Meaning of Export and Import Trade and the Need for a Procedure

When trade takes place across national boundaries, it is called foreign trade or international trade. Foreign trade has two broad directions. When goods produced in one country are sold to buyers in another country, it is called export trade; when goods produced abroad are purchased and brought into a country, it is called import trade. An Indian manufacturer who sells cotton garments to a buyer in Germany is engaged in export trade; an Indian dealer who buys machinery from Japan and brings it into India is engaged in import trade.

Foreign trade is far more complex than trade carried on within a single country (called internal or home trade). The buyer and the seller are separated by long distances, they belong to different countries with different currencies, different languages, different commercial customs, and different systems of law. Payment cannot simply be handed over across a counter; it has to travel through banks in two countries, and it usually has to be converted from one currency into another. On top of this, every country regulates its foreign trade closely — to protect its economy, to earn or conserve foreign exchange, to collect customs duty, and to keep out prohibited or harmful goods. Because of this, a trader cannot export or import goods casually; a fixed sequence of legal, banking, transport and customs formalities has to be completed at each stage. This fixed sequence is what we study as the export procedure and the import procedure.

Several authorities and documents recur throughout both procedures, so it helps to know them at the outset. The Directorate General of Foreign Trade (DGFT), which functions under the Ministry of Commerce, administers India's foreign trade policy and issues the Import Export Code (IEC) without which no person can legally export or import. The Reserve Bank of India (RBI) — through the banks it authorises to deal in foreign exchange, called authorised dealer (AD) banks — regulates the receipt and payment of foreign currency under the Foreign Exchange Management Act (FEMA). The customs authorities at ports and airports clear goods in and out of the country and levy customs duty. Alongside these authorities, a set of standard commercial and shipping documents (invoices, the bill of lading or airway bill, the bill of exchange, and so on) is used to describe the goods, transfer their title, and collect payment.

The underlying regulatory framework — the IEC, customs clearance, letters of credit, the shipping documents — is a national and international framework, not a Tamil Nadu-specific one. An exporter in Chennai and an exporter in Delhi follow essentially the same procedure, and much of it aligns with what students of commerce and business studies study under other Indian boards as well, because the rules flow from central law (the DGFT's foreign trade policy, FEMA, the Customs Act) and from internationally accepted trade practice.