Case Study

Export Procedure of Rice from India to Russia

Synopsis

India is the world's largest producer of rice, and Russia is the world's 11th largest importer of rice. In 2022, India exported about 2.1 million tons of rice to Russia, worth about US$56 million, according to the United Nations COMTRADE database on international trade. The study discusses the export procedure and douments involved in exporting rice from India to Russia.

Keywords

Rice exports, export procedure, Basmati rice

Introduction

India is the world's largest producer of rice, and Russia is the world's 11th largest importer of rice. The Harmonized System (HS) code for rice is 1006. In 2022, India exported about 2.1 million tons of rice to Russia, worth about US$56 million, according to the United Nations COMTRADE database on international trade. The main types of rice exported from India to Russia are basmati rice and non-basmati rice. Basmati rice is a long-grain rice that is prized for its aroma and flavour. It is mostly grown in the northern states of India, such as Punjab, Haryana, and Uttar Pradesh. Non-basmati rice is a shorter-grain rice that is less expensive than basmati rice. It is mostly grown in the southern states of India, such as Andhra Pradesh, Telangana, and Tamil Nadu.

The trade of rice between India and Russia is governed by a number of agreements, including the India-Russia Comprehensive Economic Partnership Agreement (CEPA). The CEPA provides for tariff-free trade in rice between the two countries. The trade of rice between India and Russia is expected to grow in the coming years, due to the growing demand for rice in Russia and the increasing availability of high-quality rice from India. Exporting rice from India to Russia involves a multi-faceted and meticulous process, with each step playing a pivotal role in ensuring a successful and compliant trade operation and the entire trade procedure for rice export from India to Russia is estimated to take approximately 85 to 90 Days. Here, we delve into each step-in detail:

Procedure for exporting Rice from India to Russia

Obtain Export License:

To embark on the journey of exporting rice from India to Russia, securing an export license is the first essential step. The Directorate General of Foreign Trade (DGFT), operating under the Ministry of Commerce and Industry in India, is the authority responsible for issuing these licenses. This crucial document acts as a legal permit, authorizing the exporter to engage in international trade activities. It serves as a declaration of compliance with Indian export laws and regulations, ensuring that the rice export adheres to all legal requirements.

Market Research and Buyer Identification

Comprehensive market research forms the foundation of a successful export venture. Before venturing into the Russian market, it is vital to gain a deep understanding of the demand dynamics, preferences, and potential competitors. The Indian Ministry of Commerce and Industry often provides valuable trade data and insights to aid in this research. By identifying potential buyers or distributors, you ensure that there is a market for your product. Additionally, understanding the trade agreements and bilateral relations between India and Russia, such as the India-Russia Free Trade Agreement, can be instrumental in market analysis.

Negotiate Terms and Sign Contract:

Once you've identified a potential buyer in Russia, negotiations commence. This stage involves indepth discussions on various aspects of the trade, including pricing, quantity, quality standards, delivery terms, and payment methods. The resultant contract serves as the legal framework for the entire transaction. It is critical to ensure that the terms are mutually agreeable, as this document will guide the entire export process. The clarity and precision of the contract are paramount to minimize misunderstandings and disputes

Export Documentation:

Accurate and comprehensive export documentation is the backbone of international trade. The documentation process includes preparing essential paperwork such as the Commercial Invoice, Packing List, Certificate of Origin, and Certificate of Inspection. Each of these documents serves a specific purpose, such as detailing the contents of the shipment, its origin, and its quality. This documentation is not only crucial for customs clearance but also for tracking and recording the trade transaction.

These essential export documents required for exporting rice from India to Russia:

Commercial Invoice

The Commercial Invoice is a detailed document prepared by the exporter (seller) and presented to the buyer. It outlines the financial aspects of the transaction, including the quantity, description, and value of the rice being exported. It includes information such as the unit price, total price, payment terms, and currency of the transaction. The Commercial Invoice serves as the basis for calculating import duties and taxes in Russia. It also helps the buyer and customs authorities verify the accuracy of the transaction.

Packing List

The Packing List is a document that provides a detailed breakdown of the shipment. It lists the contents of each package, including the type and quantity of rice in each package. This document aids in identifying and verifying the goods during customs inspections and helps ensure that the shipment matches the information on the Commercial Invoice.The Packing List assists customs officials in Russia in conducting inspections and ensures transparency in the shipment contents.

Certificate of Origin

The Certificate of Origin is a document that certifies the origin of the exported rice. It confirms that the rice originates from India and meets the necessary criteria to be considered of Indian origin. The certificate may be issued by a relevant authority, such as a chamber of commerce. The Certificate of Origin is crucial for complying with international trade agreements and customs regulations. It determines the eligibility for preferential tariffs under trade agreements and confirms the product's source.

Certificate of Inspection

The Certificate of Inspection is a document issued by an independent inspection agency or government authority. It confirms that the rice being exported meets the quality standards and specifications agreed upon in the contract. It may include information about weight, size, packaging, and other quality parameters. The Certificate of Inspection provides assurance to the buyer that the rice meets the agreed-upon quality standards. It helps prevent disputes and ensures transparency in the transaction.

Bill of Lading/Airway Bill:

The Bill of Lading (for sea shipments) or Airway Bill (for air shipments) is a transport document issued by the carrier or freight forwarder. It serves as proof of shipment and outlines details such as the name of the shipper, consignee, description of goods, quantity, and destination port or airport. It also indicates the terms of shipment (e.g., CFR, CIF, FOB). The Bill of Lading or Airway Bill is crucial for tracking the shipment, transferring ownership of the goods, and facilitating customs clearance in Russia. It is also needed for logistics and transportation purposes.

These export documents are vital for a smooth and legally compliant export process from India to Russia. They help ensure transparency, compliance with regulations, and adherence to trade agreements. Exporters must prepare these documents accurately and in accordance with the requirements of both India and Russia to facilitate the successful export of rice. Additionally, various ministries and departments in both countries may oversee the issuance and verification of these documents to ensure compliance with trade regulations and agreements. Apart from the above mentioned documents below is a complete list of other documents additionally required for exporting rice from India to Russia. The following documents are required:

Transportation to Port:

Once the exporter has obtained all the necessary export documentation, the rice can be transported from the warehouse to the port. The most common mode of transportation for this leg of the journey is by truck. The rice is typically loaded onto a truck and driven to the port. The journey from the warehouse to the port can take several hours, depending on the distance. The rice is typically transported in sealed containers to protect it from the elements. When the truck arrives at the port, the rice is unloaded and transferred to a warehouse at the port. The warehouse is a secure facility where the rice is stored until it is ready to be loaded onto a ship. The loading of the rice onto the ship is a carefully orchestrated process. The rice is carefully stacked in the hold of the ship to ensure that it is stable and secure. Once the rice is loaded onto the ship, the ship can set sail for its destination.

Customs Clearance in India:

The customs clearance process in India is conducted by the Indian Customs Department. It involves submitting the required documentation and paying any export duties and taxes applicable to the shipment. The Customs Act, 1962, and other relevant regulations (Government notifications from time to time) guide this process. Properly cleared customs ensure that the rice is legally permitted to leave the country, and adherence to these regulations is of utmost importance to prevent any legal complications or delays.

Shipment and Delivery to Russia:

With customs clearance completed, the next step is the physical transportation of the rice from India to Russia. This process necessitates meticulous planning to ensure that the rice reaches its destination in Russia in optimal condition. Proper packaging and labeling are crucial to safeguard the quality and integrity of the product during transit. International trade agreements, such as those between India and Russia, often outline transportation-related guidelines and protocols. The shipment and delivery phase involves the actual transportation of the rice to Russia, in accordance with the terms stipulated in the contract. These terms can specify the agreed-upon delivery method, such as Cost and Freight (CFR), Cost, Insurance, and Freight (CIF), or Free on Board (FOB), among others. Adherence to these terms ensures that both parties' expectations regarding the timing and manner of delivery are met

Customs Clearance in Russia:

Just as customs clearance is essential in India, it is equally critical in Russia. Russian customs authorities, acting under various Russian laws and international trade agreements, examine the documentation and goods to ensure they comply with import regulations. This step ensures that the rice can legally enter Russia and that all customs requirements are met.

Quality Inspection in Russia

Upon the rice's arrival in Russia, it may undergo a quality inspection conducted by Russian authorities. This inspection verifies that the rice meets the specified standards and is safe for consumption. Russia's food safety regulations and agreements, such as the Eurasian Economic Union (EAEU) standards, may govern this inspection. It is a pivotal step to assure the buyer of the product's quality and safety.

Payment and Settlement

The final phase of the export process revolves around payment and settlement. The terms for payment are typically outlined in the contract, and various mechanisms may be employed, including a Letter of Credit (LC), Advance Payment, or Open Account. The payment and settlement phase ensures that the exporter receives the agreed-upon compensation, thus finalizing the transaction

By following these meticulously planned steps, exporters can navigate the complexities of exporting rice from India to Russia while ensuring compliance with a multitude of regulations, standards, and trade agreements. Collaboration with government departments, industry bodies, and experienced trade professionals is often essential to successfully navigate this intricate process and establish a solid presence in the global rice market.

Time Procedure Chart of Rice export from India to Russia – Maximum time: 89-90 Days

Processes involved in exports of rice to Russia

-> Obtain Export License
-> Market Research and Buyer Identification
-> Negotiation Terms and Sign Contract
-> Export Documentations
-> Transportation to Port
-> Custom Clearance in India
-> Shipment and Delivery to Russia
-> Custom Clearance in Russia
-> Quality Inspection in Russia
-> Payment and Settlement

In order to export rice from India to Russia, an exporter typically needs to visit at least eight institutions to obtain the necessary documents and ensure the passage of the rice to its destination. These institutions are:

The Directorate General of Foreign Trade (DGFT) to obtain an export license

The Indian Chamber of Commerce to obtain a certificate of origin.

The Plant Protection Association of India (PPAI) to obtain a phytosanitary certificate.

The shipping company to obtain a bill of lading

The customs authorities in India to obtain an export declaration.

The customs authorities in Russia to obtain an import declaration

The bank to obtain a bank guarantee or letter of credit.

The insurance company to obtain an insurance policy.

The freight forwarder to arrange for the transportation of the goods

Key Updates and Progress in Export of Rice from India

In recent months, the export of rice from India has undergone significant changes and challenges, reflecting both domestic and international factors. These developments have substantial implications for India's role in the global rice market and its efforts to balance domestic food security concerns with international trade commitments.

Ban on Non-Basmati White Rice (July 2023)

In July 2023, the Indian government imposed a ban on the export of non-basmati white rice. This decision was primarily motivated by concerns regarding domestic rice availability and the resulting upward pressure on food prices within the country. By restricting non-basmati white rice exports, India aimed to secure sufficient rice supplies for its citizens and mitigate the risk of food price inflation. This measure has raised questions about its potential impact on global rice markets, as India has traditionally been a significant exporter of this rice variety.

Suspension of Basmati Rice Exports Below 1200 MT FOB (August 2023)

Around a month later, in August 2023, India took another noteworthy step by suspending the export of basmati rice below 1200 metric tons Free on Board (FOB). This move was driven by similar concerns regarding supply shortages and rising domestic prices for basmati rice. Basmati rice is a prized commodity known for its quality, and India is a key global supplier of this variety. The suspension of exports below the specified quantity raised questions about the nation's reliability as a supplier in the global basmati rice market

Food Security and Market Stability Objectives

These policy changes are aligned with India's broader objectives of ensuring food security and maintaining stability in its domestic rice market. India, as one of the world's most populous countries, places a high priority on guaranteeing an adequate and affordable food supply for its citizens. In light of the challenges posed by supply shortages and rising food prices, these measures were seen as essential steps to fulfil these objectives.

Potential for Lift on White Rice Export Ban

While these restrictions are currently in place, there is speculation that the Indian government may consider lifting the ban on white rice exports in the near future. This could become a possibility if domestic rice production increases sufficiently to alleviate supply concerns. Such a decision would depend on the evolving dynamics of the rice market within India.

Impact on Global Trade Dynamics

These developments in India's rice export policies have garnered significant attention in the global trade community. India is a major player in the international rice market, and any restrictions on its rice exports can have far-reaching consequences. The fluctuating export policies and supply dynamics from India have prompted discussions about the stability and predictability of global rice trade.

In conclusion, the recent updates and progress in the export of rice from India represent complex interplay between domestic food security concerns and international trade obligations. The bans on non-basmati white rice and certain basmati rice exports demonstrate India's commitment to ensuring the availability and affordability of rice for its citizens. However, these measures also underscore the challenges faced by a key player in the global rice market and the potential impact on global trade dynamics. The possibility of a future lift on the white rice export ban adds a layer of uncertainty to the situation, making it a critical subject of analysis in the context of international trade and food security

Value and Quantity of Basmati Rice and Non-Basmati Rice Export from India to Russia (Source:DGCIS)

Quantity of Basmati Rice Export from India to Russia

Value in Millions of Dollar of Basmati Rice Export from India to Russia

Table of Non-Basmati Rice

Value in Millions of Dollar of Non- Basmati Rice Export from India to Russia

Value in Millions of Dollar of Non- Basmati Rice Export from India to Russia

Conclusion

In this comprehensive case study, we have explored the intricate trade procedures involved in exporting rice from India to Russia, shedding light on the meticulous steps and documentation required to navigate the complex international trade landscape. The journey begins with obtaining an export license from the Directorate General of Foreign Trade (DGFT) in India, setting the legal framework for the export process. Market research, buyer identification, and contract negotiation lay the groundwork for successful trade agreements. Quality control and certification ensure that the rice meets Russia's stringent food safety standards. The documentation process is a crucial aspect of the export journey, encompassing various essential documents such as the Commercial Invoice, Packing List, Certificate of Origin, Phytosanitary Certificate, Certificate of Inspection, Bill of Lading or Airway Bill, and others. Each of these documents serves a distinct purpose, contributing to the transparency, legality, and adherence to trade regulations throughout the export process.

Customs clearance plays a pivotal role both in India and Russia, involving the submission of necessary documentation, compliance with import and export regulations, and the payment of relevant duties and taxes. Transportation and quality inspection ensure the rice reaches Russia in optimal condition, and the final settlement phase concludes the trade transaction.

Moreover, we have discussed key updates and progress in the export of rice from India, particularly the bans on non-basmati white rice and certain basmati rice exports implemented in response to domestic food security concerns and rising prices. These measures, while vital for India's food security objectives, have raised questions about their impact on global rice markets. The possibility of future policy adjustments adds an element of uncertainty to the international rice trade landscape.

In essence, this case study underscores the intricate nature of rice exports from India to Russia, emphasizing the need for meticulous planning, compliance with regulations, and adaptability in the face of evolving trade dynamics. The balance between domestic food security and international trade commitments is a complex challenge, and these developments provide valuable insights into the delicate interplay of factors that shape the global rice trade.