What are the main advantages of exporting and what is the explanation? Let’s discuss the meaning of what exports and exporters are in general.
You must have heard about what is meant by export. However, do you already know what export commodities are and what are the benefits of doing export activities for a country?
Yes, there are many things that are basically related to this export activity.
The thing that is also closely related to export activities is of course the perpetrators, aka exporters.
Exporters are people who sell goods or their products to foreign countries.
The opportunity to become an exporter in Indonesia is actually quite wide open. The main reason is that there are indeed many products from Indonesia that are needed and in demand by the world community.
However, the process is not easy. There are many stages that need to be passed first.
What is Export?
When viewed from the Law of the Republic of Indonesia Number 7 of 2014 concerning Trade.
Export is the activity of removing goods from the customs area, while exporters are individuals or institutions, or business entities, whether in the form of legal entities or not, which carry out exports.
Then, what is a customs area? The Customs area is an area of the Republic of Indonesia consisting of land, water, and air areas within the Exclusive Economic Zone (EEZ).
In general, export activities are carried out by countries that are able to produce a product in large quantities and are also able to meet the needs of their citizens for that product.
Because of that, the product is then sent abroad or to a country that is unable to produce it with the aim of making a profit from the buying and selling process or trade.
The delivery of this product is carried out by following the standard rules and regulations that apply in each country and involving Customs and Excise as the supervisory party.
This export activity can ultimately create many new demands from the international market which makes domestic producers continue to strive to create creative ideas and innovations in the products they produce.
This is done because export activities have opened up market expansion opportunities for certain businesses.
What is an Exporter?
Exporters are called exporters. If defined in general terms, exporters are individuals or legal entities that carry out export activities. Exporters can be categorized into two, namely producer exporters and non-producer exporters.
Producer exporters are exporting companies that also produce goods. The requirements to become a producer exporter, namely:
- Have an Industrial Business License
- Have NPWP
- Provide export realization reports to the Industry and Trade Service or appointed agencies and officials (periodically every three months) which are legalized by the Foreign Exchange Bank by attaching a statement such as: not involved in tax arrears, not involved in banking arrears, not involved in customs problems.
Non-producer exporters are exporters who export or send goods belonging to other companies or are commonly referred to as general exporters. The requirements that need to be met if you want to become a non-producer exporter are:
- Have a Trading Business License
- Have NPWP
- Provide export realization report to the Department of Industry and Trade or the appointed agency/official (every three months) which is legalized by the Foreign Exchange Bank by attaching a statement such as not involved in tax arrears, not involved in banking arrears, not involved in customs problems
If classified in general, then the requirements to become an exporter are:
- Registering officially with the government agency for trade
- A legal entity such as a company or organization. This needs to be proven by valid legality in the form of Firms, PT, CV, Persero, Perum, and so on
- Have a Taxpayer Identification Number (NPWP) because export activities will also be related to taxation.
- Have a license in the form of a Trading Business Permit (SIUP) for the type of activity in the trading business sector issued by the Trade Office. Meanwhile, businesses in the industrial sector must have an Industrial Permit issued by the Industry Service.
People who sell goods abroad through export activities aka exporters have their own roles and responsibilities. These roles and responsibilities include:
- Communicate and negotiate directly with foreign companies or organizations.
- Offering and selling a product to foreign companies or organizations.
- The main responsibility of the exporter is to maintain the condition and quality of the goods to be exported until they reach the buyer.
- Introducing domestic products to foreign companies or international markets.
- Establish cooperation with new consumers from various foreign countries.
Exporters with all their export activities, either directly or indirectly, have brought many benefits, both for themselves and the country. The benefits of carrying out export activities for a country include:
- Increase the country’s foreign exchange
Export activities or sending products from Indonesia to other countries carried out by exporters will automatically increase the country’s economic income. Export activities can also open up new market opportunities abroad, grow investment, and widen the scope of the domestic market.
- Developing Domestic Industry
Exporters act as people who sell goods abroad because there is a demand for goods from abroad first. The incoming demand will have a direct effect on industrial development in the country and create a conducive business climate.
- Train Yourself to Compete in the International Market
Becoming an exporter or carrying out export activities directly has an impact on getting used to competing in the international market and trade.
- Making Product Prices Controlled
The benefit of carrying out export activities for another country is to deal with the excess capacity of a product in a country while controlling the price of its product. This is because when the product is easy to produce and the capacity is abundant, the price of the product in the country will be cheaper. To deal with this, it is necessary to export activities to countries that need it more so that product prices can be kept under control.
- Opening Many Jobs
Export activities will indirectly create new jobs. In this way, export activities will also reduce the unemployment rate. In addition, export growth in Indonesia will create employment opportunities that will reduce poverty.
How to Calculate Export Tax
Export activities cannot be separated from taxes. In this activity, there are several goods or products that are subject to export tax fees, namely exports of wood, crude palm oil, and rattan.
There are two ways to calculate export tax, namely:
- Calculation of export goods subject to ad valorem (percentage) tariffs.
The export tax is calculated as follows:
Export Tax = Export Tax Rate x Export Benchmark Price x Number of Units of Goods x Exchange Rate
- Calculation of export goods subject to ad naturam (specific) tariffs.
Export Tax is calculated as follows:
Export Tax = Export Tax Rate x Number of Units of Goods x Exchange Rate
Products Included in Export Commodities
The definition of export commodities is products or goods traded by one country to another. These goods can be in the form of raw materials or finished goods and have their own trademark.
Indonesia is also one of the countries that do a lot of exporting goods to other countries. The products or goods that are the leading export commodities from Indonesia are very diverse, including:
Rubber is one of the most important export commodities in Indonesia because Indonesia is the second-largest rubber-producing country in the world. Many rubber products are shipped to Japan, China, and America.
Not only wood in raw form, processed wood products such as furniture from Indonesia also have a lot of interest in the international market. For example, in Japan, China, the United States, and also the European Union countries.
• Textile Products
It is quite ironic that this happened in the field of textile or fabric export commodities. Many Indonesian people bring in cloth products from abroad for various reasons, whereas in some countries, Indonesian textile products are much more popular.
For example, in the United States, United Kingdom, Germany, Panama, Italy, Canada, Mexico, Shopping, Spain, France, Japan, Australia, Singapore, and many more.
• Palm oil
Palm oil is an ingredient used as raw material for cooking oil, butter, soap, and various beauty products. Most of the palm oil will be exported in the form of palm oil and palm kernel oil. Indonesian palm oil products are usually shipped to several countries such as Pakistan, India, and China.
• Forest products
Indonesia as a tropical country has good and abundant prospects for the development of the timber industry. Apart from wood, paper pulp is also a forest product that is shipped overseas.
You must still remember the history of Indonesia, which tells that many countries are interested in Indonesian spices. This interest has finally made several countries colonize Indonesia for years. Currently, many spices from Indonesia are used as export commodities to China, India, Vietnam, to the Netherlands.
There are many types of native Indonesian coffee that are very popular with the world’s population, for example, Gayo coffee or Toraja coffee. The export destinations of this coffee export commodity are Brazil, Spain, Italy, Argentina, the United States, Turkey, India, China, Thailand, Japan, Vietnam, Pakistan, Malaysia, Hong Kong, Sri Lanka, and Egypt.
The unique taste of cocoa beans makes cocoa products much sought after by the international market. Cocoa will generally be exported in the form of cocoa beans or in the form of processed products. Countries that import cocoa from Indonesia are Malaysia, Singapore, Thailand, China, India, Philippines, and Taiwan. Switzerland, and Russia.
Indonesia is also known as a coal-producing country. This product has been shipped to various countries, such as Japan, Vietnam, and South Korea.
Footwear in the form of shoes or sandals is also one of Indonesia’s most needed export commodities. The types of footwear exported vary, ranging from footwear made of leather, rubber, cloth, and special footwear for the disabled. Countries that need it include Belgium, America, Canada, Chile, Panama, Japan, and many more.
All things that become export commodities from a country are basically influenced by 3 important factors, namely natural factors, technological factors, and factors of the magnitude of production costs.
1. Helping the development of a product market
With exports and imports, we can encourage industries around the world to make more innovative products. Because with the emergence of more competitive competition it can make newer and more efficient products.
Sometimes these innovations create new consumer segments. (An example is Netflix, a digital streaming service provider where we have to subscribe to be able to access hundreds to thousands of movies)
2. Increase profits
By selling goods abroad there is the potential for us to get a bigger profit. Because an economic condition between 2 countries must have differences, the value of the currency is different. (For example: in Indonesia, the cost required for one meal is approximately 10 thousand to 20 thousand.
While in Singapore we have to spend as much as 70 thousand to 100 thousand for one meal). This is where we can see the difference in currency values and their impact on other countries. But this can give us an advantage by selling the product at more expensive than the original price and still affordable for the buyer.
3. Enlarge the production scale
Through exports and imports we in addition to increasing sales in a larger market. We can also increase the scale of production by increasing the supply of materials. Thus we can enlarge our production scale and minimize production costs.
4. Expanding market reach
As mentioned in the previous point. By maintaining cooperation with other countries we can enter a wider market. The more areas we can export, it means that the potential for profit increases. Because we can sell more and various products.
5. Avoid local competition
If we continue to compete in the same market we will not experience any change. We need to be aware that the population in a country will continue to increase over time. This means that over time our competitors will continue to grow in the same market.
Tag competition for too long will lead us to an unhealthy market. Usually, unhealthy competition will trigger a price war which will eventually reduce the profit we get.
6. Establishing cooperative relations between countries
With exports and imports, we will be able to interact and have an impact on other countries. Maintaining a cooperative relationship allows the two countries to create a program. Where the program will be beneficial for both parties such as the exchange of knowledge, culture, and business opportunities of course.
7. Addressing deficiencies in a country’s needs
With the help of exports and imports, we can get something to cover the shortfalls that our country needs to develop. For example, our country does not have sufficient natural resources for the needs of all its human resources. We can cover this shortfall by importing natural resource products.
8. Bring something new
With the uniqueness that exists in each country (culture, resources, etc.) it is not uncommon for the products produced to be different too. In China, almost all products that support daily needs are produced even though we sometimes don’t think about it.
By importing these products we can sell them in our country and of course, get a profit because it is not produced in Indonesia.
9. Prevent monopoly of a certain product
With exports and imports, we can reduce the risk of monopoly due to a lack of resources or markets. We can reach a wider market. Through imports, we can also bring in products of varying quality for different segments to prevent monopoly.
So there are quite a lot of main advantages of export activities that can be utilized by entrepreneurs in Indonesia.
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