Anshul Sharma

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What are tariff barriers in international trade?

A tariff is a tax a government charges on goods coming into its country. Your buyer doesn't pay it up front, but it's added to the landed cost of your product, which means your price in that market goes up.

Governments do this to protect local industries from cheaper imports, and sometimes just to collect revenue. Either way, the exporter feels it first.

A practical example: Say you're shipping cotton fabric to Brazil. Brazil charges a 20% import duty on that category. Your buyer clears customs, pays the duty, and suddenly your fabric costs 20% more than it did when you quoted it. That difference either comes out of your margin or makes you more expensive than local suppliers.

What are the main types of tariff barriers?

Here are the main types of tariff barriers you'll come across.

This is the most common type. The duty is calculated as a percentage of your product's declared value. So if a country charges 15% ad valorem on electronics and you're shipping a consignment worth $10,000, you owe $1,500 in duty.

Here, the tariff is a fixed amount per unit, regardless of the product's cost. A country might charge $2 per kilogram of imported coffee beans, whether that coffee is worth $5/kg or $15/kg. This can hit lower-value products harder.

This is a combination of both. You pay a percentage of the product's value, plus a fixed amount per unit. Luxury goods often attract compound tariffs, since governments want both a revenue cut and a price deterrent on high-value imports.

For example, a country might charge 10% of the invoice value plus $5 per kilogram on imported chocolates. So a 100 kg shipment worth $2,000 would attract $200 (10% ad valorem) plus $500 (specific duty), bringing the total tariff to $700.

Protective tariffs are designed to make foreign goods expensive enough that local buyers stick to domestically produced alternatives.&nbsp;

Revenue tariffs are less about blocking trade and more about collecting income for the government.&nbsp;

The duty on petroleum imports in many countries, for instance, isn't meant to stop imports; it's just a steady revenue source.

A non-tariff barrier is any restriction on trade that isn't a tax. It could be a rule, a standard, a quota, a licensing requirement, or a procedure that governs what enters or leaves a country. Unlike a tariff, there's no clear number attached to it. You just find out you can't sell there, or that selling there costs far more than you planned.

Countries use these measures for all kinds of reasons: food safety, environmental protection, national security, and public health. Some of those reasons are completely legitimate. But governments don't always draw a clear line between protecting public health and protecting local industry, and for an exporter, the impact is the same either way.

A practical example: An Indian food exporter shipping to the EU, for instance, may need to obtain FSSAI-aligned documentation and pass pesticide residue checks before the goods are cleared.

What are the main types of non-tariff barriers?

Non-tariff barriers show up at different points in the export process. Here are the main types to know:

A quota is a hard limit on how much of a product can enter a country within a given period. If you're exporting garments to a country that allows only 500,000 units of a particular fabric category per year, and that limit is reached in Q2, your Q3 shipment will wait until the next cycle.

Some products need government approval before they can be imported. Your buyer must apply for and obtain that license before your shipment can clear customs. For exporters, this adds an unpredictable step to the timeline that's entirely outside your control.

These are product standards, testing requirements, and labeling rules set by the destination country. Your product has to meet them before it's allowed in. An Indian electronics exporter selling to Europe, for instance, needs CE certification confirming the product meets EU safety and electromagnetic standards. Without it, the shipment doesn't clear.

These apply mainly to food, agricultural products, and anything involving animals or plants. The destination country inspects for pesticide residues, disease, contamination, or non-compliance with its food safety standards. Indian basmati rice exports to the EU, for example, are regularly tested for pesticide levels, and shipments that don't pass get rejected at the port.

When a government financially supports its own producers, it indirectly makes imports less competitive. If a country subsidizes its wheat farmers, locally produced wheat is cheaper on the shelf than anything you ship in, even if your product is genuinely better. There's no rule blocking you, but the economics work against you.

Lengthy documentation requirements, inconsistent inspections, and slow clearance processes delay shipments and add costs you didn't budget for. A few extra days at the border means storage charges, missed delivery windows, and buyers who start looking elsewhere.

What is the difference between tariff and non-tariff barriers?

Both restrict trade, but they work differently and require different responses from exporters. Here's a side-by-side look at how they compare in practice.

For small exporters, non-tariff barriers tend to be the harder problem. A tariff rate is published, and you can price around it. A certification requirement you didn't know about, or a quota that filled up before your shipment arrived, is much harder to plan for.

How do tariff and non-tariff barriers affect international trade?

Trade barriers do more than slow goods at the border. They affect your pricing, your cash flow, and sometimes your ability to enter a market at all

How can exporters navigate barriers to global trade?

Here are a few ways in which exporters can plan ahead and navigate barriers to global trade:

Research the destination market requirements before exporting

Partner with customs brokers or freight forwarders

Use digital tools for tracking and payments

Simplify your cross-border payments with Skydo

Navigating trade barriers already takes enough bandwidth. Skydo handles the payment side so you're not also chasing transfers, decoding fee structures, or waiting on settlements while your shipment clears.

<a href="https://www.skydo.com/">Explore how Skydo works for Indian exporters →</a>

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Export incentives are benefits, refunds, credits, and concessions given by the Indian government to exporters to make their goods and services more competitive in global markets.

Exporters end up paying several embedded taxes and duties during manufacturing or distribution that don't get refunded through regular GST or customs channels. Things like tax on electricity, fuel cess, and other hidden state and central levies. Export incentives compensate for these, so you keep a healthy margin while offering attractive pricing to your global buyers.

Here's a quick glance at the benefits covered across these programs:

What types of export incentive schemes can Indian exporters claim

Here’s an overview of the major export incentive schemes that Indian exporters can claim a refund on:

RoDTEP (Remission of Duties and Taxes on Exported Products)

The <a href="https://www.skydo.com/blog/rodtep-scheme-guide">RoDTEP scheme</a> remits central, state, and local taxes not refunded under any other program. That means you can claim a refund for electricity duty, fuel tax, and stamp duty on documentation.

You get transferable electronic scrips on the ICEGATE portal as a refund. If this is new to you, think of scrips as coupons that you can redeem to get a discount on future import duties. Or you can transfer it to a fellow importer if you don’t need it.

The scheme covers 8,555 tariff lines and the remission rate can range from 0.3% to 4.3% of the FOB value depending on your 8-digit HSN code.

With this scheme, you can claim a refund for customs duties on imported raw materials used in manufacturing an export order. Like a leather bag exporter claiming a refund for customs duties on imported leather.

The refund amount depends on the All Industry Rates (AIR), which are fixed percentages set by the government for various product categories.

AIR is calculated on the Free On Board (FOB) value, which is the price of goods at the time of loading them onto the vessel minus insurance and freight. However, if it covers less than 80% of your actual duties paid, you can apply for a Brand Rate.&nbsp;

Brand rate is a customized refund calculated for your business. It is calculated based on your evidence, such as duty payment receipts and consumption data. If approved, it can increase your reimbursement to 6–8%, but you must diligently maintain production and consumption records for the next five years to support your claim during audits.

Here’s an example of AIR and brand rate to make it simpler for you: An industrial machinery manufacturer exports an order with an FOB value of Rs.10 lakh. The AIR is 2%, so the exporter will receive a refund of Rs. 20,000. However, they paid Rs. 50,000 as customs duties on importing high-value steel and electronic controllers; AIR only covers 40% of the duties paid. The exporter is eligible for a brand rate, and after submitting all the verified receipts, he gets a refund of Rs. 50,000, 5% of the FOB value.&nbsp;

Export Promotion Capital Goods (EPCG) Scheme

The <a href="https://www.skydo.com/blog/export-obligation-period">EPCG</a> scheme is for manufacturers to import capital goods, like advanced machinery, computer systems, and software at 0% customs duty. The cost of high-tech equipment reduces, and businesses can upgrade their production quality and competitiveness simultaneously.

But there is one condition: the manufacturer must export goods worth six times the duty saved within six years.&nbsp;

You can take advantage of duty-free imports of raw materials, packaging, and fuel for manufacturing export products with this scheme. The Standard Input-Output Norms (SION) calculates the exact amount of raw material needed for an export order that you can claim duty-free.

Unlike the Duty Drawback scheme, which is a post-export refund of duties already paid, Advance Authorization is a pre-import exemption. Your initial product costs reduce, and you’re left with more working capital.

The IES provides subsidized interest rates on<a href="https://www.skydo.com/blog/pre-shipment-credit"> pre-shipment credit</a> and post-shipment loans for MSME exporters.

Latest Update: Under the government’s recently launched<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2199733&amp;reg=3&amp;lang=1"> Export Promotion Mission</a> (EPM), eligible MSMEs can now receive a 2.75% interest subvention on their export credit costs.

The goal is to reduce their interest burden, allowing them to reinvest those savings into operations or improving production efficiency.

Who is eligible for tax incentives for exporters in India

Whether you’re eligible to claim tax incentives depends on what you export. Here’s what you must know:

Eligibility for service exporters and freelancers

How to claim export incentives: A step by step guide

Note: This is the generalised workflow. Specific steps and application requirements vary by scheme, see our dedicated guides on Duty Drawback, <a href="https://www.skydo.com/blog/rodtep-scheme-guide">RoDTEP</a>, and EPCG for more details.

Start by obtaining a ten-digit Import Export Code (IEC) from the DGFT portal. It is your unique business identifier for all international trade transactions. Link IEC to your GST registration on the portal to synchronize your trade data with tax records.

Step 2. File shipping bills with incentive declaration

A shipping bill is a mandatory customs document. File it electronically when your goods physically leave India. You must also declare your intent to claim benefits on the shipping bill, at the time of filing it.

File GSTR-1 and GSTR-3B returns regularly to be eligible for a refund claim. The government systems match the GST portal and ICEGATE data to reconcile your<a href="https://www.skydo.com/blog/what-is-export-invoice"> export invoices</a> with shipping bill data.

Post-shipment, log into the DGFT or ICEGATE portal to submit your application online. Provide digital copies of the shipping bill, commercial invoice, and packing list.

Step 5. Track claim status and receive credit

You can track your application’s real-time status online. Once your application is approved, you get benefits as electronic credits to your duty credit ledger.

What documents are required to claim export benefits

Most exporters have digital and physical records of essential export documents. They are required for claiming refunds and present as proof during audits.

How long does it take to receive export incentive payments

Having realistic expectations for your payout is crucial because timelines vary based on the scheme and the verification process.

Delays are most commonly caused by data mismatches between your shipping bills and GST returns. A single character difference can stop the automated system from releasing your funds.

What are common mistakes that delay export incentive claims

A minor error can cause weeks of delay, which will impact liquidity. You don’t want that and the best way to avoid it, is by preventing from making these common errors:

How can service exporters and freelancers claim export benefits

The claim process for service exporters and freelancers differs from that for goods exporters. Here’s how:

Simplify your export payment documentation with Skydo

If you have read till here, you must have realized the importance of documentation in claiming export benefits. And it doesn’t just end there. There’s also post-payment documentation, which involves getting FIRC from the bank.&nbsp;

There are two challenges with banks: the process is slow, requiring multiple follow-ups, and they don’t provide an FIRC ‌for free. Plus, banks charge costly SWIFT fees and apply forex markups on the conversion rate, which takes a deep cut in your earning.

<a href="https://www.skydo.com">Skydo</a> is a modern payment platform that serves as a potent alternative to these challenges.&nbsp;

FIRC and eBRC comes in handy while claiming export benefits under various government schemes. Try Skydo.

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What Is an Inward Remittance Forex Rate for Exporters?

An inward remittance <a href="https://www.skydo.com/blog/7-factors-affecting-forex">forex rate</a> is the rate at which an Indian bank converts foreign currency received from an overseas buyer into Indian rupees and credits it to the exporter's account. For exporters, this rate is called the TT (Telegraphic Transfer) buying rate.

The bank applies the TT buying rate at the moment of settlement. It determines the exact rupee amount that lands in your account after a foreign client pays your invoice.

Say a Pune-based IT services exporter invoices a US client $10,000. The bank applies its TT buying rate of ₹83.20 per dollar instead of the mid-market rate of ₹84.00, so the exporter receives ₹8,32,000 instead of ₹8,40,000. That's ₹8,000 lost before any fees are even deducted.

Which Bank Gives the Best Forex Rate for Exporters in India?

No single bank consistently offers the best forex rate for exporters in India. What matters is the combination of the <a href="https://www.skydo.com/blog/forex-markup-fee-explained">TT buying rate spread</a> over the <a href="https://www.skydo.com/blog/why-do-banks-differ-from-live-fx-rates-in-currency-exchange">mid-market rate</a>, the flat fees charged per transaction, and the timeline for crediting funds.

Currency fluctuations affect your profit margin even when no bank is involved. If you raise an invoice for $10,000 when USD/INR is 83, you expect ₹8.3 lakh. If the rate drops to 80 by the time payment arrives, you receive ₹8 lakh. That's a ₹30,000 shortfall with no bank fee involved at all.

The direction of the move matters. A weaker rupee benefits exporters by making their goods and services cheaper for foreign buyers. A product priced at ₹10,000 costs a foreign buyer $133 at 75 USD/INR but only $125 at 80 USD/INR. A stronger rupee compresses margins.

Currency volatility also forces exporters to maintain larger cash reserves for working capital, tying up funds that could otherwise be deployed in operations.

What Are the Hidden Bank Fees Eating Into Your Export Earnings?

Beyond the forex spread, banks layer on <a href="https://www.skydo.com/blog/hidden-fees-in-bank-rates">additional charges</a> that are deducted silently before funds reach your account, so the amount credited is always less than what your foreign buyer sent.

How Much Does a Bank's Forex Spread Actually Cost on a $10,000 Invoice?

A bank's forex spread costs Indian exporters ₹8,000–₹16,000 per transaction on a $10,000 invoice when the spread is 1–2% below the mid-market rate. That's before any flat fees are added on top.

Here is the scenario. An exporter <a href="https://www.skydo.com/blog/how-to-choose-the-right-currency-exchange-rate-for-invoicing">invoices a US client</a> $10,000, and the mid-market rate (RBI reference rate) on the day of settlement is ₹84.00 per dollar. The three routes below show what lands in the account after <a href="https://www.skydo.com/blog/how-much-forex-fees-do-you-pay-on-global-transactions">forex fees</a>.

The rupee difference between a bank settlement and a Skydo flat-fee settlement on a single $10,000 invoice can range from ₹5,000 to ₹13,000. That difference compounds across every invoice an exporter raises in a year.

Unlike banks, Skydo charges a flat fee with no forex spread, so the exporter knows exactly what they will receive before the payment is processed.

If you want to see how that looks on your own invoices, check <a href="https://www.skydo.com/">Skydo's flat-fee pricing</a>. On a $10,000 invoice the fee is a flat $29 with no forex spread. You get a free Foreign Inward Remittance Advice (FIRA) certificate issued instantly, you don't need to switch your primary bank account, and setup takes 10 minutes.

Banks vs Fintech Platforms: Which Gives Better Forex Rates

Fintech platforms built specifically for inward remittances give exporters better effective forex rates than banks. They do this by charging a flat fee instead of building their margin into the exchange rate spread.

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What Is Export Payment Reconciliation in Xero?

Export payment reconciliation in Xero is the process of matching and verifying the international payment receipts recorded in Xero against the actual credits in your bank account, so the two sets of records agree with zero unexplained variance.

For Indian freelancers and service exporters, the need comes up after a foreign client pays an invoice. The amount that lands in your bank account almost never equals the invoiced amount, because of bank charges and exchange rate differences. Reconciliation is how you account for that gap officially in your books.

Take a Bengaluru-based freelancer who raises a $3,000 USD invoice. The client pays in full, but only ₹2,43,500 is credited after a $25 intermediary bank deduction and a slightly different RBI reference rate. Reconciliation is the step that closes that gap in Xero without leaving a ghost difference on the balance sheet.

Why Export Payment Reconciliation Matters?

Export payment reconciliation matters because the amount credited to your bank rarely matches the invoice value, and four variables cause that gap: bank charges, exchange rate differences, agreed deductions or discounts, and partial payments. Each one must be recorded separately in Xero. If none of them are, Xero carries a permanent unreconciled difference on the balance sheet.

Reconcile each inward remittance against the exact RBI reference rate on the credit date. That is the rate that will appear on your Foreign Inward Remittance Certificate (FIRC), and it must match your Xero entry.

Leaving these gaps unrecorded also creates problems during FEMA compliance checks and <a href="https://www.skydo.com/blog/fira-gst-refund-saas-exporters-india">GST refund claims</a>, because your books won't match <a href="https://www.skydo.com/blog/export-realisation-guide">bank realization records</a>.

What Documents Do You Need Before You Start Reconciling in Xero?

Before you reconcile <a href="https://www.skydo.com/blog/cross-border-payments">cross-border payments</a> in Xero, you need two groups of items: source financial records and Xero setup prerequisites. The records are bank statements, sales invoices and receipts, bills and expense receipts, the previous reconciliation report, loan and credit card statements, and records of unrecorded items. The setup prerequisites are verified opening balances, all transactions already entered in Xero, and an active bank feed or an imported bank statement.

You do not need to wait for the month to close to reconcile. Reconciling transaction by transaction as credits arrive is cleaner and faster to audit.

How Export Reconciliation Works in Xero? A Step-by-Step Guide

Export reconciliation in Xero means matching payment data that has arrived in your bank account, or synced from a <a href="https://www.skydo.com/blog/third-party-payment-export-transactions">third-party payment platform</a>, against your Xero general ledger so that the variance column reads zero. It takes five steps: export data or run reports from Xero, extract or align external data, compare totals and identify variances, reconcile and clear variances, and verify the final status.

The steps below use a running $3,000 USD freelance invoice as the example throughout.

Step 1: Export Data or Run Reports From Xero

Step 3: Compare Totals and Identify Variances

Bank Wire vs Skydo on the Same $3,000 Invoice

If hidden bank charges are the reason your received amount never matches your invoice, <a href="https://www.skydo.com/">Skydo's</a> fee is known before the payment lands, making every Xero reconciliation a single clean line match.

How Does Skydo Help Receive International Payments?

Reconciliation gets harder when the amount that lands in your account rarely matches the invoice, because traditional bank wires carry unpredictable intermediary charges and delayed documentation. <a href="https://www.skydo.com/">Skydo</a> is built to remove that uncertainty at the source.

Skydo is a cross-border payment aggregator that helps Indian freelancers and exporters <a href="https://www.skydo.com/blog/payment-gateway-for-international-payments-india">receive international payments</a>. It does not send money abroad.