exim policy project-1

8/8/2019 EXIM Policy Project-1

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EXIM Policy

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EXIM Policy

INDEX

SRNO. TOPIC

PAGE

NO.

1 PRE 1991 SCENARIO OF FOREIGN TRADE 3

Brief Review of Indias Trade Policy 3

Indias Share In World Trade 8

General Provisions Regarding Imports And Exports 9

2 JOURNEY OF EXIM POLICY 16

Exim Policy, 1992-97 16


Modified Exim Policy, April 1998 18

Exim Policy 1999-2000 19





Mini EXIM Policy, Jan 2004 23

Foreign Trade Policy, 2004-2009 243 HIGHLIGHTS OF EXIM POLICY & ITS IMPACT 28

Special Economic Zone (SEZ) 28

Duty Free Replenishment Certificate (DFRC) Scheme 31

Duty Entitlement Pass Book (DEPB) Scheme 32

Quantitative Restrictions (QR) 34

Agricultural Export Zones (AEZ) 37

Status Holders 38

Export Promotion Capital Goods Scheme (EPCG) 39

Deemed Exports 42

Advance License Scheme 43

4 EXIM BANK 45

5 EXPORTS, IMPORTS & TRADE BALANCE 49

6 INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE 50

7 FUTURE OF EXIM 51

8 BIBLIOGRAPHY 52

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PRE 1991 SCENARIO OF FOREIGN TRADE

Exim is the principal financial institution in the country for co-ordinating working of

institutions engaged in financing exports and imports. The import policy in the postindependence period was guided by consideration of a growth oriented policy which shouldultimately lead us to the objective of self reliance:

a) Imports should be limited as far as possible so as to conserve foreign exchange.

b) Imports of those items were to be encouraged which would help the industrialization ofthe economy and imports of such items which could be produced at home werediscouraged or completely banned. This distinction between essential and non-essentialitems of imports were necessary in view of the fact that even the demand for imports ofcapital goods and other equipment in a developing economy could be of such a

magnitude that it might become difficult to find foreign exchange for developmentalimports.

c) The nature of imports should be so modified that it helped export promotion, and thusmitigate the deficit in the balance of payments position ultimately.

The government appointed the Import and Export Policy Committee headed byMr.Mudaliar in 1962 to review Governments trade policy. The recommendations of thecommittee were accepted by the government. Mr.V.P.Singh, the then Commerce Minister,announced the Export Import policy on the 12 th of April, 1985.It was here that for the firsttime the Government announced the policy on a three year basis. The basic aim of the policy

was to facilitate production through easier and quicker access to imported inputs, impartcontinuity and stability of Exim Policy, strengthen the export production base, facilitatetechnological up gradation and affect all possible savings in imports.

Brief Review of Indias Trade Policy

Indias foreign trade policy during the last five decades may be broadly split intoimport substitution policy, export drive policy and export acceleration policy. The importsubstitution was followed in the first two decades. With fears of external dominance, theIndian planners adopted a somewhat introvert external trade strategy which relied onencouraging domestic production for the domestic market with the help of high tariffs andhigh degree of protection. Far from viewing foreign trade as an engine of growth, Indian

planners sought to minimise import demand by adopting an import substitution policy andgave secondary place to exports primarily as a source to generate the foreign exchangeearnings to meet that part of the import bill not covered by external assistance. There werecontrols over both imports and exports. However, this policy of import substitutingindustrialisation and system of controls failed to produce rapid growth and self-reliance.

With the realisation of the drawbacks of the excessively inward-looking strategy on

one hand and the need for modernisation and technology upgradation on the other, certainpolicy measures were initiated in the late seventies. Export incentives in the form of cash

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compensatory support (CCS), import replenishment (REP), duty drawback (DDS), marketdevelopment assistance (MDA) etc and export services in the form of export promotioncouncils, commodity boards and specialised services institution were introduced. The strategytowards a greater integration of the Indian economy with the rest of the world has been

pursued since then. In 1975-76 import policy was liberalised to make available importedinputs for registered exporters. In mid-1980s the government adopted a three-year import-export policy (1985-88) with the aim to provide easy access to imports, essential formaximizing production and exports. The main policy changes were abolition of automaticlicensing, inclusion of 201 items of industrial machinery under capital goods import underOGL, decentralisation of 53 import items and granting facility for import of capital goodsagainst REP license from Rs 1 lakhs to Rs 2 lakhs.

The second three-year policy (1988-91) carried forward the process of tradeliberalisation to make exports more competitive. The policy was designed to stimulateindustrial growth by providing easy access to essential imported capital goods, raw materialsand components to industry so as to sustain movements towards modernization, technologicalupgradation and making Indian industry competitive internationally. The liberal imports ofcapital goods and technology were viewed as a means to enable exporters to undertaketechnological upgradation in order to compete more effectively in the international market.

In the 1990s many short run adjustments were made in the trade policy in order toovercome the external sector crisis, which hit the country in 1991. Two major measures takenin trade policies were (a) liberalisation of imports entailing successive expansion in the OGLlist and (b) linking expansion in exports to import liberalisation. CCS scheme was suspended;REP license was substituted by EXIM scrips. The rupee was devalued in July 1991 and the

country saw transition towards the market-based exchange rate regime.

From Independence in 1947 till mid 1990s, India with some exceptions, always faceddeficit in its balance of payments i.e. imports always exceeded exports. This wascharacteristic of a developing country struggling for reconstruction and modernization of itseconomy. Imports galloped because of increasing requirements of capital goods, defenceequipments, petroleum products, and raw materials. Exports remained relatively sluggishowing to lack of exportable surplus, competition in the international market, inflation athome, and increasing protectionist policies, of the developed countries.

India embarked on the path of globalization in the early 1990s with the objective of

improving overall productivity, competitiveness and efficiency of the economy in order toattain a higher growth profile. Concomitantly, industrial, financial and external sector reformswere initiated with a view to creating an environment conductive for the expansion of trade.As a result, growth in trade accelerated in the early part of the 1990s. This momentumhowever could not be sustained in the face of various domestic bottlenecks and exogenousconstraints like East Asia crisis and slowdown in the US economy. These external factorsalong with stagnation in investment rate, sluggish industrial growth and slow down inmanufacturing productivity, predicted Indias trade during the closing years of the 1990s.Thus while the opening of the economy presented a range of opportunities and advantages tothe trade sector in India, the greater integration with the global economy has posed severalchallenges as well.

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Since the initiation of economic reforms, Indias outward orientation has increasedconsiderably. The destination pattern of Indian exports has remarkably changed in the sensethat the importance of developing countries as an export market has increased considerably.There are, however, concerns that the country the dramatic changes in exports of East Asia.

Indias experience has seemingly fallen short of expectation. Indias share in global trade didnot rise as impressively and the commodity structure of Indias export remained almostunchanged until the mid 1990s.

Moreover, unlike the East Asian countries where industry has been the major driverof exports growth, the contribution of industrial exports in India has been comparatively low.This could perhaps be attributed to small scale industry reservations and inflexible labourlaws besides infrastructural bottlenecks. The labour cost in India however is one of the lowestamong the competitor countries. Given the export structure on India, the potential for higherexports of manufactures, especially to the developed countries is high.

On the imports side, despite some initial apprehensions, liberalization has notadversely affected Indias balance of payments. On the contrary, increased tradeliberalization along with the prudent management of capital account liberalization hasimparted with significant strength to the balance of payments since the mid 1990a. With theincreased competitiveness of Indian Industries imports of low and medium technologyintensive products have declined. At the same time, imports of high technology intensive

products and imports used for export production have increased. There is growing evidencethat accessibility to imports has a positive impact on the growth performance of the country.

In the 1990s, a liberalised trade regime was put in place, which marked a significant

turnaround from the earlier controlled regime. The challenge of restoring the macro-economic balance initially was combined with a long term new trade policy which formed amajor ingredient of the economic reforms programme. It was recognised that trade policiesshould form a part of an integrated policy framework if the aim was to improve the overall

productivity and efficiency of the economic system. Apart from devaluation of the exchangerate and a switch over to a unified marked determined exchange system in 1993, the newtrade policy was characterised by a short negative list of imports and exports, lowering of thelevel and dispersion of nominal tariffs, withdrawal of quantitative restrictions on imports and

phasing out of the system of import licensing. The new trade policy reforms alsoencompassed significant changes in the system of export incentives, moving away from directsubsidies to indirect export promotional measures.

The multi-pronged strategy undertaken in the beginning of the 1990s gradually hadits desired effects on the economy and ushered in a phase of a stable and high growth. Therising exports combined with significant surge in capital flows provided opportunities forfurther liberalization of essential imports from quantitative restrictions. The stability in theexchange rate of the rupee maintained the competitiveness of Indian exports and at the sametime prevented the upsurge of cheap imports. The loss of the East European markets since theearly 1990s was successfully countered by diversifying into newer markets of developingcountries of Asia and the Organization of the petroleum Exporting Countries(OPEC).

The economic reform process introduced in the beginning of the 1990s wit focus on

liberalization had enabled increased integration of the Indian Economy with the rest of theworld. The growth rate of Indias trade is increasingly dependent on exogenous factors such

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as world trade growth, international price changes and developments in the competitorcountries. Cross currency exchange rates as well as solar-rupee exchange rate movementsalso get reflected in the performance of Indias trade. Although the level and dispersion ofIndias tariff have considerably come down since the early 1990s it remains among the

highest as compared to emerging market economies.

It is increasingly being realised that the desirable structure of tariff rates shouldcomply with the basic principles of simplicity, transparency, stability and international

practices. As noted in the tenth plan document, the most effective means of encouragingoutward orientation is to lower tariffs on imports so that the anti-export bias corrected.Further, it may be noted that as the duty rates fall, the need for refunds will commensuratelydecline thereby bringing down the transaction cost.

It has been observed that in contrast to the structural and compositional shifts inworld trade towards higher technology intensive products, the commodity structure ofIndias exports remained largely unchanged until the mid 1990s. Although, of late Indiasexports have shown a steady trend towards higher technology content, Indias specializationof in exports lies in manufacturing goods, especially to the developed markets remains high.However, given the general trend of movement of terms of trade towards higher technologyintensive products, it may be imperative for India to move up the technology ladder.

At the same time, the policy of reservation for SSIs had declined successful smallscale units to expand and achieve economies of scale and upgrade technology. This in turnhas affected export growth, manufacturing production and employment generation.

A noteworthy fact is that despite significant liberalization of imports during the1990s the overall balance of payments has been in surplus for most of the years with thecountry foreign exchange reserves crossing US$ 100 billion mark. Thus, in contrast to fearsexpressed at the time if the opening up of the economy, import, and liberalization policieshave in fact strengthened the countrys external sector since 1990-91. The implication is thatcontinued reduction in import tariffs will help in inducing greater efficiency andcompetitiveness in the economy, while reducing avoidable transaction costs in trade. For thefuture, the prospects of sustained growth in exports of goods and services are bright providedthe Indian economy can face the challenge of enhancing productivity and competitiveness inan increasingly integrated global environment.

Import Substitution: Cornerstone of Trade Policy

India adopted an inward looking development strategy after independence whereinimport substitution constituted a major element of both trade and industrial policies. Thefocus in the initial stages of planned development was on stimulating home grownindustrialization, essentially based on the infant industry argument ,wherein production fordomestic market was shielded behind high tariff walls and high effective protection .this

policy not only underestimated the export possibilities but also the import intensity of theimport substitution process itself.

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Import substitution was the prime objective of Indias trade policy till the mid 1970s.This policy was largely based on the imports and exports act of 1947. Liberal incentives weregranted to firms if they were undertaking production of an imported item that was notdomestically produced.

Protective quotas however remained more or less intact and domestic industry continuedto be shielded from import competition. Production for exports cannot be isolated from

production for the home market and trade policy would have to be integrated with the policyfor domestic industrialization.

A three year export import policy was introduced in 1985 to provide a definite focus tothe trade sector. A major ingredient of this policy was the provision of easy access toessential capital goods, raw materials and component from abroad since these were viewed asa major incentive for exporters in undertaking technological up gradation for reducing costand improving quality.

In short prior to mid 1991, foreign trade of India suffered from strict bureaucratic anddiscretionary control. Foreign exchange transactions were controlled by the government andthe Reserve Bank of India. Beginning mid1991 the government of India introduced a series ofreforms to liberalise and globalise the Indian economy. The process of globalisation is areality which cannot be denied and also should not be avoided .It needs to be managed so thatwe can derive the maximum advantage from world markets.

Balance of payment crisis, 1991

The balance of payment situation became very difficult in 1991-1992 despite ofsoftening of oil price in the world market. Even with a substantial import compression, the

pressure on the balance of payments persisted throughout the current financial year.

The government attempted to mobilize support for balance of payments formultilateral financial institutions the international monetary fund, the World Bank and theAsian development bank.

Another important initiative taken by the government to meet the urgent need for the

balance of payments financing was the announcement of two schemes designed to encouragethe inflow of capital funds from abroad .The India development bond scheme and theimmunity scheme for repatriation of funds held abroad were introduced in October1991.

Foreign currency assets, which had declined to $1.1 billion at their lowest point injune1991, had risen to $4.4 billion by February1992.

The build up of the reserves in the course of 1991-92 was necessary to restoreconfidence in the system, but it also meant the additional resources mobilized from themultilateral financial institutions and the IDB and immunity schemes were primarily used for

building up reserves and not to liberalize imports, which remain severely constrained in 1991-

92.

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Following adjustments were called for a broad based, rapid and sustained growth of exports.

Reduction in the excess domestic demand-Domestic demand had to be restrained andsupply increased.

Enhanced Competiveness-This required two changes, a change in the exchange rate ofrupee and a reduction in a relative prices of those products which were costly vis--vis competing goods abroad. The first step was taken by means of a downwardadjustment of about 18 percent in the external value of the rupee .The second steprequired a phasing down of import restrictions and a reductions in the high levels of

protection ,which characterize Indian industries.

Deregulation-One of the obstacles to exports lied in the cumbersome administrative procedures involved, arising from controls over imports and exports, exchangecontrol and also procedures.

Measures which were taken for lowering the inflation rate in the economy are:-

Reducing subsidies and external support to production enterprises so as to make moreresponsive to price and demand changes.

Ensuring that buffer stock operations for food grains and interventions in agriculturalmarkets were counter cyclical.

Encouraging savings to be high not only as a proportion of GDP but in relation todemand for investment funds in the economy.

Keeping entry barriers low in the industrial sector and improving industrys access toimported inputs at low tariffs.

Indias Share In World Trade

In 1950, India accounted for 1.8 percent (1.85 percent of exports and 1.71 percent of

imports) of world trade, gradually declining to 0.53 percent by 1991; it marginally improvedto 0.61 percent in 1994. The decline in Indias share in world trade has not only been arrested

but reversed. Below table shows trends in Indias share in the world trade during the post-Independence period. It is discernible that of late Indias share in world exports in on theincrease. It s noteworthy that India commands an important place in world trade in tea,

precious, and semi-precious stone, spices, iron ore, leather and coffee. The Foreign TradePolicy, 2004 2009 has set an ambitious task of achieving 1.5 percent share in the worldtrade by the year 2009.

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Selected Years (percent)

Year Exports Imports Trade

1950 1.85 1.71 1.78

1960 1.03 1.69 1.36

1970 0.64 0.65 0.65

1980 0.42 0.72 0.57

1990 0.52 0.66 0.59

1991 0.50 0.56 0.53

1992 0.53 0.61 0.57

1993 0.58 0.60 0.59

1994 0.60 0.63 0.61

1998 0.60 - -

2000 0.70 - -

2001 0.70 - -

2003 0.86 - -

Sources: Government of India, Economic Survey, 1996-1997, p.88, and Economic Survey,2005-2006 p. S-95

General Provisions Regarding Imports And Exports

Exports and Imports free unless regulated

2.1 Exports and Imports shall be free, except in cases where they are regulated bythe provisions of this Policy or any other law for the time being in force. Theitemwise export and import policy shall be, as specified in ITC(HS) publishedand notified by Director General of Foreign Trade, as amended from time to

time.Compliance with Laws

2.2 Every exporter or importer shall comply with the provisions of the ForeignTrade (Development and Regulation) Act, 1992, the Rules and Orders madethereunder, the provisions of this Policy and the terms and conditions of anylicence/certificate/permission granted to him, as well as provisions of anyother law for the time being in force. All imported goods shall also be subjectto domestic Laws, Rules, Orders, Regulations, technical specifications,environmental and safety norms as applicable to domestically produced goods.

Interpretation of Policy

If any question or doubt arises in respect of the interpretation of any provisioncontained in this Policy, or regarding the classification of any item in the

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ITC(HS) or Handbook (Vol.1) or Handbook (Vol.2), the said question ordoubt shall be referred to the Director General of Foreign Trade whosedecision thereon shall be final and binding.

If any question or doubt arises whether a licence/ certificate/permission hasbeen issued in accordance with this Policy or if any question or doubt arisestouching upon the scope and content of such documents, the same shall bereferred to the Director General of Foreign Trade whose decision thereon shall

be final and binding.

Procedure

The Director General of Foreign Trade may, in any case or class of cases,specify the procedure to be followed by an exporter or importer or by anylicensing or any other competent authority for the purpose of implementingthe provisions of the Act, the Rules and the Orders made thereunder and thisPolicy. Such procedures shall be included in the Handbook (Vol.1), Handbook(Vol.2) and in ITC(HS) and published by means of a Public Notice. Such

procedures may, in like manner, be amended from time to time.

The Handbook (Vol.1) is a supplement to the EXIM Policy and containsrelevant procedures and other details. The benefits available under variousschemes of the Policy are given in the Handbook (Vol.1).

Exemption from Policy / Procedure

Any request for relaxation of the provisions of this Policy or of any procedure,on the ground that there is genuine hardship to the applicant or that a strictapplication of the Policy or the procedure is likely to have an adverse impact

on trade, may be made to the Director General of Foreign Trade for such reliefas may be necessary. The Director General of Foreign Trade may pass suchorders or grant such relaxation or relief, as he may deem fit and proper. TheDirector General of Foreign Trade may, in public interest, exempt any personor class or category of persons from any provision of this Policy or any

procedure and may, while granting such exemption, impose such conditions ashe may deem fit. Such request may be considered only after consulting ALC ifthe request is in respect of a provision of Chapter-4 (excluding any provisionrelating to Gem & Jewellery sector) of the Policy/ Procedure. However, anysuch request in respect of a provision other than Chapter-4 as given above may

be considered only after consulting Policy Relaxation Committee.

Principles of RestrictionDGFT may, through a notification, adopt and enforce any measure necessaryfor:-

Protection of public morals. Protection of human, animal or plant life or health. Protection of patents, trademarks and copyrights and the

prevention of deceptive practices. Prevention of prison labour. Protection of national treasures of artistic, historic orarcheological value. Conservation of exhaustible natural resources. Protection of trade of fissionable material or material from which

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they are derived; and

Prevention of traffic in arms, ammunition and implements ofwar.

Restricted GoodsAny goods, the export or import of which is restricted under ITC(HS) may beexported or imported only in accordance with a licence/ certificate/ permissionor a public notice issued in this behalf.

Terms and Conditions of a Licence / Certificate / Permission

Every licence/certificate/permission shall be valid for the period of validityspecified in the licence/ certificate/permission and shall contain such termsand conditions as may be specified by the licensing authority which mayinclude:

a. The quantity, description and value of the goods;b. Actual User condition;c. Export obligation;d. The value addition to be achieved; and

e. The minimum export price.

Licence/ Certificate/ Permission not a Right

No person may claim a licence/certificate/ permission as a right and theDirector General of Foreign Trade or the licensing authority shall have the

power to refuse to grant or renew a licence/certificate/permission inaccordance with the provisions of the Act and the Rules made thereunder.

PenaltyIf a licence/certificate/permission holder violates any condition of thelicence/certificate/ permission or fails to fulfill the export obligation, he shall

be liable for action in accordance with the Act, the Rules and Orders madethere under, the Policy and any other law for the time being in force.

State Trading

Any goods, the import or export of which is governed through exclusive orspecial privileges granted to State Trading Enterprise(s), may be imported orexported by the State Trading Enterprise(s) as specified in the ITC(HS) Booksubject to the conditions specified therein. The Director General of ForeignTrade may, however, grant a licence/certificate/permission to any other person

to import or export any of these goods.

In respect of goods the import or export of which is governed throughexclusive or special privileges granted to State Trading Enterprise(s), the StateTrading Enterprise(s) shall make any such purchases or sales involvingimports or exports solely in accordance with commercial considerations,including price, quality, availability, marketability, transportation and otherconditions of purchase or sale. These enterprises shall act in a nondiscriminatory manner and shall afford the enterprises of other countriesadequate opportunity, in accordance with customary business practices, tocompete for participation in such purchases or sales.

Importer-Exporter Code Number

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No export or import shall be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted. An Importer-Exporter Code (IEC) number shall be granted on application by the competentauthority in accordance with the procedure specified in the Handbook (Vol.1).

Trade with Neighbouring CountriesThe Director General of Foreign Trade may issue, from time to time, suchinstructions or frame such schemes as may be required to promote trade andstrengthen economic ties with neighbouring countries.

Transit Facility

Transit of goods through India from or to countries adjacent to India shall beregulated in accordance with the bilateral treaties between India and thosecountries.

Trade with Russia under Debt- Repayment Agreement

In the case of trade with Russia under the Debt Repayment Agreement, the

Director General of Foreign Trade may issue, from time to time, suchinstructions or frame such schemes as may be required, and anythingcontained in this Policy, in so far as it is inconsistent with such instructions orschemes, shall not apply.

Actual User Condition

Capital goods, raw materials, intermediates, components, consumables, spares,parts, accessories, instruments and other goods, which are importable withoutany restriction, may be imported by any person. However, if such importsrequire a licence/certificate/ permission, the actual user alone may import suchgoods unless the actual user condition is specifically dispensed with by thelicensing authority.

Second Hand GoodsAll second hand goods shall be restricted for imports and may be importedonly in accordance with the provisions of this Policy, ITC(HS), Handbook(Vol.1), Public Notice or a licence/certificate/permission issued in this behalf.

Import of samples

Import of samples shall be governed by the provisions given in Handbook(Vol.1).

Import of Gifts

Import of gifts shall be permitted where such goods are otherwise freelyimportable under this Policy. In other cases, a Customs Clearance Permit(CCP) shall be required from the DGFT.

Passenger Baggage

Bonafide household goods and personal effects may be imported as part ofpassenger baggage. Samples of such items that are otherwise freely importableunder this Policy may also be imported as part of passenger baggage without alicence/certificate/ permission. Exporters coming from abroad are also allowedto import drawings, patterns, labels, price tags, buttons, belts, trimming andembellishments required for export, as part of their passenger baggage withouta licence/certificate/ permission.

Import on Export basis

New or second hand capital goods, equipments, components, parts and

accessories, containers meant for packing of goods for exports may beimported for export without a licence/certificate/permission on execution of

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Legal Undertaking/ Bank Guarantee with the Customs Authorities.

Re-import of goods repaired abroad

Capital goods, equipments, components, parts and accessories, whetherimported or indigenous, may be sent abroad for repairs, testing, quality

improvement or upgradation or standardisation of technology and re-importedwithout a licence/certificate/permission.

Import of goods used in projects abroad

After completion of the projects abroad, project contractors may import,without a licence/certificate/permission, used goods including capital goods

provided they have been used for at least one year.

Sale on High Seas

Sale of goods on high seas for import into India may be made subject to thisPolicy or any other law for the time being in force.

Import under Lease Financing

Permission of licensing authority is not required for import of new capitalgoods under lease financing.

Clearance of Goods from Customs

The goods already imported/shipped/arrived, in advance, but not cleared fromCustoms may also be cleared against the licence/ certificate/ permission issuedsubsequently.

Execution of BG/LUT

Wherever any duty free import is allowed or where otherwise specificallystated, the importer shall execute a Legal Undertaking (LUT)/Bank Guarantee(BG) with the Customs Authority before clearance of goods through theCustoms, in the manner as may be prescribed. In case of indigenous sourcing,

the licence/certificate/ permission holder shall furnish BG/LUT to thelicensing authority before sourcing the material from the indigenoussupplier/nominated agency.

Private/ Public Bonded Warehouses for Imports

Private/Public bonded warehouses may be set up in the Domestic Tariff Areaas per the terms and conditions of notification issued by Department ofRevenue. Any person may import goods except prohibited items, arms andammunition, hazardous waste and chemicals and warehouse them in such

private/public bonded warehouses. Such goods may be cleared for homeconsumption in accordance with the provisions of this Policy and againstLicence/certificate/ permission, wherever required. Customs duty asapplicable shall be paid at the time of clearance of such goods. If such goodsare not cleared for home consumption within a period of one year or suchextended period as the custom authorities may permit, the importer of suchgoods shall re-export the goods.

Free Exports

All goods may be exported without any restriction except to the extent suchexports are regulated by ITC(HS) or any other provision of this Policy or anyother law for the time being in force. The Director General of Foreign Trademay, however, specify through a public notice such terms and conditionsaccording to which any goods, not included in the ITC(HS), may be exported

without a licence/ certificate/ permission.Export of samples

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Export of samples shall be governed by the provisions given in Handbook(Vol.1)

Export of Passenger Baggage

Bonafide personal baggage may be exported either along with the passenger

or, if unaccompanied, within one year before or after the passenger's departurefrom India. However, items mentioned as Restricted in ITC(HS) shall requirea licence/certificate/permission, except in the case of edible items.

Export of Gifts

Goods, including edible items, of value not exceeding Rs.1,00,000/- in alicensing year, may be exported as a gift. However, items mentioned asrestricted for exports in ITC(HS) shall not be exported as a gift, without alicence/ certificate/ permission, except in the case of edible items.

Export of Spares

Warranty spares, whether indigenous or imported, of plant, equipment,

machinery, automobiles or any other goods may be exported upto 7.5% of theFOB value of the exports of such goods along with the main equipment orsubsequently but within the contracted warranty period of such goods.

Third Party Exports

Third party exports, as defined in paragraph 9.56 shall be allowed under thePolicy.

Export of Imported Goods

Goods imported, in accordance with this Policy, may be exported in the sameor substantially the same form without a licence/certificate/ permission

provided that the item to be imported or exported is not mentioned asrestricted for import or export in the ITC(HS). Exports of such goods imported

against payment in freely convertible currency would be permitted againstpayment in freely convertible currency.

Goods, including those mentioned as restricted item for import or export(except prohibited items) in ITC(HS), may be imported under Customs Bondfor export in freely convertible currency without a licence/certificate/

permission.

Export of Replacement Goods

Goods or parts thereof on being exported and found defective/damaged orotherwise unfit for use may be replaced free of charge by the exporter andsuch goods shall be allowed clearance by the customs authorities provided that

the replacement goods are not mentioned as restricted items for exports inITC(HS).

Export of Repaired Goods

Goods or parts thereof on being exported and found defective, damaged orotherwise unfit for use may be imported for repair and subsequent re-export.Such goods shall be allowed clearance without a licence/certificate/

permission and in accordance with customs notification issued in this behalf.

Private Bonded Warehouses for Exports

Private bonded warehouse exclusively for exports may be set up in DTA asper the terms and conditions of the notifications issued by Department of

Revenue. Such warehouse shall be entitled to procure the goods from domesticmanufacturers without payment of duty. The supplies made by the domestic

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supplier to the notified warehouses shall be treated as physical exportsprovided the payments for the same are made in free foreign exchange.

Denomination of Export Contracts

All export contracts and invoices shall be denominated in freely convertible

currency and export proceeds shall be realised in freely convertible currency.Contracts for which payments are received through the Asian Clearing Union(ACU) shall be denominated in ACU Dollar. The Central Government mayrelax the provisions of this paragraph in appropriate cases. Export contractsand Invoices can be denominated in Indian rupees against EXIMBank/Government of India line of credit.

Realisation of Export Proceeds

If an exporter fails to realise the export proceeds within the time specified bythe Reserve Bank of India, he shall, without prejudice to any liability or

penalty under any law for the time being in force, be liable to action inaccordance with the provisions of the Act, the Rules and Orders made thereunder and the provisions of this Policy.

Free movement of export goods No seizure of Stock

2.42.1

No seizure of stock shall be made by any agency so as to disrupt themanufacturing activity and delivery schedule of export goods. In exceptionalcases, the concerned agency may seize the stock on the basis of prima facieevidence. However, such seizure should be lifted within 7 days.

Export Promotion Council

2.43 The basic objective of export promotion councils is to promote and developthe exports of the country. Each Council is responsible for the promotion of a

particular group of products, projects and services. The list of the councils,

and their main functions are given in Handbook (Vol.1).Registration -cum-Membership Certificate

2.44 Any person, applying for (i) a licence/ certificate/ permission to import/export, [except items listed as restricted items in ITC(HS)] or (ii) any other

benefit or concession under this policy shall be required to furnishRegistration-cum-Membership Certificate (RCMC) granted by the competentauthority in accordance with the procedure specified in the Handbook (Vol.1)unless specifically exempted under the Policy.

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JOURNEY OF EXIM POLICY

India`s foreign trade is regulated by the foreign trade (Development and Regulation)Act, 1992 which replaced the import and export (control) Act,1947. The act of 1992empowers the central government to formulate and announce from time to time the exportand import policy and to amend it in like manner.

Prior to mid -1991, foreign trade of India suffered from strict bureaucratic anddiscretionary controls. However, the new government which took over at the centre in June1991 soon realised that Indias foreign trade policy must respond to the changes(liberalisation and openness) sweeping across the world. To reduce controls, simplify

procedures and to create a congenial environment for trade, the government made a statement

on trade policy in parliament on august 13, 1991, ushering a new era in the foreign trade policy of India. Instead of controls and regulations, the focus shifted to promotion anddevelopment of foreign trade.

Before 1985-86, the annual export-import policy was announced at the beginning ofthe financial year. In 1985-86 , a three year export-import policy was announced for the

period April 1985 through march 1988, providing a reasonable degree of stability to thepolicy framework. On its expiry, the new policy for three years 1988-91 was announced inMarch 1988 which laid even greater emphasis on promotion of exports.

EXIM POLICY, 1992-97

On March 31, 1992, the government announced the export and import policy for a periodof five years (April 1, 1992 to march 31, 1997), coinciding with the period of eighth five year

plan. The chief controller of imports and exports was re-designated as director general offoreign trade. EXIM Policy, 1992-97 made a conscious effort to dismantle various

protectionist and regulatory policies and accelerate India`s transition towards a globallyoriented economy. The export-import policy was further liberalised by the government onMarch 31, 1993. Substantial concessions were announced to boost agricultural exports. The

government also announced a centrally sponsored scheme to set up industrial parks indifferent states.

EXIM POLICY, 1997-2002

The export and import policy, 1997- 2002 (coinciding with the period of ninth five yearplan) sought to consolidate the gains of the previous policy and further carry forward the process of liberalisation by deregulating and simplifying procedures and removingquantitative restrictions in a phased manner. It set an ambitious target of attaining an export

level of US$ 90-100 billion by the year 2002 and achieving 1 per cent share in world trade.

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Objectives:

The principal objectives of the policy were the following:

1. To accelerate the country`s transition to a globally oriented vibrant economy to derivemaximum benefits from expanding global market opportunities.

2. To stimulate sustained economic growth by providing access to essential raw materials,intermediates, Components, consumables and capital goods required for augmenting

production.

3. To enhance the technological strength and efficiency of Indian agriculture, industry andservices, thereby improving their competitive strength while generating new employmentopportunities, and encourage the attainment of internationally accepted standards of quality.

4. To provide consumers with good quality products at reasonable prices.

Salient Features:

Following were the salient features of the policy:

1. Exports and imports shall be free, except to the extent they are regulated by the provisionsof this policy.

2. The Central Government may in public, interest, regulate the import or exports of goodsby means of a negative list of imports or a negative list of exports, as the case may be.

3. The negative list may consist of goods, the import or export of which is prohibited,restricted through licensing, or canalised.

4. Prohibited items in the Negative list of Imports shall not be imported and prohibited itemsin the Negative list of exports shall not be exported.

5. Any goods, the export or import of which is restricted through licensing , may be exported

or imported only in accordance with a license issued in this behalf.

6. Any goods, the import or export of which is canalised, may be imported or exported bycanalising agency specified in the negative list.

7. No export or import shall be made by any person without an importer exporter code(IEC) number unless specifically exempted.

MODIFIED EXIM POLICY, APRIL 1998

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The new government at the centre, which assumed office in March 1998, announced itsexports and import policy for the year 1998-99 on April 13, 1998. As part of the annualexport-import policy modification, the government freed from import restrictions a largenumber of consumer goods and liberalised all major export promotion schemes. This new

dose of liberalisation of the trade regime by the new government was necessitated by thecommitments made by India at the World Trade Organisation (WTO). The timing of theimport policy liberalisation coincided with the scheduled review of India`s trade policy byWTO on April 16 and 17, 1998. Apart from the general global pressure on India to removerestrictions on imports, the US had filed a complaint with the WTO against India`s importregime. The following were the main provisions of the modified Export-import policyunveiled by the Commerce Minister on April 13, 1998.

1. 340 more items were shifted from restricted list to open general licence (OGL). Thus outof the total number of 10, 202 items covered under the export-import policy, only 2200remained on the restricted list.

2. The revised policy set an export growth target of 20 percent for the year 1998-99 which inother words required total exports of the order of US$ 41.4 billion during 1998-99.

3. Zero duty export promotion capital goods (EPCG) scheme was extended to all thesoftware exporters by lowering the threshold limit of importable capital goods from Rs 20crore to Rs 10 lakhs. The lowering of the threshold limit was expected to help the softwarecompanies to proliferate throughout the length and breadth of the country. In other wordsthey could import any capital goods without paying any import duty and in return sign anexport obligation of 5 times the value of capital goods on net foreign exchange earning

basis for a period of six years. In the case of garments, agriculture, food processing, gems

and jewellery, electronics leather, sport goods and toys the minimum limit was lowered toRs 1 crore.

4. In a bid to prevent cheap imports being dumped at unreasonable prices, the government setup an anti-dumping cell called Directorate General (DG) of Anti-Dumping and AlliedDuties. The DG would be responsible for investigation into alleged cases of dumping aswell as subsidised cases. DG would be recommended Anti Dumping duties where it isfound that dumped imports are causing harm to the domestic industry. Where harm iscaused to the domestic industry by subsidising exports of the exporting countries then theDG would have the jurisdiction to investigate all such cases and recommend possibleimposition of countervailing duties. The DG would also advice the industry groups and

consumer for on how to go about collecting information and procedures involved inmaking out a case for anti-dumping duties.

5. Other provisions include:

Delegation of powers to regional licensing offices, Doing away with the minimum valueaddition of 33 percent under advance licensing scheme, Simplified procedures forclubbing of advance license scheme and Private bonded warehouses to be set up to import,stock and sell even negative list items.

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EXIM POLICY 1999-2000

In its effort to further dismantle the import control regime and hasten the integration ofthe Indian economy with the world economy, the government announced a revised export-import policy on March 31, 1999 which came into force on April1, 1999.

The new export import policy freed import of 894 items of consumer goods, agriculturalproducts and textile from licensing requirements. In other words a number of

Consumer items could now be imported license-free subject only to the payment of importduty. Physical controls on imports were removed and the only control over imports was fiscalin nature, i.e. adjusting import duty to regulate imports. These adjustments were to be madewithin the upper limit prescribed by WTO.

Moreover, another 414items were removed from the restricted list, allowing these to beimported against special import licenses. India`s international commitments require it toremove licensing curbs on imports by the year 2003.

EXIM POLICY 2000-2001

The union commerce and industry minister announced on march 31, 2000 the newexport-import policy of the government of India for the year 2000-2001. The export import

policy envisaging a 20 percent export growth in dollar terms in 2000-2001, brought about amajor rationalisation in export promotion schemes and launched a series of sector specificinitiatives.

Export Promotion: In a major initiative to boost exports, the Government announced thefollowing measures:

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Special Economic Zones (SEZ): in the pattern of Chinese models the government announcedthe setting up of two SEZs at Positra in Gujarat and Nangunery in Tamil Nadu ]. Industrial

units located in SEZs will be exempted from rules and regulations governing exports andimports. The entire production will have to be exported from these zones. Sales fromDomestic Tariff Area (DTA) can be done only on full payment of custom duty. SeveralExport Processing Zones (EPZs)will shortly be converted into SEZs. The EPZs located inKandla, Vizag and Kochi will be converted into SEZs immediately. It was further announcedthat 100 percent foreign direct investment (FDI) would be allowed in all products in SEZs.

SEZs would be treated as if they are outside the customs territory of the country.The units would be able to import capital goods and raw material duty free. The movement ofgoods to and from SEZs would be unrestricted.

It is noteworthy that SEZs have played a crucial role in boosting China`s exportsand presently the country derives 40 percent of its exports from such zones. However,Chinese SEZs are based on contract labour system (hire and fire policy). The commerceminister while announcing the EXIM policy categorically ruled out any changes in labourlaws. Moreover, there is no systems of reservation of items for small scale industries inChina. It is unclear if the Government of India would allow the production of reserved item

for small industries in the SEZs. Still further there are various infrastructural bottlenecks likepower shortage, lack of transport facility and of course procedural delays. Hence the successof SEZs in India is a moot question

Sector-Specific Packages: the Export-import policy 2000-2001 announced sector-specificpackages for sever core areas to boost export, viz. Gems and jewellery, pharmaceuticals,agrochemicals, biotechnology, silk, leather and garments.

For the gems and jewellery exporters, the government announced a diamond-dollaraccount (DDA) scheme export proceeds can be retained in a dollar account and the exporterscan use funds in this account for import of rough diamonds.

For agrochemicals, biotechnology and pharma units (considered as knowledge-intensive), the government has allowed duty free imports of laboratory equipment, chemicalsand reagents upto 1% of the FOB value of exports. Similarly the government increased dutyfree import of trimmings, embellishments and other items from 2 to 3% of the total export

value

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Involvement of State Governments in Export Promotions: Since the stages forgo taxes (mainlysales tax) on exports, they have little incentive to promote exports. [1] the 2000-2001 export

-import policy announced financial incentives to states based on their export performance.An incentives scheme with an initial outlay of Rs. 250 crores to secure states involvement inthe national export drive was unveiled. The states can use the funds for export promotionsactivities such as infrastructure development. The commerce and industry minister said thathe would request the state to treat all units exporting more than 50 percent of their turnover as

public utility services. This would enable them to keep their international commitment ondelivery schedule.

Furthermore, the minister observed that the recent spectacular growth of software exportswas, apart from Indias knowledge in high-tech, due to hands off policy of governmenttowards this sector .A similar approach to hardware electronics is called for.

Import liberalisation: The export import policy 2000 to 2001 lifted quantitative restrictionson 714 commonly used items (agricultural products and consumer durables ) which can now

be freely imported. Thus, commodities like meat, milk powder, coffee, tea, fish, pickles,cigars , cigarettes, television , radio , tape recorders , foot wares & umbrellas can be importedfreely from April 1, 2000. However most of these items will attracts peak rates of basicimport duty.

The lifting of licensing and quota restrictions on 714 import items was in line with IndiasWTO obligations. The government promised to abolish licensing and quota curbs on theremaining 715 items (such liquor, cars etc) in April 2001.

Many critics of new policy fear that that removal of licensing and quota restriction will leadto surge in imports of these items, hurting the domestic industry. However, it is noteworthythat import restrictionare being phased out since 1966 but no extraordinary growth hasoccurred in the import of freed items. The commerce minister maintain that anti-dumping andanti-subsidy tariffs and other safeguards would be used if there is sudden search in imports,causing serious injuries to the domestic industry.

EXIM Policy, 2001-2002

The union commerce And industry minister unveiled on march 31, 2001, the export importpolicy for the year 2001-2002.

Removal of Quantitative restrictions: The process of removal of import restrictions , whichbegan in 1991, was completed in a phased manner bye the Export-Import Policy 2001-2002with the removal of restriction on the remaining of 715 items. This was in tune with thecommitments made to the WTO. Out of these 715 items 342 were textile products, 147 wereagricultural products and 226 were other manufactured products.

However, import of agricultural products like wheat, rice, maze, copra and coconut oil wasplaced in the category safe trading . the nominated state trading enterprise will conduct the

import of this commodity solely as per commercial consideration . similarly, import ofpetroleum products including petrol , diesel & ATF was placed in the category of state

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trading in all 27 out of 715 items taken of the quantitative restrictions list were put under thestate trading category.

The minister was confident that the Indian market will not swamped by imported brands of

commonly used articles. To prevent dumping, government will take recourse to anti-dumpingduties and other non-tariff barriers. Arrangements have been made to track, collate andanalyse data on 300 sensitive items which mainly comprise farm goods and items produced

by small scale sectors.

Agricultural Export Zones: With a view to boost agricultural exports and provideremunerative returns to the farming community, the Export-Import policy proposed thesetting up of agricultural export zones. Three such zones are proposed to be set up inhimanchal Pradesh , jammu Kashmir (to promote export of apples) and Maharashtra.Government will make efforts to provide improved access to the produce/products of theagriculture and allied sectors in the international market. State governments have been asking

to identify product specific agricultural export zones for development for export of specificproducts from a geographically contiguous area.

EXIM Policy , 2002-2007

The EXIM Policy 2002-07 was unveiled on march 31, 2002. The policy entailed severalinstitutional, infrastructural and fiscal measures intended to promote exports which areconductive to the economic development of the country. The following were the salientfeatures of the policy.

Special Economic zones (SEZs): Offshore banking units (OBUs) were permitted in SEZs .Units in SEZ were permitted to undertake hedging of commodity price risks, provided suchtransactions are undertaken by the units on stand-alone basis. This will impart security to thereturns of the unit.

It has also been decided to permit external commercial borrowings (ECBs) for tenure of lessthan three years in SEZs. The detailed guidelines will be worked out by RBI. This will

provide opportunities for accessing working capital loan for these units internationallycompetitive rates.

Employment Generation: In an effort to generate additional employment , the following

announcements were made pertaining to agricultural and small industry sectors.

Exports restrictions like registration and packaging requirement were removed forthwith on butter, wheat & wheat products, coarse grains groundnuts oil and cashew to Russia .Quantitative and packaging restrictions on wheat and its products, butter, pulses, grains andflour of barley, maize, bajra, ragi and jowar had already been removed on march 5, 2002.

Restrictions on export of all cultivated varieties of seed, except jute and onion, wereremoved.

To promote export of agriculture and agriculture-based products, 20 agriculture exportzones were notified.

In order to promote diversification of agriculture, transport subsidy shall be available forexport of fruits, vegetables, floriculture, poultry and dairy products.

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3 percent special DEPB rate was announced for primary and processed foods exported inretail packaging of 1 kg or less

An amount of Rs 5 crore under Market Access Initiative (MAI)

Was earmarked for promoting cottage sector exports coming under te KVIC.

The units in the handicrafts sector can also access funds from MAI scheme fordevelopment of website for visual exhibition of their product.

Under the export of Promotion Capitals Goods (EPCG) scheme, these units will not berequired to maintain average level of exports, while calculating the export obligation.

These units shall be entitled to the benefit of Export House Status on achieving loweraverage export performance of Rs 5 crore as against Rs 15 crore for others.

The units in handicraft sector will be entitled to duty free imports of an enlarged list ofitems as embellishments up to 3 percent of FOB value of their exports.

With a view to encouraging further development of centers of economics and exportexcellence such as Tirupur for hosiery, wollen blanket in Panipat, wollen knitwear in

Ludhiana, following benefits shall be available to small scale sector:1. Common service providers in these areas shall be entitled for facility of EPCG scheme.2. The recognized associations of units in these areas will be able to access the funds under

the Market Access initiative scheme for creating focused technological services andmarketing abroad.

3. Such areas will receive priority for assistance for identified critical infrastructure gapsfrom the scheme on Central Assistance to States.

4. Entitlement for Export House Status at Rs 15 crore for others.

Technology Upgradation: Electronic Hardware Technology Park(EHTP) scheme wasmodified to enable the sector to face the zero duty regime under ITA(Information TechnologyAgreement)-1.The units shall be entitled to following facility.

Net Foreign Exchange as a Percentage of Exports (NFEP) positive in 5 years.

No other export obligation for units in EHTP.

Supplies of ITA-1 items having zero duty in the domestic market to be eligible forcounting of export obligation.

Growth-oriented: The status holders shall be eligible for the following new/special facilities.

License/Certificate/Permissions and customs clearance for both exports imports on self-declaration basis.

Fixation of input-output norms on priority.

Priority finance for medium and long-term capital requirement as per conditions notifiedby rbi.

Exemption from compulsory negotiation of documents through banks. The remittances,however, would continue to be received through banking channels.

100 percent retention of foreign exchange in Exchange Earners Foreign Currency (EEFC)account.

Enhancement in normal repatriation period from 180 days to 360 days.

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EXIM Policy, 2003-2004

It had the following provisions:

The policy provided a massive thrust to export of services by introducing duty free exportfacility for the service sector units having a minimum foreign exchange earning of Rs 10lakh.

Encouragement of corporate sector with proven credential to sponsor Agri-Export Zonesfor boosting farm exports.

EPCG scheme made more flexible and attractive so that even the small scale sector couldset up and expand its manufacturing base for exports.

Fixing of input-output norms for status holders on priority basis within a period of 60 daysand permission to status holders in Software Technology Parks India(STPI) for freemovement of professional equipments.

Simplification and codification of rules, regulations and procedures application on SEZand EOU units by putting all these rules and regulations in one place, thus greatlyfacilitating both potential investors and existing units.

To increase the overall competitiveness of export clusters, a scheme for upgradation ofinfrastructure in existing clusters/industrial locations would be implemented.

Extension of Duty Free Replenishment Certificate(DFRC)scheme to deemed exports andreduction in its value addition norms from 33 percent to 25 percent.

Mini EXIM policy, Jan 2004

Preceding the dissolution of the 13th Lok Sabha on Feb. 6, 2004 the government of Indiaannounced mini EXIM policy on Jan 28, 2004. It included facilitation and simplificationmeasure to sustain the momentum of export growth. Specifically it was aimed at providing

boost to exports of gems and jewellery, encouraging tourism and making energy generationcheaper. Highlights of new policy were.

Free import of gold and silver for export purpose permitted. In other words, gold and silvercan now be imported without paying any commission to channelling agents. (in 10997, thegovernment authorized three canalizing agencies viz MMTC, STC and HHEC, and eight

banks to import gold and silver for sales in the domestic market ). Likewise, import ofrough, uncut and semi polished diamonds will not be valued for export obligations.Quantitative restriction on gold and silver imports has also been lifted. Government alsoannounced the introduction of a gold card for creditworthy exporters to make availablecheaper foreign currency debt on easier terms.

Duty free import facility available to star hotels extended the heritage, one and two starhotels and stand alone restaurants. All these hotels have been allowed duty free importequivalent to 5% of their export earnings in three preceding years.

Restriction on import of electrical energy lifted

Online license electronic fund transfer facility for exporters. These measures are expectedto reduce transaction cost for exporters and make export administration transparent

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FOREIGN TRADE POLICY, 2004-2009

In radical move the government of India announced on August 31 2004 a new forigntrade policy for the period 2004-09, replacing the hitherto nomenclature of EXIM policy byforeign Trade policy. A vigorous export led growth strategy of doubling Indias share inglobal merchandise trade in the next 5 years , with a focus on the sector having prospectus forexport expansion and potential for employment generation, constitute the mail plank of the

policy. These measures are expected to enhance international competiveness and aid infurther increasing the acceptability on Indian exports.

Objective and strategy

The new FTP takes an integrated view of the overall development of Indias foreigntrade and essentially provides a roadmap for the development of this sector. It is built aroundtwo major objectives of doubling Indias share of global merchandise trade by 2009 and usingtrade policy as an effective instrument of economic growth with a thrust on employmentgeneration. Key strategies to achieve these objectives, inter alia, include: unshackling ofcontrols and creating an atmosphere of trust and transparency; incidence of all levies on inputused in export products; facilitating development of India as a global hub of manufacturing,trading and services; identifying and nurturing special focus area to generate additionalemployment opportunities, particularly in semi urban and rural areas; facilitating

technological and infrastructural up gradation of the Indian economy, epically and ensuringthat domestic sector are not disadvantage in trading agreements upgrading the infrastructuralnetwork related to the entire foreign trade chain to international standards revitalizing the

board of trade by redefining its role and inducting into it experts on trade policy andactivating Indian embassies as key players in export strategies.

Special focus initiatives

The FTP 2004 has indentified certain thrust sector having prospects for export

expansion and potential for employment generation. These thrust sector include agriculture,handlooms and handicraft, gems and jewellery and leather footwear sector. Sector specific

policy initiatives for the thrust sector include for agriculture sector introduction of newscheme called vishesh krishi upaj yojana to boost export exports of fruit, vegetables, flowersminor forest produce and their value added products. Under the scheme exports of these

products qualify for duty free credit entitlement for importing inputs and other goods underEPCG scheme permitting the installation of capital goods imported under EPCG foragriculture anywhere ASIDE scheme for development of AEZs, liberalization of import ofseeds bulbs tuberts and planting material and liberalization of the exports of plant portion,derivatives and extract to promote export of medicinal plants and herbal produce

The special focus initiatives for handlooms and handicraft sector include extension offacilitating like enhancing duty free imports of trimming and embellishment for handlooms

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and handicrafts exemption of samples from CVD authorizing handicraft export promotioncouncil to import trimmings embellishment and samples for small manufacturing andestablishment of a new handicraft special economic zone.

New Export Promotion scheme

A new scheme to accelerate growth of export called the target plus has beenintroduced. Under the scheme exporters achieving a quantum growth in exports are entitled toduty free credit based on incremental exports substantially higher than the general actualexport target fixed. Rewards are granted based on a tired approach. For incremental growth ofover 20%, 25% and 100%, the duty free credit are 5%, 10%, and 15% of f.o.b value ofincremental exports. Another new scheme called vishesh kishi upaj yojana has beenintroduced to boost exports of fruits, vegetables and flower. Exports of these products qualifyfor duty free credit entitlement equivalent to 5% of f.o.b value of exports. The entitlement isfreely transferable and can be used for import of a variety of input and goods. To accelerategrowth in export of service so as to create a powerful and unique served from India brandinstantly recognized and respected the world over the earlier duty free export credit schemefor service has been revamped and re cast into the served from India scheme. Individualservice providers who earn foreign exchange of at least 5 lakh, and other service providerswho earn foreign exchange of at least Rs. 10 lakh are eligible for a duty-credit entitlement of10% of total foreign exchange earned by them. In the case of hotels it is 5%. Hotels andrestaurants can use their duty credit entitlement for import of good items and alcoholic

beverages. To make India into global trading hub a new scheme to establish Free trading andwarehousing zones has been introduced to create trade related infra to facilitate the importand export of goods and service with freedom to carry out trade transaction in convertible

currency. Besides permitting FDI up to 100% in the development outlay of Rs 100 cr and fivelakh sq. mts built up area. Units in the FTWZ qualify for all other benefits as applicable forSEZ units.

Simplification, rationalization and modification of ongoing schemes:

EPCG scheme has been further improved upon by providing additional flexibility forfulfilment of export obligation, facilitating and providing incentives for technological upgradation, permitting transfer of capital goods to group companies and managed hotels, doingaway with the requirement of certificate from central excise and improving the viability ofspecified projects by calculating their exports obligating based on concessional duty

permitted to them. Import of second hand capital goods without any restriction on age hasbeen permitted and the minimum depreciated value for plant and machinery to be re locatedinto India has been reduced from Rs 50 cr to Rs 25 cr. The new policy has been allowedtransfer of the import entitlement under duty free replenishment certificate scheme in respectof fuel to the marketing agencies authorized by the ministry of petroleum and natural gas to

facilitate sourcing of such import by individual exporters.

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The Duty Entitlement passbook scheme will continue until replaced by a new scheme tobe drawn up in consultation with exports. Additional benefits have been provided to EOU ,including exemption from service tax in proportion to their goods and service, permission toretain 100% of exports earnings in export earners foreign currency accounts, extension of

income tax benefits on plant and machinery to DTA unit which convert to EOU, EHTP, STP,BTP units allowing imports of capital goods on self certification basis and permission todispose of leftover material and fabrics up to 2% of c.i.f value or quantity of import onimports on payment of duty on transaction value only. Minimum investment criterion has

been waived for handicraft, agriculture, floriculture. The FTP propose setting up to BTPs bygranting all facilitates of 100% EOUs. The FTP 2004 has introduced a new rationalizationscheme of categorization of status holders as star export houses with benchmarking forexports performance varying from Rs15 cr to Rs 5000cr.

Simplification of rules and procedure and institutional measures:

Policy measures announced to further rationalize/simplify the rule and procedure includeexemption for exporters with minimum turnover of Rs 5cr and good track record fromfurnishing bank guarantee in any of the scheme service tax exemption for exporters of allgoods and service uniformly to 24 months reduction in number of return of returns and formsto be filled delegation of more power to zonal and regional offices and time boundintroduction of electronic data interface. Institutional measures proposed in the FTP 2004include revamping and revitalizing the board of trade setting up of council to mapopportunities for key service in key markets and setting up of common facility centres for use

of professional home based service providers in state and district level towns.

Annual supplement 2005-06 to the foreign trade policy 2004-05

The union commerce and industry minister announcement on april 8 2005, the 2005-06

supplement to the five year foreign trade policy, giving a big boost to exports fromagriculture and manufacturing sector. Auto components pharmaceuticals gems and jewelleryand seafood exports firms stood to gain the most. Highlights of the annual supplement wereas follows

Push to exports of farm, marine, manufacture and pharma products

Exports cess on farm commodities abolished

Infra imitative to reduce port congestion

Imports by hotels, other service industry made duty free

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Setting up of interstate trade council mooted

Procedure simplified cut transaction costs aayat niryat introduced

HIGHLIGHTS OF EXIM POLICY & ITS

IMPACT

SPECIAL ECONOMIC ZONE (SEZ)

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Special economic zone is a particular area inside a state which acts as foreign territory fortariff and trade operations. Govt. provides tax exemption (IT, Excise, customs, sales etc.),subsidised water and electricity etc.

SEZ can be sector specific or multi product SEZ. It helps in the development of infrastructureof the area around the SEZ, provides employment to people, makes the exports more viable.All this will helps the country's products to become more competitive vis-a-vis providing allround development of region.

It should be noted that if 100 acres are allotted for SEZ, then only 30-35% of area is used forsetting up plants. rest of the area is used to provide housing facilities, malls, multiplexes etc.Also Tax exemption is for specific period say for 10 yrs or so

Units in SEZ would be permitted to It has also been decided to permit Special EconomicZones (SEZs)

Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed guidelines are beingworked out by RBI. This should help some of our cities emerge as financial nerve centres ofAsia & undertake hedging of commodity price risks, provided such transactions areundertaken by the units External Commercial Borrowings (ECBs) for a tenure of less thanthree years in SEZs. The detailed guidelines will be worked out by RBI. This will provideopportunities for accessing working capital loan for these units at internationally competitiverates.

The SEZ scheme has undergone few changes:

FDI permitted under automatic route for all manufacturing sectors, except a smallnegative list.

No licence required to set up units for items reserved under SSI.

Units in SEZs can bring back their proceeds in 365 days and retain 100 per cent ofproceeds in EEFC account.

No CR waiver is required for sending sample goods for participation in exhibitions.

SEZ developers will be given infrastructure status under the Income-Tax Act, asprovided in the Finance Bill, 2001, and will be entitled to concessional duty for procuring

goods for setting up SEZs.

All the necessary steps were initiated to give permission to set up SEZs to the States, theprivate sector and the joint sector.

Special Economic Zones Scheme

Sales from Domestic Tariff Area (DTA) to SEZs to be treated as export. This wouldnow entitle domestic suppliers to Drawback/ DEPB benefits, CST exemption andService Tax exemption.

Agriculture/Horticulture processing SEZ units will now be allowed to provide inputsand equipments to contract farmers in DTA to promote production of goods as per the

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requirement of importing countries. This is expected to integrate the production andprocessing and help in promoting SEZs specialising in agro exports.

Foreign bound passengers will now be allowed to take goods from SEZs to promotetrade, tourism and exports.

Domestic sales by SEZ units will now be exempt from SAD. Restriction of one year period for remittance of export proceeds removed for SEZ

units.

Netting of export permitted for SEZ unit provided it is between same exporter andimporter over a period of 12 months.

SEZ units permitted to take job work abroad and exports goods from there only.

SEZ units can capitalise import payables.

Wastage for subcontracting/exchange by gem and jewellery units in transactionsbetween SEZ and DTA will now be allowed.

Export/import of all products through post parcel/courier by SEZ units will now be

allowed. The value of capital goods imported by SEZ units will now be amortised uniformly

over 10 years.

SEZ units will now be allowed to sell all products including gems and jewellerythrough exhibitions and duty free shops or shops set up abroad

Goods required for operation and maintenance of SEZ units will now be allowed dutyfree.

According to the Exim Policy (1997-2002), SEZs may be set up for manufacture of goodsand rendering of services, production, processing, assembling, trading, repair, remaking,reconditioning, re-engineering, including of making of gold/silver/platinum jewellery andarticles.

An SEZ is a specially delineated `duty free' enclave and shall be deemed to be foreignterritory for trade operations, duties and tariffs.

Thus, there should be necessary `check posts' and Customs duty vigilance as in the case ofairport and ports. However, there are many advantages, and of course, one or twodisadvantages.

In a major step towards achieving sustained, quantum growth in exports, Special Economic

Zones (SEZs) will soon be established in different parts of the country, as in China.Announcing the annual Export & Import (Exim) Policy for 2000-2001 at a press conferencehere today, Shri Murasoli Maran, Union Minister of Commerce and Industry, said that India'sfirst two Special Economic Zones would come up in the States of Gujarat and Tamil Nadu.The SEZs would come into operation very soon, with the basic idea being to establish theZones as areas where export production could take place free from all rules and regulationsgoverning imports and exports and to give them full operational flexibility. The movement ofgoods to and from the SEZs would be unrestricted and without any hindrance and any Stategovernment or corporate entity or individual may furnish proposals for setting up such Zonesin the country. Land for the first two SEZs in Gujarat and Tamil Nadu has already beenearmarked, the Minister said. Observing that India, by not following vigorous policies, was

ceding billions of dollars in FDI to its East Asian neighbours each year (investment flows thatotherwise would have come to India), Shri Maran expressed the hope that with the

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establishment of the SEZs, procedural constraints and delays would be taken care of andforeign direct investment in the export sector would become attractive. The units in the SEZswould be able to import capital goods and raw materials duty-free and would also be able toaccess the same from the Domestic Tariff Area (DTA) without payment of terminal excise

duty. The entire production of the units in these SEZs would be exported and DTA saleswould be permitted on payment of full applicable customs duty. The minimum size of theSEZs would be 400 to 500 hectares or more. Shri Maran also announced that immediately,the existing Export Process Zones at Santa Cruz, Kandla, Vizag and Cochin would beconverted into SEZs, although the area of these existing Zones were limited due to historicalreasons

Major advantages

SEZs may export goods and services, including agro-products, partly processedjewellery, sub-assemblies and components. It may also export by-products, rejects, wastefrom the production process.

SEZs may import all types of goods without payment of duty. This includes capitalgoods, but not prohibited items for imports.

Even SEZ units can lease capital goods from a domestic/foreign leasing company.

But, both the SEZ unit and domestic foreign lease company shall jointly file thedocuments to enable import/procurement of the capital goods.

SEZs may procure goods required by it without payment of Duty from bondedwarehouses in the DTA set up under the policy.

SEZ units may import goods for creating a central facility for use by softwaredevelopment units, without payment of duty.

SEZs may also import gold/silver/platinum and specified goods from DTA through thenominated agencies for setting up units without duty, but subject to governmentconditions.

SEZ gem and jewellery units, with the Development Commissioner's permission, shall beentitled to personal carriage of gold/silver/platinum jewellery, precious, semi-preciousstones and articles.

They can export jewellery, including branded jewellery, which is also permitted fordisplay/sale in the permitted shops set up abroad.

SEZs may bring back sold goods for repair and replacement. Goods may be transferred to DTA for replacement/repair/testing or calibration, quality

testing and R&D purposes under intimation to the Customs authorities.

SEZ units, with the maintained records and prior intimation to Customs authority, maysupply or sell samples in the DTA for display/market promotion on payment ofapplicable duties.

Remove samples on furnishing a suitable undertaking to customs authorities for bringingthe goods back within a stipulated time without payment of duty.

No duty shall be payable if the goods are destroyed with the permission of Customsauthorities.

SEZs may subcontract a part of their production or production process through units inthe DTA.

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Major disadvantages

The SEZ shall execute a legal undertaking with the Development Commissioner that if itfails to achieve positive foreign exchange earnings, it will be liable to penalty in terms ofthe legal undertaking, or under any other law for the time being in force.

SEZ units may be debonded with the approval of the Development Commission.Debonding shall be subjected to payment of applicable Customs and excise duties andthe imported and indigenous capital goods, raw materials, finished goods in stock, and soon.

DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) SCHEME

DFRC Scheme announced in 2002-07 EXIM Policy has been continued in 2003-04 Policy.Henceforth supplies made under Deemed Export Scheme in terms of Para 8.2 of the EXIMPolicy would also be entitled for benefit of DFRC Scheme. Import of inputs against DFRCLicense (issued against supplies made under Deemed Export Scheme) shall also be permittedfrom sea-ports, airports, ICDs and CFSs specified in the DFRC Notification as usual. For this

purpose, DFRC licence issued under Deemed Export Scheme shall inter-alia contain detailsof excise certified invoice number and date with value of supplies in Indian rupees. All other

conditions of the DFRC Scheme remain unchanged.

In order to monitor revenue outflow under DFRC scheme, the concerned Custom Housesshall send a monthly report containing details of CIF value of goods imported and amount ofduty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). The firstsuch report shall be sent by 10th May, 2003.

Duty Free Replenishment Certificate is issued to a merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods without payment of basiccustoms duty, and special additional duty. However, such inputs shall be subject to the

payment of additional customs duty equal to the excise duty at the time of import.

Duty Free Replenishment Certificate shall be issued only in respect of export productscovered under the SIONs as notified by DGFT. However, DFRC shall not be issued inrespect of SIONs which are subject to "actual user" condition or where the input is allowedwith prior import condition or where the norms allow import of acetic anhydride, ephedrineand pseudo ephedrine in the Handbook (Vol-II).

Duty Free Replenishment Certificate shall be issued for import of inputs, as per SION, havingsame quality, technical characteristics and specifications as those used in the end product andas indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and

or the material(s) imported against it shall be freely transferable

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Validity of DFRC to be extended from 12 months to 18 months. Dispensing with the need of technical characteristics for inputs except for items in the

sensitive list. Automatic calculation of CIF value under DFRC scheme without reference to

international price of individual inputs. Provision incorporated for claim of DFRC against advance payment. Coverage of additional ports under DFRC Split up facility extended to DFRC scheme to give operational flexibility to the holder

of DFRC.

The Duty Free Replenishment Certificate shall be subject to a minimum value addition of33%.

The export products, which are eligible for modified VAT, shall be eligible for CENVATcredit. However, non excisable, non dutiable or non centrally vatable products, shall beeligible for drawback at the time of exports in lieu of additional customs duty to be paid at thetime of imports under the scheme.

The exporter shall be entitled for drawback benefits in respect of any of the duty paidmaterials, whether imported or indigenous, used in the export product as per the drawbackrate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however berestricted to the duty paid materials not covered under SION.

DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME

DEPB Scheme announced in 2002-07 EXIM Policy has been continued. In this regard earlierCustoms Notification No.45/2002-Cus. dated 22.4.2002 and DOR Circular No.24/2002-Cus.dated 6.5.2002 refers. Henceforth, supplies made by DTA units to units in SEZ would beentitled for DEPB benefits. The area of the Special Economic Zone shall be a CustomsStation and all the functions relating to the enforcement of the Customs Act shall becontrolled by the Commissioner of Customs with the assistance of proper officers ofCustoms. The goods entered into the SEZ from the DTA shall be under the cover of a Bill of

Export. This Bill shall be registered in the SEZ Customs formation and assigned a runningserial number. Thereafter the goods shall be examined by the Customs Officers posted in theSEZ like a normal export consignment. These goods shall be eligible for DEPB benefit & theDEPB scrips shall be issued by the licensing authority to the SEZ Unit receiving suppliesfrom DTA Unit on the basis of a disclaimer certificate given by the DTA Unit in favour ofSEZ Unit. This is because it has now been decided to treat supplies made by DTA Unit to aunit in SEZ as exports for the purpose of granting DEPB benefit.

For the purpose of allowing DEPB benefit against DEPB licenses issued for supplies to SEZunits, verification of the DEPB license shall be done in the same manner as specified inearlier DOR Circular No.14/99-Cus. dated 15.3.99 excepting that in case of supplies made toSEZ units, the Bill of Export and other related documents shall be verified. Since the port of

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registration in respect of such DEPB license would be the place where the receiver SEZ unitis located, import against such DEPB scrips shall be permitted either from the same CustomHouse or from any other place notified in DEPB Custom Notification No.45/2002 againstTRA in terms of para 6 of DOR Circular No.85/99-Cus. dated 23.12.99 and also in terms of

DOR Circular No.66/2001-Cus. dated 19.11.2001 when the Custom House of receiver SEZunit is a non-notified place. For this purpose, both Commissioner Incharge of Customs House(who issues TRA) and the Custom House receiving the TRA shall follow the procedure asspecified in DOR Circular No.66/2001.

Objectives

The objective of DEPB is to neutralise the incidence of Customs duty on the import contentof the export product. The neutralisation shall be provided by way of grant of duty creditagainst the export product.

Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB valueof exports, made in freely convertible currency. The credit shall be available against suchexport products and at such rates as may be specified by the Direc

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