In 1958, it was realized that unless positive steps were taken to build up a number of merchant houses, concentrating almost exclusively on exports and capable of undertaking trade on a sustained basis, it would be impossible to compete successfully against the highly experienced and resourceful trading houses of other countries. They were also expected to become focal points for organizing exports of small scale units for whom it may not be practicable to embark on export marketing.
A new scheme of recognition of trading Houses was introduced in 1981 to develop new products and new markets particularly for products from the small and cottage industry sector. Export houses with demonstrated export capabilities and having facilities for testing and quality control were made eligible of recognition as Trading Houses. With effect from April 1988 Trading Houses having high volume of exports are eligible for recognition as star Trading Houses. With effect from 1.4.94 another category Super Star Trading Houses, has also been introduced. As of 21.4.97 the number of Super Star Trading Houses was 9. Star Trading Houses 52, trading Houses 464 and Export Houses 3,027. It might be noted that merchant exporters including export houses etc account for 78 per cent of India’s exports.
With a view to encourage participation of State Governments and Union Territories in export promotion, one State corporation nominated by the respective State Government/Union territories may be recognized as an export House, even though the criterion of such recognition is not fulfilled by them.
The various criteria of eligibility of recognition of export houses, etc and it may be noted that the criteria for recognition have been made more stringent with effect from April1, 1997 and the number of these houses is likely to go down.
Recognition is valid for 3 years after which it has to be renewed within a period of 6 months.
Export Houses/Trading Houses/ Star Trading Houses/Super Star Trading Houses are entitled to special import licenses which enable them to import certain specified items from the negative and the restricted lists.
A new development in this area has been the decisions to allow large trading houses to set up fully owned trading subsidiaries to operate in India exclusively for export and import related activities. The existing trading multinational in India would be allowed to increase their stake to 100 per cent. The advantages expected from this step are the availability of highly professional marketing expertise and the use of their existing foreign offices for marketing intelligence and business contacts.
Advantages Enjoyed by Export houses/Trading Houses:
1. They can avail themselves of the various economies of scale in transportation, warehousing and other areas related to physical distribution
2. They can avail themselves of export finance available at confessional rates.
3. They are in a position to employ qualified and specialized staff to look after the complicated work relating to customs, legal problems, procedures and documentation.
4. They can bargain with large adding companies in foreign countries on an equal footing
5. They can achieve economies in export promotion by using the most effective advertising and publicity media as also by participating in many trade fairs and exhibitions.
6. They can very often profit by taking a position on exchange rates.
7. They are able to absorb many of the risks inherent in International trade because of the wide range of products handled by them.
Small industrial units can derive significant advantages by availing themselves of the services of export houses.
(1) Expertise and information on market opportunities abroad
(2) Ability to provide finance through trade credits, investments, direct loans and loan guarantees.
(3) Ability to absorb many of the risks inherent in trade because of the wide range of products they handle.
(4) Sales opportunities in otherwise out-of-the-way markets.
Export houses are themselves keen to help small manufacturers in their export effort as thy get extra weightage for the foreign exchange earned by the exports of products manufactured by small industrial units and for exports of handicrafts including silk products (double weightage).