Merchant export is a common word utilised in foreign trade. It is a process of trading export but is equally essential as any manufacturer exporter. An individual who is involved in the activity of merchant exports is called a merchant exporter. These exporters do not possess a manufacturing unit. They purchase goods from a manufacturer-exporter and then send them to overseas customers.
What are Merchant Exports?
In merchant exports, goods are bought from a country and sold to other countries without being substantially changed. A merchant exporter works as a mediator between overseas suppliers and buyers in global trade. Global trade is very simplified by them, as they offer links between producers and customers in various countries.
Merchant Exporters in India
Many merchant exporters work in India and add amply to the country’s exports. Governments have introduced various schemes and incentives to endorse this type of export. A merchant exporter has to list on the GST portal to avail of the incentives.
Merchant Exporters: How Do They Work?
Merchant exporters work like manufacturer exporters; other than that, they do not manufacture the goods. This signifies that merchant exporters do not have to establish manufacturing units. In its place, these exporters check suppliers who produce the goods and then trade the same to their prospective foreign buyers.
After creating a network of suppliers, merchant exporters search for purchasers by adopting different marketing methods such as email and social media campaigns, making an informative website, running PPC campaigns online, etc. The merchant exporter attains leads and, finally, more business by putting in these efforts.
Once the sales order is obtained, the merchant exporter requests his supplier to supply the required quantity of products, which then the exporter sends to the client. The products include the name of the merchant exporter and not the key supplier.
How Merchant Exports under GST Made Easier?
With the Goods and Services Tax or GST, all the procedures related to merchant exports have been made easier, and the repetitions have been smoothened. In the pre-GST age, it was necessary to get the C.T. 1 bond in addition to the ARE-1 form. The government has now eliminated both of these conditions under the new GST rule. There has been no interference from the legislative officer in this respect, and all the products for export have been self-authorised and self-sealed.
To get a refund on the Integrated Goods and Services Tax (IGST), the shipping bill documented with the customs office is regarded as a de facto application. This makes the procedure flawless. Before this, the merchant exporter had to put forward the Export General Manifest (EGM) and give a credible return in form GSTR-3B.
Under the GST regime, a merchant exporter can export products with or without paying IGST, as is the condition with a manufacturer exporter. The exporter only needs to list on the GST portal.
Merchant Exporters have two options to ask for a refund under the GST rule:-
A. They can either file a Letter of Undertaking (LUT) or a bond prior to exporting the products and then claim a refund on the extra Input Tax Credits (ITC).
B. They can reimburse the IGST on the export and then claim a rebate. In this condition, they do not need to file any bonds or LUT. Moreover, if the exporter chooses this route, they will not be liable for the concessional rates of 0.1% GST.
What is the significance of Merchant Exports?
1. Market Diversity
Businesses can transform their client base and grow their markets by exporting products. Businesses can lessen risks linked to financial variations in particular areas by selling to varied countries and decreasing their dependence on only one market.
2. Financial Growth and Job Creation
Export financing and job opportunities are produced by merchant exports, which add to an economy’s development. A company that concentrates on exporting frequently increases its operations to fulfil foreign market demand, developing jobs and increasing manufacturing at home.
3. Increased Competitiveness
Businesses are supported to become more competitive by getting involved in global business through merchant exports. Organisations are compelled to invent and enhance their manufacturing procedures because of international competition.
4. Access to Resources
Countries can avail of merchant exports by getting access to resources and goods that are not readily accessible domestically. Access to a wide range of products adds to the improvement in technology and living standards.
Steps to Run Merchant Export Operations
1. Market Study
Performing complete market research is the initial step in merchant exports. In order to accomplish this, it is essential to check potential markets, know customer choices, assess competition, and identify the requirements for the product in the intended country.
2. Product Choice
Merchant exporters choose products that are likely to do well in their intended markets once the target market is verified. As part of the goods selection procedure, cultural variations and consent with foreign rules are considered.
3. Identifying Suppliers
Looking for reliable suppliers is important for assuring the quantity and quality of the selected products. You require establishing trustworthy connections with your suppliers if you wish to keep your supply chain running properly.
4. Regulatory Conformity
There are several legal requirements for merchant exporters in both the importing and exporting countries. You must obtain the needed licenses to follow global business rules.
5. Shipping and Logistics
The arrangement of logistics and shipping is one of the most significant features of merchant export activities. Sending goods to overseas markets needs dealing with documentation, transportation, and making sure on time delivery.
6. Payment and Pricing
In order to be successful in the global market, you should set competitive costs. Forex rates and global transaction risks should be regarded by merchant exporters when determining payment terms.
7. Quality Control
Keeping up product quality is important for making a solid status in foreign markets. Daily quality inspections of the products are done to make sure that they furnish both international norms and client anticipations.
8. Marketing and Promotion
Different marketing and promotional tactics are used by merchant exporters to bring in prospective buyers. It is normal to take part in trade shows, use online marketing, and develop a powerful online existence.
9. Validation and Customs Clearance
An overall set of documentation is created, involving invoices, bills of lading (BoL), and certificates of origin. For clearing customs and entering the importing country flawlessly, these documents are essential.
Final Words
Merchant exports, which are significant to international trade, support business growth and financial prosperity. Businesses must identify the value of these exports and take the required actions when running export operations if they wish to compete in the international trade world.
