Strategic Export Management Programme

Trichy exporters get insights on global export trends

LEFT: From left, are Mr Unnikrishnan K, Director, FIEO (SR); Mr S. Abdul Rasheed, Secretary, TIDITSSIA; Mr S. Sridharan, President, TIDITSSIA; Mr R. Muthuraj, JDGFT, Chennai; Mr R. Khadere Mohideen, Principal, JMC College, Trichy; and Mr V. Bashyam, Branch Manager, ECGC. RIGHT: A view of the participants
FIEO jointly with ECGC and Tiruchirapalli District Tiny & Small Scale Industries Association (TIDITSSIA) organized a one-day seminar on Strategic Export Management on October 19, 2012 at Trichy. The aim of the programme was to provide insights on the latest developments in international trade, marketing strategies required, mitigating risks involved in exports and export finance. More than 70 exporters form in and around Trichy attended the programme. The programme was part of FIEOs strategy to promote exports form Tier II and Tier III cities which lack the necessary infrastructure and support for exporters. Mr Unnikrishnan K., Director, FIEO (Southern Region) welcomed the participants and highlighted the opportunities available in international trade. Various infrastructure inadequacies in the region including electricity and connectivity were discussed during the presentation. Mr S. Sridharan, President, TIDITSSIA, inaugurated the programme and highlighted the potential in the region especially in engineering and the agro sector. Mr R. Khadere Mohideen, Principal, JMC College, Trichy, talked on international marketing. Mr R. Muthuraj, Jt. DGFT, Chennai, made a presentation on Foreign Trade Policy and incentive schemes and interacted with the participants, giving clarifications on various schemes under FTP. Mr V. Bashyam, Branch Manager, ECGC, and Mr Sridar, Manager, IOB, made presentations on credit risks and export finance. Mrs Selvanayagi, Co-ordinator, FIEO (Southern Region) made a presentation on FIEOs services. Mr Thyagarajan, Manager, Alibaba.com, made a presentation on sourcing buyers through internet. Mr S. Dharmaraj, Airport Director, Trichy International Airport, made a presentation on the facilities available in the newly opened international air cargo terminal at Trichy airport. The new international cargo terminal has two wings, one for export, spread over a total area of 2200 sq m, and another for import with 1750 sq m built-up area. The export wing is fitted with a sterile area and additional facilities include cold storage for perishable cargo, a shed for hazardous cargo, a room for valuable cargo, and an embedded electronic weighing scale for weighing up to 5 tonnes at a time. It is expected to serve the trade needs of districts such as Trichy, Karur, Namakkal, Madurai, Erode, Pudukottai and Thanjavur for various non-perishable export items, as well as coastal areas like Nagapattinam, Karaikkal, and Ramanathapuram for marine products. As of now, the one-time holding capacity of the terminal is 250 metric tonnes, and the AAI plans to add additional facilities in keeping with the increasing volume of freight traffic, Mr Dharmaraj said. Cold storage facility at the cargo complex is also will be established soon. Located in Tamil Nadu, Trichy is a major engineering hub and is renowned as the energy equipment and fabrication center of India. As a fabrication hub, it is catering as an outsourcing hub primarily to BHEL and of late, to other international demands as well.

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FIEO NEWS l December 2012

The Trichy Engineering Cluster, due to the presence of BHEL, caters to the power industry and is also strong in undertaking fabrication work for a number of process industries like sugar, paper, cement, fertilizer and petrochemicals. In terms of activity profile, fabrication is the dominant group. There are also several small or tiny units engaged in short blasting, sand-blasting, galvanizing, bending, drilling etc. Some of them are also involved in the manufacture of consumables like electrodes, grinding wheels, paints etc. In addition to the above, there are three units who are into manufacture of power equipment like boilers, heat exchangers, pressure vessels etc. However, most of them supply to exporters or large industries.

Newly opened Air Cargo Complex at Trichy Airport

The Cluster Development Programme planned by FIEO aims at making a paradigm shift in thinking and doing. And fortunately in the case of Trichy cluster, there are enough indications to suggest that the time is ripe for making such a shift. FIEO is planning for specific products focus activities in this centre with the supn port of the State Government.

ICC unveils new uniform rules on forfaiting

The International Chamber of Commerce (ICC) unveiled new uniform rules on forfaiting (URF) to govern the international forfaiting market estimated at more than $300 billion annually. The URF will enter into eect on Jan uary 1, 2013, providing a set of rules for the sale of instruments used for nancing trade which include bills of exchange, promissory notes, documentary credits and invoice pur chases as well as some newer instruments. Forfaiting facilitates the provision of nance to the international trade community and gives liquidity to instruments that would otherwise be limited to evidencing payment claims. By making payment claims easier to transfer, forfaiting enables them to be used as more than just a means of obtaining payment for goods or services delivered: they can be used to provide nance. The URF are the result of an ambitious project by ICC and the International Forfaiting Association (IFA) to create new rules for a mul tilateral trading system t for the 21st century. Essentially, forfaiting involves selling a bill of exchange without recourse. It frees the ex porter from political or commercial risks. It does not aect his borrowing limits/capacity and relieves him from the trouble of credit ad ministration and collection problems. It does not require a longterm relationship with the forfaitor and eliminates the need for export credit insurance. Typically, the transaction involves an ex porter who approaches a forfaitor, who col lects details about the importer, supply, credit terms, documentation, etc, and after ascertaining the country risk and credit risk involved, quotes a discount rate. If this is ac ceptable, the exporter signs a contract with the forfaitor and after the export, sells his bills of exchange to the latter. The exporter saves on costs of interest, credit insurance and, sometimes, the letter of credit but still might find the discount rate unattractive. But he gets the convenience of selling the debt without recourse, unlike a postshipment credit facility, where banks can recover the money from the exporter if the importer does not pay. Invariably, there are counterparties with whom the forfaitor covers his risk, usually a bank which issues a letter of credit or guaran tee or coaccepts the bill of exchange. In very exceptional cases, the forfaitor may proceed with only the assurance of the importer. There is also a fairly developed secondary market, of transactions between banks and other nan cial institutions. However, standard disciplines had not evolved for forfaiting transactions and so, the ICC and the International Forfaitors As sociation collaborated to create new rules, suitable for modern practices. ICC says the rules do not change the na ture of the payment claim being originated or ontraded; these can be used with the full and everexpanding range of instruments used to finance trade. The URFs major ad vantage is the standardization of practices, the way Uniform Customs & Practices for Documentary Credits developed by ICC has standardized the way the banks handle trans actions in letters of credits, to make it the most used set of private rules in the com mercial world. In India, forfaiting as an export nancing option has been approved by the Reserve Bank of India. The facility is to be provided by an in ternational forfaiting agency through an au thorized dealer (see RBI Circular 42 A. D.(M.A.) series dated October 27, 1997). Forfaiting pro ceeds, on a without recourse basis, are to be received in India as soon as possible after ship ment but within the period specied by RBI for realisation of export proceeds. A transaction is to be routed through an authorized dealer who, apart from handling documentation, will also provide certication for GR Form purposes. ICC estimates that the URF will help grow the forfaiting business signicantly from the annual turnover of $300 billion. In India, for faiting has not caught on signicantly, due to preferential interest rates for export credit and reasonable guarantee cover costs from the Ex port Credit Guarantee Corporation.

FIEO NEWS l December 2012

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