Case Study

Trade procedure analysis of Agrochemical exports from-India to Russia

Abstract

Agrochemicals (HS code 3808) encompass various chemical products used in agriculture, including pesticides and fertilizers. They play a crucial role in crop protection and enhancement. In India, the agrochemical industry is a significant component of the manufacturing sector. The case explains the export procedure of agro chemicals from India to Russia.

Keywords

: Export process, export documentations, export process time chart

Introduction

Agrochemicals (HS code 3808) encompass various chemical products used in agriculture, including pesticides and fertilizers. They play a crucial role in crop protection and enhancement. In India, the agrochemical industry is a significant component of the manufacturing sector. As of the latest available data, 154 agrochemical businesses operate in the country, providing employment opportunities for approximately more than 2,00,000 workers. Many of these enterprises are situated in various states across India.

While India has witnessed fluctuations in agrochemical exports, these products remain a substantial part of the country's export portfolio, with significant exports to various international markets. India's agrochemical exports have surged, surpassing its domestic demand, and the country has now become the world's second-largest agrochemical exporter, trailing only China. The latest data from the WTO reveals that India's agrochemical exports reached a record high of $5.4 billion in the fiscal year 2022-2023, marking a substantial increase from the previous year's $4.9 billion. Over the past six years, the agrochemical export sector has witnessed remarkable growth, doubling from $2.6 billion in 2017–18 to $5.4 billion in the most recent financial year, boasting an impressive compound annual growth rate (CAGR) of 13%. The majority of agrochemicals are exported to Russia by sea transportation. It is exported from India on the basis of advance payments and sometimes on the basis of Documentary collection. According to recent reports Russia imported Agrochemicals worth $49.8 million from India in a recent financial year.

Regulations for Agrochemical Export

The Insecticides Act of 1968 regulates the production, distribution, and application of agrochemicals in India. This law is administered by the Ministry of Agriculture, Department of Agriculture, and Cooperation. The act enforces mandatory registration, quality requirements, and fines for violations like misbranding and inferior pesticides. It is implemented by state governments. The Central Insecticides Board and the Registration Committee control different facets of agrochemical use. The act's shortcomings include its primary focus on insecticides, limited state jurisdiction, and a failure to expressly address pesticide-related environmental risks and dangers to biodiversity

Pesticide Management Bill of 2017: To replace the Insecticides Act, there is a bill called the Pesticide Management Bill. It aims to control the import, production, sale, and use of pesticides, with an emphasis on their efficacy and safety. The measure puts a strong emphasis on avoiding pesticide residue contamination of agricultural products and encouraging safe usage. Penalties for violations, such as the sale of fake pesticides, have significantly increased. The law permits states to impose a 6-month pesticide ban and provides mechanisms for compensating impacted farmers.

Export volume of agrochemicals by India from the financial year 2014–2021

Figure 1 shows that India has witnessed consistent growth in the volume of agrochemical exports since 2014 and successfully exported a record-breaking 461 thousand metric tons of agrochemicals in the fiscal year 2019, the greatest amount in the previous ten years. According to the statistics, over 330 thousand metric tons of agrochemicals were exported from India to other nations in fiscal year 2020, a massive 28% decline from the prior year. The United States and China's ongoing trade dispute and the impact of the COVID-19 pandemic on the supply chain prompted a decline in export volume.

Procedures for exporting Agrochemicals from India to Russia

The process of exporting agrochemicals to Russia starts with obtaining a Certification of Registration and export Licence, finding a buyer, obtaining an order, and then activities of production, document preparation, transportation, and customs clearance. Figure 1 illustrates the steps followed in the process of exporting agrochemicals from India to Russia.

Obtain Certificate of Registration

Under the terms of the Insecticides Act, registration is necessary before manufacturing or importing pesticides for export. Because importing nations frequently need this document to confirm that the agrochemicals requested for import are legally approved for manufacture/export in the country of export, companies/firms exporting agrochemicals are also required to provide the "Certificate of Registration."

Obtain Export License

Obtaining an export license better known as IEC (Import Export Code) is an essential requirement before starting the process of exporting agrochemicals from India to Russia. The Indian Ministry of Commerce and Industry's Directorate General of Foreign Trade (DGFT) is the agency in charge of providing this license. This vital document serves as legal permission, allowing the exporter to take part in activities related to international trade. It ensures that the export complies with all legal requirements by acting as a declaration of compliance with Indian export laws and regulations.

Register with CHEMEXCIL

The Indian Chemical Export Promotion Council is referred to as CHEMEXCIL. Although membership in CHEMEXCIL is not mandatory, it might be advantageous for connecting with other exporters and gaining access to government assistance.

Research and Find a buyer

A successful export endeavor is built on thorough market research. Before you start exporting, it is important to do your research and identify potential buyers for your products. It is crucial to get a thorough understanding of demand trends, consumer preferences, and prospective competitors before entering the Russian market. For this research, the Indian Ministry of Commerce and Industry frequently offers helpful trade information and insights. You may make sure that your product has a market by finding potential customers or distributors. You can also do this by attending trade shows, networking with industry professionals, and researching through online Platforms.

Negotiate Terms, prepare, sign, and exchange Contracts

Negotiations start as soon as you find a possible buyer in Russia. This phase involves in-depth conversations on a range of trade-related topics, including pricing, quantity, quality requirements, delivery schedules, and payment options. The resulting agreement acts as the transaction's legal basis. As this document will serve as the roadmap for the entire export process, it is essential to make sure the terms are mutually acceptable. To reduce misunderstandings and disagreements, the contract must be precise and clear.

Advance payment or Document collection

The Russian buyer transfers the agreed-upon funds to the Indian exporter before the agrochemicals are dispatched in the case of advance payment. In a documentary collection, the exporter sends his or her bank the necessary shipping documents (such as Shipping bill, bills of lading, invoices, and other necessary paperwork), and the bank of the buyer receives them. In order to ensure that the buyer only receives the items when payment is confirmed, the buyer's bank releases the documentation to the buyer adhering to payment.

Produce Agrochemicals

This phase entails producing the agrochemical goods in accordance with the details and quantities specified in the sales contract. To make sure the items are safe to use and satisfy the necessary requirements, quality control procedures are put in place.

Get Lab test

Agrochemical products are put through extensive laboratory testing to determine their quality, purity, and adherence to legal requirements. These tests attest to the items' usability and compliance with the demands of the Russian market.

Issue a Material Safety Data Sheet (MSDS)

An MSDS is a comprehensive document that details the characteristics, risks, recommended handling practices, and emergency protocols for agrochemical products. It is a crucial piece of paper for guaranteeing safety and legal compliance.

Pack product

The agrochemical items are securely packed and bundled to avoid damage while being transported. Additionally, packaging must adhere to foreign shipping laws, particularly when handling hazardous items.

Complete Export Documentation

The completion of export documentation is a crucial step in the export procedure for agrochemicals. It requires cautiously putting together the necessary papers, including commercial invoices, certificates of origin, packing lists, bills of lading, and any other paperwork that Russian and Indian customs officials may require. These records enable customs clearance, guarantee adherence to trade laws, and serve as a formal record of the transaction. Precision is essential since mistakes or omissions might cause delays or difficulties at customs inspections. In addition to legalizing the export, proper documentation streamlines logistics and speeds up the shipment of agrochemicals from India to Russia.

Obtain Cargo Insurance

In order to protect against the possibility of damage or loss during transit, cargo insurance is bought. This insurance offers financial protection in the event of unanticipated occurrences during transportation, such as accidents or theft.

Transportation to port

Transport of the packed agrochemicals to the specified port for export occurs from the manufacturing site. This may require using the road, the rail, or a combination of transit modes, depending on logistics.

Custom Clearance in India

The Indian Customs Department oversees the customs clearance procedure in India. It involves filling in the necessary paperwork and paying any export taxes and tariffs that apply to the cargo. This procedure is governed by the Customs Act of 1962 and other pertinent regulations. Adherence to these rules is crucial to avoid any legal issues or delays since properly cleared customs to ensure that the agrochemicals are lawfully permitted to leave the nation.

Shipment via Vessel

To be shipped to Russia, the agrochemical products must be loaded onto a ship. This calls for careful planning of shipments, container loading, and preparation of the cargo for sea travel.

Custom Clearance in Russia

To ensure adherence to Russian import laws, customs clearance procedures are carried out upon arrival in Russia. Authorities in charge of customs check that the documentation matches the goods and may levy import charges and taxes.

Quality Check

To ensure that the imported agrochemicals fulfil the agreed-upon quality criteria, quality inspections may be carried out in Russia. To ensure the quality and safety of the product, this may require sampling and testing.

Payment And Settlement (in case of export through Document collection)

If the export was executed through documentary collection, payment is processed as per the agreed terms. Settlement typically involves the buyer's bank confirming payment to the exporter's bank before the goods are released to the buyer.

Documentation

Table – 1 Documents required to export Agrochemicals to Russia

Export’s personal documents

PAN Card
Identity Proof, in the form of an Aadhar Card, Driving License, Voter ID, etc
Address Proof of the Registered Office, in the form of Utility Bills and Sale Deed or Rent Agreement

Commercial documents

Performa Invoice: - A document specifying the details of the agrochemicals, their quantities, prices, and terms of sale between the exporter and the importer.
Commercial Invoice: - A comprehensive invoice containing detailed information about the agrochemicals, including the terms of trade and payment.
Bill of Lading: - A legal document issued by the shipping carrier, acknowledging the receipt of the agrochemicals for shipment and serving as evidence of the contract of carriage.
Certificate of Origin: - A document declaring the country of origin of the agrochemicals, essential for availing trade benefits and determining import duties.
Packing List: - A detailed list specifying the contents, quantities, and packaging of the agrochemicals being shipped.
Insurance Certificate

Regulatory Documents

Certificate of GST Registration
Shipping Bill: - A customs document declaring the agrochemicals to be exported, providing essential information to the customs authorities.
Import Export Code
Acknowledgment Receipt of Income Tax Forms: Proof of submission of income tax forms, ensuring compliance with tax regulations during the export process.
Form No. 15 CA (Sea Rule 37BB): A declaration form for foreign remittances, ensuring tax compliance on the payment made for the agrochemicals.
Form No. 15 CB (Sea Rule 37BB): A certificate issued by a chartered accountant, verifying the details of the remittance and compliance with tax laws.
Request Letter for Clean Outward: A formal request to customs for allowing the shipment of the agrochemicals after ensuring compliance with all necessary export requirements.
Remittance (with Form A2 and Proforma Invoice): Documentation of the payment for the agrochemicals accompanied by Form A2 (for foreign remittance) and Proforma Invoice to facilitate the transaction.

Documents required especially for Agrochemicals

Material Safety Data Sheet (MSDS): - A document providing vital safety information about the hazardous characteristics of the agrochemicals ensuring safe handling during transportation.
IIP UN Mark Certificate: - It is primarily known as the UN Certificate, which is issued by the Indian Institute of Packaging (IIP) for packages containing hazardous or dangerous goods for transportation. It is issued only after conducting tests of the package samples as per the UN Standards for transportation.
Certificate of Analysis (COA): - A Certificate of Analysis is a document that manufacturers produce that verifies the product they manufactured conforms to their customer’s requirement, it verifies the composition and purity of the agrochemical. It is typically issued by the manufacturer of the product.
Certificate of Registration: - Under the terms of the Insecticides Act, the manufacture or import of pesticides for export must be registered. The "Certificate of Registration" is also required by the businesses/firms exporting pesticides because importing nations typically want this document to confirm that the pesticide being proposed for import is lawfully licensed for manufacture/import in the country of export.
An exporter usually needs to contact at least nine institutions in order to collect the required paperwork and secure the shipment of the agrochemicals to their destination in order to export them from India to Russia. These organizations are

Time Chart :

The time factor is also an important determinant of the volume of trade and of competitiveness. In the process of exporting Agrochemicals to Russia, the exporter must spend time in visiting several institutions.

obtaining licenses from the DGFT takes 7 days and the documentation process takes 7 to 10 days, with the exception of the IIP certificate, which is provided by the India Institute of Packaging and takes 21 days to arrive. Production time of Agrochemicals may change Depending on the order volume and the manufacturing unit's capacity.

At least 122 days are required to complete the process of exporting vegetable ghee from Nepal to India (minimum 122 days and maximum 135 days). Refer to Figure 2 These timeframes are estimations because there is typically no set time for executing a particular task and the amount of time needed for each activity varies on how quickly the individual can complete it

Figure 2: Time procedure chart of Agrochemicals exports to Russia

Obtain Certificate of Registration, Obtain Export Licence & Register with CHEMEXCIL
Research and Find a buyer, Negotiate Terms, prepare, sign, and exchange Contracts & Advance payment or Document collection
Produce Agrochemicals
Get Lab test
Issue a Material Safety Data Sheet (MSDS):
Pack product
Complete Export Documentation
Obtain Cargo Insurance
Transportation to port
Custom Clearance in India
Shipment via Vessel
Custom Clearance in Russia
Quality Check
Payment And Settlement (in case of export through Document collection)