How to export from Pakistan?

Note: Visitors from other countries may contact any exporter to understand the process. 

Written by Nabeel Azeem

For a new entrant, who has not exported ever in his life, the biggest challenge is finding relevant customers and companies for his/her products. There are usually four traditional ways of finding customers, and marketing in export markets; 

• The first is trade shows/exhibitions. Usually, trade shows are arranged all over the world. You rent a stall, showcase your product there, and get the maximum possible orders by giving discounts or other promotion tactics. The second benefit of having a stall in an international trade show is that you meet potential new customers, and can convert those potential customers into actual customers by a consistent sales, and marketing effort e.g. keeping in touch with them through emails, WhatsApp, sending promotional items, offering discounts, and if possible, meeting them personally at least once a year.
• The second way is to find a list of possible potential customers through trade organization websites. Every trade category in the world has its country-specific or global trade organization. You can Google the trade organization of your relevant category by using relevant keywords e.g. trade organization, association, etc, and check their website’s members section to find your potential customer companies.
• The third way, which is a bit more traditional is to go to your local chamber of commerce, and ask them to give the specific trade directory of that category or country in which you are interested, get the list of your industry-specific relevant companies, and then contact them with your specific product offering. The fourth way is to have a sales team, either commission-based or full time, in your target country. You can find salespeople through local job sites.
• The fifth and most modern way is to market through online B2B trade portals e.g. Alibaba.com. Alibaba.com is the world’s biggest online wholesale trade portal for small companies, and traders. Ali Baba group is valued at around 200 billion dollars. If you register there and pay a small fee they also give you a verified, and gold supplier status by physically verifying your company documents and office which adds credibility to your company name. You may not be able to get big orders from there, but you may be able to get small orders, and small fish captured together can make a big fish.
• Another possible option is to market directly to international big chains in your target country/region e.g. Walmart, Tesco, or Metro, etc. You can also sell to Amazon directly as it gives the option of bulk buying without selling your goods directly to consumers. For that, you need to have a partner outside Pakistan who has a registered company in your target market. Similarly, selling at E–bay also requires having a partner outside Pakistan in one of those countries where it is currently operating

Feasibility

Feasibility is a detailed document which outlines all the important elements needed to start a business e.g. the cost of your product, the current price in the export markets, and the gross margins, the growth rate of the sector, important competitor countries, and major export markets, a possible production method for your product, financial projections, etc. For export, knowing your global competitor’s rates is very important to compete with them. You can easily do that by finding the contact information of your competitor companies from trade directories or the internet and asking them the rates as a customer.

An important mistake which people make is they think that they can only start an export business by manufacturing. It is not true. You can also start exporting your product as a marketing company or a third-party manufacturer. In this arrangement, you have the export order, you buy the product from the manufacturer, and export it to your customer. The benefit of this arrangement is that in the beginning when you have few orders you do not have to pay the huge overhead of a manufacturing unit. Once when you start getting sufficient orders to sustain the overhead payments, then you can start your manufacturing.

The second way in the modern world is retail export. Retail export has been made possible in the world thanks to the global connectivity provided by the internet. In the retail export, you do not sell out the products at the wholesale price, instead, you sell them at the retail rate with a huge profit margin. In this case, even if your number of customers is small, still then you can reap healthy profits because of the huge margin per unit.

HS code, and the Taxes

HS code is the key thing that you will need to know for your export. HS code means a harmonized system of international classification which classifies every traded item with a number like 2018.4044 and based on this number, the duties, and taxes are assigned to every imported product. The first four numbers represent the specific category of that product e.g. plastics, metal, etc, and the second number represents the specific subcategory for that product. Your customer will ask you about your product’s HS code so you should know about it.

Secondly, you should know the duties, value-added tax, or any other sales tax which will be levied on your product. If there is any export rebate offering, PTA (Preferential Trade Agreement), or FTA (Free Trade Agreement) of Pakistan with that country, you should know about it to maximize the value both for yourself, and your customer as well.

Logistics

Logistics are the backbone of international trade. You should know how your item will be shipped to your destination country; by sea or by air. Usually, high volume items with low prices per unit are exported through the sea, and high value but low weight items are exported through the air. The cost of your shipment is measured in terms of CBM. CBM stands for a cubic meter which is the standard size for which you will be charged for your shipment. You can divide your number of cartons or number of units per product which makes one cubic meter to calculate the shipping cost per unit. Along with that, you will have to pay your customs clearing agent, pay the relevant duty, hand over the relevant documents to your customer’s shipping agent, and you are done. The documents which are needed are the invoice, packing list, and the bill of lading.

The next step in logistics is to decide the terms of shipment with your buyer. Usually, FOB (Freight on Board) is the common method in which the seller will deliver the goods up to the port of departure in the exporting country, and hand them over to the buyer's shipping agent. Then from there, the importer will have to bear all the freight and shipment costs of the goods. Another possible arrangement could be EXW (Ex-works/Ex-factory) in which your customer would pick up the goods from your factory, and all the costs of delivery up to his country will be borne by him; and CIF (Cost, Insurance, Freight) in which all the cost, insurance, and freight of the goods will have to be borne by the exporter until the warehouse of the importer.

In Karachi, the export through sea route is from Port Qasim, Kemari, and West Wharf, and for air route export is done through Jinnah International Airport.

Payment Methods

Once you get the order from your prospective buyer then the next thing is to decide on the payment terms. The most preferred payment term is LC (Letter of Credit) in which the buyer’s bank gives you the payment guarantee in case if the buyer defaults or refuses to give you the payment on any grounds. The other possible options are D/C (Documents against Payment), and D/A (Documents against Acceptance). In D/C, the documents for releasing the shipment are received by your customer’s bank, and they will only give them to your buyer if he/she has paid the cash for shipment to the bank. In documents against acceptance, the importer agrees to pay after a certain period e.g. 90 days once the required documents for shipment release have been released. The last possible option is an open account method in which the goods are shipped, and delivered before payment is due, which is usually in 30 to 90 days. Usually, D/P, D/A, and the open account are the riskiest options for a new exporter as there is no payment guarantee in these payment terms. However, some financial institutions also give credit insurance to your shipment, and export finance facility as well. If you have the export order, they will give you the money to finance your current financial needs for export order preparation, and then they will receive the payment from the customer on your behalf. DS Concept is one of the international companies providing export finance facilities in Pakistan.

Documents Required

The following documents are required for the processing of export.

• E-Form (from the authorized commercial bank)
• Commercial invoice
• Certificate country of origin
• Packing list
• B/L or AWB
• Non-GMO certificate (selected countries)
• Pre-shipment certificate (if needed)