, Australia).
• Established: 1989.
• Key Goals: Trade liberalization, investment facilitation, and sustainable develop-
ment.
• Achievements: Reduced trade barriers and enhanced economic cooperation.
• Website: https://www.apec.org

3.3 North American Free Trade Agreement (NAFTA)

• Purpose: Facilitated trade between the USA, Canada, and Mexico (replaced by
USMCA in 2020).
• Established: 1994.
• Key Features: Eliminated tariffs, promoted investment, and protected intellectual
property.
• Impact: Increased intra-regional trade but faced criticism for job displacement in
some sectors.
• Website: https://www.trade.gov/usmca (for USMCA).
Image Placeholder: A world map highlighting SAARC, APEC, and NAFTA/USMCA
member countries with color-coded regions.

4 Foreign Exchange Market

4.1 Meaning and Need
The foreign exchange market (forex) is a global decentralized market for trading curren-
cies.

3
 • Meaning: Facilitates the exchange of one currency for another (e.g., USD to INR).
• Need:
– Enables international trade by converting currencies for payments.
– Supports investment and capital flows across borders.
– Stabilizes economies by managing exchange rate fluctuations.
– Facilitates tourism, remittances, and global financial transactions.

4.2 Functions
• Currency Conversion: Converts currencies for trade and investment (e.g., USD
to EUR).
• Hedging: Protects against exchange rate risks using derivatives (e.g., forward
contracts).
• Speculation: Traders profit from currency price movements.
• Liquidity Provision: Ensures smooth flow of funds for global transactions.
• Price Discovery: Determines exchange rates based on supply and demand.
Image Placeholder: A graph showing exchange rate fluctuations (e.g., USD/INR over
a year) with annotations for key events.

5 Financing Foreign Trade

5.1 Letter of Credit (LC)
• Definition: A bank guarantee ensuring payment to the exporter upon meeting
specified conditions.
• Process:
– Importers bank issues LC in favor of the exporter.
– Exporter ships goods and presents documents (e.g., Bill of Lading).
– Bank verifies documents and releases payment.
• Advantages: Reduces payment risk for exporters and ensures delivery for im-
porters.

5.2 Forfeiting
• Definition: A financing method where the exporter sells trade receivables (e.g.,
promissory notes) to a forfaiter (financial institution) at a discount for immediate
cash.
• Features:
– Non-recourse: Forfaiter assumes payment risk.
– Used for medium- to long-term trade financing.

4
 • Advantages: Provides liquidity to exporters and mitigates credit risk.

5.3 FERA and FEMA

• Foreign Exchange Regulation Act (FERA), 1973:
– Strict regulation of foreign exchange transactions in India.
– Focused on conserving foreign exchange and preventing misuse.
– Limitation: Rigid and restrictive, discouraging foreign investment.
• Foreign Exchange Management Act (FEMA), 1999:
– Replaced FERA to liberalize foreign exchange regulations.
– Facilitates external trade and payments while promoting orderly forex market
development.
– Key Features: Simplified procedures, allows resident Indians to hold foreign
assets, and encourages FDI.
– Website: https://www.rbi.org.in (for FEMA guidelines).
Image Placeholder: A comparison table of FERA vs. FEMA, highlighting key differ-
ences in objectives and regulations.