The import and export codes in trade are allotted by the Director General of Foreign Trade (DGFT) to all traders across the globe. It allows importers and exporters to avail of several government benefits and incentives, easily make customs clearances, facilitates legal shipping transactions across the globe, and has credibility among suppliers and other shipping parties. All traders must have an IEC code, but there are certain exemptions when an IEC code can be overlooked. Let us learn more about import and export codes in trade.

What are imports and exports in trading?

Import and export are terms commonly used in international trade business across borders. The buyer and seller understand their responsibility by the incoterms defined to avoid any confusion during the transit. It refers to moving goods or services from one country to another. Import is when a country orders goods from another country to bring or sell in its trade market. It includes raw materials, finished products, or services. Adhering to various regulatory compliances in supply chain management, goods are imported and sold inside the importing countries. The role of import trade is to acquire goods and services from other countries that their domestic industries do not produce or require more investment for production than other countries. It enables consumers of the importing country to get access to a variety of goods and services of high quality and at lower costs.

Export trade refers to selling or shipping goods from one country to another. These exported goods include manufactured goods, raw materials, or services the importing country requires. The role of export is to sell products for consumption across borders to generate more revenue and boost the exporting country’s national economy. Countries profit by selling their produce and making economic use of surplus produce.

Export and import trade leverage both countries by developing international trade relations. It helps countries’ economic development and optimizes resource allocation to other countries, boosting international cooperation.

What is import and export code?

Import-export code, or IEC, is a 10-digit alphanumeric code issued by the Director General of Foreign Trade (DGFT) to exporters and importers and has a lifetime validity. Importer and exporter merchants can only exchange goods across borders with an import-export code. An IEC license is required by traders to ship intermodal containers to successfully trade in any country by availing benefits from the various schemes by the DGFT. Registered and non-registered businesses must acclaim the unique identification number, a mandatory documentation process that every business or trader must undergo to indulge in international commerce.

Why is the IEC essential for international trade?

The role of the IEC in trade is as follows-

• Traders with an IEC are verified as legal importers and exporters, which helps prevent any illegal transportation of goods across international borders. 
• All foreign exchange transactions related to international trade business involving currency flow require the IEC. It helps authorities monitor and regulate the flow of currency across the globe.
• The IEC tracks trade activities of import and export. Customs authorities keep track of all goods going in and out of the country through import-export codes.
• Keeping track of trade and national benefits through it makes it easier to analyze data and formulate trade policies through informed and statistical decision-making.

When is an IEC needed?

Various authorities need an IEC throughout the shipping process to verify the traders, both importers and exporters. It helps conform to legal trade between countries.

• IEC is necessary to get permission for shipments to cross the border of an importing country. The customs authorities need to check an importer’s import and export code to provide clearance for international trade.
• If the bank processes the shipping transactions, they ask the importer for the IEC to send any money abroad.
• The customs port also requires it when an exporter is preparing to send a shipment to international destinations.
• If the business transaction to the exporter’s bank account consists of foreign currency, the bank asks the exporter for their IEC.

When is an IEC not needed?

There are certain exemptions where traders are not required to have an IEC.

• All traders registered under GST (goods and services tax) need not apply for an IEC.
• If the imported or exported goods are not meant for any commercial purposes and are entirely intended for internal use.
• Traders who are PAN card holders can use their PAN number instead of applying for an IEC number.

Benefits of Import-Export Code

The various advantages of import-export code in international trade are as follows-

1. Fosters inclusive economic growth – Having an import-export code allows all small and medium-sized businesses to participate in international trade, fostering unbiased and fair competition in the trade market. The involvement of multiple businesses increases the chances of the nation’s economic growth.
2. Builds credibility – Customers, suppliers, and overseas trade partners ask for IEC to establish legitimacy and reliability in trade transactions. International trade business rests on building credibility so that shipping parties trust you enough to do business with you. An IEC is proof that the exporter or importer is legitimate.
3. Getting government incentives – The government offers various benefits and incentives such as export subsidies, drawbacks on duty charges, low-cost loans, and various tax exemptions to promote international trade. Exporters or importers with a valid IEC can avail of these benefits and carry out profitable trade.
4. Analyzing trade activities – Using IEC, trade authorities can track and analyze trade activities across the nation to plan trade policies strategically and identify trade patterns. 
5. Allows more accessible customs clearances – By tracking shipments using the import export code noted in the bill of lading, customs authorities ensure accurate and efficient processing of shipments across borders. It reduces the chances of delays and extra fees during customs clearances.
6. Documentation – Bill of lading and bill of entry are two types of documentation used in shipping that require the import-export code as primary information. Using the IEC, traders can apply for these documents.

The import and export code benefits trade by helping the government access incentives and benefits for international trade and allowing for easy customs clearances.

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