Common Mistakes

10 Costly Export Mistakes Indian Beginners Make (and How to Avoid Them)

Unverified buyers, wrong HS codes, no LUT, skipping insurance, missing EDPMS deadlines. 10 mistakes with real cost examples and prevention checklists.

By Aaryan Kakani · · 13 min read

Key takeaways

India's merchandise exports crossed USD 437 billion in FY 2025. 26, and thousands of new exporters enter the market every year. The opportunity is real. But so are the pitfalls. Most of the costly mistakes happen not because export regulations are impossibly complex, but because beginners simply do not know what they do not know.

The list below is drawn from real cases we have seen across first-time exporters. Each mistake includes the actual cost or consequence, and a concrete way to prevent it. If you are about to ship your first consignment (or you have shipped a few and want to make sure nothing is slipping through) this is your reference.

Not Verifying Buyer Credibility Before Shipment

The most dangerous mistake a first-time exporter can make is shipping goods to a buyer they have not verified. It sounds obvious, but the excitement of landing that first overseas order often overrides basic due diligence. The buyer sends a purchase order, the exporter ships on open account or documents against acceptance (D/A) terms. And then the buyer goes silent. The goods are in another country, you have no payment, and your legal recourse is effectively zero.

This is not a hypothetical scenario. First-time exporters lose entire shipments worth Rs 10. 50 lakh to unverified buyers every year. The loss is not just the goods. It is the freight, insurance, customs broker fees, and months of working capital that went into production.

How to prevent it

  • Run the buyer through a credit check service like Dun & Bradstreet, Coface, or Creditsafe before accepting the order.
  • Ask the Indian embassy or consulate in the buyer's country for trade references through their commercial wing.
  • For first orders, insist on advance payment (at least 30. 50%) or a confirmed, irrevocable Letter of Credit from a reputed bank.
  • Consider ECGC export credit insurance to cover commercial and political risk on the receivable.

Skipping the Proforma Invoice Step

A proforma invoice is not a formality. It is the document that locks down every commercial term before you commit to production. It specifies the product description, quantity, unit price, Incoterms (FOB, CIF, EXW, etc.), payment terms, delivery timeline, and packaging details. Without it, you and the buyer are operating on assumptions.

Beginners often skip straight from a WhatsApp conversation to production, assuming the buyer understands the terms. Then disputes erupt at shipment: the buyer expected CIF (you cover freight and insurance) while you quoted FOB (buyer pays from port of loading). Or the buyer assumed a specific packaging standard that you did not factor into your costing. These disputes delay shipments, erode margins, and kill the relationship.

How to prevent it

  • Issue a proforma invoice for every export order. No exceptions. Get the buyer's written acceptance before starting production.
  • Spell out the Incoterm explicitly (e.g., "FOB Mumbai Port") so both sides know exactly where cost and risk transfer.
  • Include payment terms, currency, bank details, and the correct export documentation list the buyer will receive.

Wrong HS Code on the Shipping Bill

The HS (Harmonized System) code on your shipping bill determines three things: the duty rate at the destination country, the export incentives you are entitled to in India (RoDTEP rate, duty drawback rate), and whether your product needs any specific compliance certificates. Getting the 8-digit CTH (Customs Tariff Heading) wrong creates a cascade of problems.

At the Indian customs end, a wrong HS code can trigger a first-check examination, delaying your shipment by 2. 5 days. If the code you used carries a lower incentive rate than the correct one, you lose money on every shipment. If it carries a higher rate, you will face a recovery notice from DGFT when they audit. With interest and penalty.

How to prevent it

  • Verify the HS code through ICEGATE's tariff search tool and cross-check with the destination country's tariff schedule.
  • Consult your licensed customs broker. They handle classification disputes daily and can save you from costly errors.
  • If in doubt, apply for an advance ruling on classification from the Commissioner of Customs before your first shipment.

Not Filing LUT Before the First Export

A Letter of Undertaking (LUT) under Section 16 of the IGST Act allows you to export goods and services without paying IGST. Without a valid LUT, you must pay IGST on every export invoice and then claim a refund from the GST department. A process that routinely takes 3. 6 months and sometimes longer if there are discrepancies.

Many first-time exporters either do not know about the LUT or assume their CA will handle it. They ship their first consignment, discover they have an IGST liability of 12. 18% on the invoice value, and suddenly their working capital is locked up in a GST refund claim they cannot speed up.

How to prevent it

  • File the LUT on the GST portal before your first export invoice. It takes 15 minutes and is valid for the entire financial year.
  • Renew the LUT in the first week of every April. Set a calendar reminder. If it lapses, every export invoice in the new FY attracts IGST.
  • Keep a signed copy of the LUT confirmation handy for your customs broker and AD bank.

Ignoring Product-Specific Compliance Requirements

Every destination country has product-specific regulations that go beyond what Indian export law requires. The EU requires CE marking for machinery and electronics. The US requires FDA registration for food, supplements, and cosmetics. The Middle East requires halal certification for food products. And India itself requires FSSAI registration for food exports and BIS certification for certain product categories.

Beginners frequently assume that if Indian customs clears the shipment, the destination country will accept it too. That is not how it works. Your goods can clear Indian customs perfectly and still be rejected, destroyed, or returned at the destination port because they lack the right certification or labelling.

How to prevent it

  • Research the destination country's import regulations for your specific product category before accepting the order.
  • Check if your product needs CE marking, FDA registration, FSSAI, BIS, halal certification, or phytosanitary certificates.
  • Ask the buyer to share the exact import compliance requirements in their country. Reputable buyers will provide this willingly.

Accepting Open Account Terms From Unknown Buyers

Open account means you ship the goods and the buyer pays later. Typically 30, 60, or 90 days after shipment. This is the highest-risk payment method for the exporter because the buyer has the goods and you have nothing but a promise. For established trading relationships with verified buyers, open account can work. For a first order from a new buyer, it is a gamble.

First-time exporters often agree to open account because the buyer insists ("all our other suppliers give us 60-day credit") and the exporter does not want to lose the order. But a buyer who refuses to open a Letter of Credit or pay any advance for a first order is already signalling a problem.

How to prevent it

  • Never ship on open account to a buyer you have not traded with before. Period.
  • If the buyer resists an LC, negotiate a middle ground: 30. 50% advance via wire transfer, balance on D/P at sight.
  • Get ECGC insurance to cover the receivable if you must extend credit terms.

Not Registering AD Code at the Port

The AD Code (Authorised Dealer Code) is a 14-digit code issued by your bank that links your export shipping bills to your bank account in the ICEGATE system. Without a registered AD Code at the specific port or airport from which you are shipping, customs will not accept your shipping bill. Your goods are packed, your container is booked, your customs broker files the shipping bill. And it gets rejected because the AD Code is not registered.

AD Code registration is port-specific. If you have it registered at Nhava Sheva (JNPT) but ship from Mundra, the Mundra customs system will reject your bill. Registration takes 2. 7 working days depending on the port, and you need it done before your first shipment.

How to prevent it

  • Get the AD Code letter from your bank as soon as you obtain your IEC registration.
  • Register the AD Code at every port and airport you plan to ship from. Your customs broker can handle the registration.
  • Keep a list of ports where your AD Code is registered. If you switch to a new port, register the AD Code at least 10 days before the planned shipment.

Shipping Without Marine Cargo Insurance

If you are shipping on CIF or CIP terms, you are contractually obligated to provide marine cargo insurance. But even on FOB terms (where the buyer technically bears the transit risk), shipping without insurance is a dangerous bet. Containers fall off ships. Goods get damaged by moisture. Consignments get stolen at transit ports.

The cost of marine cargo insurance is negligible compared to the value at risk. Typically 0.3. 0.8% of the invoice value for most product categories. Yet many beginners skip it to save a few thousand rupees and expose themselves to total loss.

How to prevent it

  • Always buy marine cargo insurance, regardless of the Incoterm. On CIF/CIP terms it is mandatory; on FOB terms it is still smart.
  • Insure for at least 110% of the CIF value (the standard in international trade, covering invoice value plus 10% for lost profit).
  • Use Institute Cargo Clause A (all-risk coverage) for high-value or fragile goods. Clause C (basic coverage) is cheaper but excludes many common risks.

Missing the EDPMS Closure Deadline

The Export Data Processing and Monitoring System (EDPMS) is the RBI's system for tracking whether export proceeds have been received against each shipping bill. Every shipping bill generates an EDPMS entry, and that entry must be "closed" (matched against an incoming payment) within 9 months of the shipping bill date.

If an EDPMS entry stays open beyond 9 months, the RBI flags the exporter. This can lead to the exporter being placed on the "caution list," which blocks future export incentive claims and can even lead to IEC suspension. First-time exporters often do not even know EDPMS exists until their bank or customs broker mentions it months after their first shipment.

How to prevent it

  • Track every EDPMS entry from the day the shipping bill is filed. Do not rely on the bank to notify you.
  • Set alerts at 6 months and 8 months from the shipping bill date. Follow up with the buyer on payment and with the bank on EDPMS closure.
  • If the buyer cannot pay in time, apply for an extension through your AD bank or initiate a write-off application before the 9-month deadline passes.

Not Claiming Available Export Incentives

India offers meaningful export incentives that directly add to your bottom line. And many beginners either do not know about them or assume the process is too complicated. The two biggest schemes are RoDTEP (Remission of Duties and Taxes on Exported Products) and Duty Drawback, which together can be worth 2. 8% of your FOB value depending on the product category.

RoDTEP reimburses embedded central, state, and local taxes that are not refunded through GST (fuel taxes, mandi tax, electricity duty, etc.). Duty drawback refunds the customs duty paid on imported inputs used in manufacturing the exported product. Both are claimed through the ICEGATE portal after the shipping bill is processed. The process is straightforward once set up, but the first claim requires some paperwork.

How to prevent it

  • Check the RoDTEP rate and duty drawback rate for your HS code on the DGFT and CBIC websites before your first shipment.
  • Ensure your customs broker ticks the RoDTEP and drawback claim boxes on the shipping bill. Many beginners miss this because the broker was not informed.
  • Register on ICEGATE and track your scrip/credit generation. RoDTEP credits are generated automatically once the shipping bill is processed and the EGM (Export General Manifest) is filed.
  • Read the GST for exporters guide to understand how these incentives interact with your GST refunds.

Pre-Shipment Checklist for First-Time Exporters

Use this checklist before every shipment to make sure none of the ten mistakes above slip through.

  • Buyer verified through credit check, embassy, or trade references
  • Proforma invoice issued and accepted with clear Incoterms and payment terms
  • HS code verified through ICEGATE tariff search and confirmed by customs broker
  • LUT filed on the GST portal for the current financial year
  • Product-specific compliance checked (CE, FDA, FSSAI, BIS, halal, phytosanitary as applicable)
  • Payment secured: advance, LC, or D/P at sight (no open account for new buyers)
  • AD Code registered at the specific port of shipment
  • Marine cargo insurance purchased (minimum 110% of CIF value)
  • EDPMS tracking set up with alerts at 6 and 8 months from shipping bill date
  • RoDTEP and duty drawback claim boxes ticked on the shipping bill

Frequently Asked Questions

What is the most common mistake first-time exporters in India make?

The most common mistake is not verifying the overseas buyer's credibility before shipping goods. Many beginners accept orders on open account terms from unknown buyers without checking trade references or company registration. This leads to shipped goods with no payment and no legal recourse. Always verify through the Indian embassy, a credit rating agency, or the buyer's local chamber of commerce before committing to a shipment.

What happens if I use the wrong HS code on my shipping bill?

A wrong HS code can trigger customs examination (delaying your shipment by days), result in claiming the wrong export incentive rate (leading to a DGFT recovery notice), and cause rejection at the destination country's customs if the code does not match the product. Always verify through ICEGATE tariff search and your licensed customs broker.

How much do Indian exporters lose by not claiming RoDTEP and duty drawback?

Exporters who do not claim RoDTEP and duty drawback leave between 2% and 8% of their FOB value on the table with every shipment. For an exporter shipping Rs 1 crore worth of goods per year, that is Rs 2. 8 lakh in unclaimed benefits annually. Both schemes are claimed through ICEGATE after the shipping bill is processed.

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