intro, ftp 1,2,3-final

UNDERSTANDING

POLICY

Understanding Policy

q Foreign Trade Policy :§ Drafted by Director General of Foreign Trade under the Ministry

of Commerce. The governing Act is Foreign Trade Development Regulation Act, 1992 and Rules framed there under.

§ Implemented with the help of various other Departments mainly Customs, Excise and RBI.

§ In order to understand the co-relation, one must get familiar with the various laws and functions of various departments.

§ As far as implementation is concerned, the co-relation of Foreign Trade Policy with the following Acts, Laws and Regulations must be taken into account :


§ Customs Act, 1962§ Customs Tariff Act, 1975§ Foreign Exchange Management Act, 1999§ Central Excise Act, 1944§ Central Excise Tariff Act, 1985§ Industrial Policy Resolution, 1956.§ Industries Development and Regulation Act, 1951§ Laws of Weights and Measures

All the above Laws are primarily taken into account at the time of actual implementation of export/import activities. Physical movement of goods inward and outward is monitored mainly by Customs and Excise Field Formations which work under Department of Revenue [DoR], Ministry of Finance [MoF].

Ministry of Finance

Monitoring CENVATExamining co-relation and compliance with other laws

ImportInspection and supervision of cargo

Monitoring factory stuffed containers in certain cases

Collection of duty

Rebate of excise duty post exports where exports have been effected after payment of excise duty

Determination of import / export duty applicable

Under bond – clearance of excisable goods for export under bond

Assessment and valuationExportValidity of imports and exports

CoverageCoverageExciseCustoms

Contd…

Dept. of Revenue

Continued from the previous slide

Tools : i) Notificationsii) Central Excise Circularsiii) General Exemption

Notifications

Tools : i) Notificationsii) Public Noticesiii) Customs Circulariv) General Exemption

Notifications

3. Central Excise Law Manual 3. Customs Law Manual

2. Central Excise Tariff Act, 19852. Customs Tariff Act, 1975

1. Central Excise Act, 19441. Customs Act, 1962

Governing Acts/Laws/ManualGoverning Acts/Laws/Manual


q Export or import involves movement of goods as well as receipt/remittance of foreign exchange.

q Though foreign exchange regulations are relaxed, monitoring of forex operations is still being carried out by Reserve Bank of India.

RBI

CoverageMonitoring Foreign Exchange

Inflow – on account of exports of goods and servicesOutflow – on account of imports of goods and services

Governing Acts/Laws/Manual1) Foreign Exchange Management Act 1999

2) Foreign Exchange Manual

Tools:Master Circulars

FEMA NotificationsA.P. (DIR. Srs.) Circulars

In order to understand full implications of Foreign Trade Policy one must get oneself familiarized with all the above mentioned

departments and their working

O R G A N ISATION

DGFT

Addl. DGFT Export Commissioner

Zonal Jt. DGFT & Addl. Export

Commissioner, Delhi


Commissioner, Mumbai


Commissioner, Chennai


Commissioner, Kolkata

Jt. DGFT (Pune)

Jt. DGFT (Ahmedabad)

Jt. DGFT(Vadodara)

Jt. DGFT(Rajkot)

Dy. DG

Asst. DG

FTDO

Staff

Dy. DG

Asst. DG

FTDO

Staff

Dy. DG

Asst. DG

FTDO

Staff

Dy. DG

Asst. DG

FTDO

Staff

The Law

The Lawq FOREIGN TRADE (DEVELOPMENT & REGULATION)

ACT, 1992§ Foreign Trade Policy is formulated under Foreign Trade

(Development & Regulation) Act, 1992.

§ This Act is to provide for the development and regulation of foreign trade by • facilitating imports• augmenting exports and • for matters connected therewith or incidental thereto.

The Law§ The Central Government can appoint any person to be the

Director General of Foreign Trade [DGFT]

§ DGFT shall advise the Central Government in the formulation of the export and import policy

§ DGFT shall be responsible for carrying out the announced policy.

§ This Act is more like a facilitating measure than a regulatory one.

The Law§ It encompasses provisions like

• Power of Central Government to make orders and announce Export and Import Policy,

• Importer-Exporter code • Cancellation and Suspension of IE code and Licences issued

by the Director General of Foreign Trade, • Search, Seizure, Penalty and Confiscation, • Appeal and Revision, etc.

The details of the Act are given in Appendix 38A of Handbook of Procedures (Vol.I)

The Law§ Subsequently Foreign Trade (Regulation) Rules, 1993 were

issued. The Rules contain the following provisions:• Definitions of charitable purpose, licensing authority, etc.• Grant of special licence• Application for grant of licence• Fee• Conditions of licence• Refusal of licence• Amendment of licence• Suspension of a licence • Cancellation of a licence

The Law• Declaration as to value and quality of imported goods• Declaration as to Importer-exporter code number• Utilization of imported goods• Prohibition regarding making, signing of any declaration,

statement or documents• Power to enter premises and inspect, search and seize

goods, documents, things and conveyances• Settlement • Confiscation and redemption• Confiscation of conveyance

Full details are given in Appendix 38C of Handbook of Procedures (Vol.I)

Structure of Foreign Trade Policy

q Foreign Trade policy consists of 5 books, which are as under: a. Foreign Trade Policy [FTP]b. Handbook of Procedures Vol. I [HBPv1]c. Handbook of Procedures Vol. II [HBPv2]d. ITC (HS) Classification of Export and Import itemse. Schedule of DEPB rates

q FTP contains basic provisions, whereas HBPv1 contains procedural details.

q HBPv2, ITC (HS) Classification and schedule of DEPB rates are reference books


q Foreign Trade Policy covers the basic provisions of import and export of goods and services.The policy consists of the following chapters :

1 – Preamble

1A- Legal Framework

1B- Special Focus Initiatives

1C- Board of Trade

2 – General Provisions regarding Imports and Exports

3 – Promotional Measures


4 – Duty Exemption / Remission Scheme

5 - Export Promotion Capital Goods Scheme

6 – Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs)

7 – Special Economic Zones **

7A- Free Trade and Warehousing Zones **

8 – Deemed Exports

9 – Definitions

**[The policies relating to Special Economic Zones and Free Trade and Warehousing Zones are governed by SEZ Act 2005, and the Rules framed thereunder and hence they now stand deleted from the Policy]


q Handbook of Procedures Vol. I covers detailed procedures with respect to import of items for domestic markets and various export promotion schemes. It also covers miscellaneous matters.

1 – Introduction

2 – General Provisions regarding Exports and Imports

3 – Promotional Measures

4 – Duty Exemption / Remission Scheme

5 – Export Promotion Capital Goods Scheme


6 – Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs)

7 – Special Economic Zones **

8 – Deemed Exports

9 – Miscellaneous Matters

**[The procedures relating to Special Economic Zones are contained in Special Economic Zone Rules, 2006 and hence now stand deleted from Handbook]


qWhat is ITC (HS) Classification of Export and Import items:§ The Harmonized Commodity Description and Coding Systems

generally referred to as "Harmonized System" or simply "HS" is amultipurpose international product nomenclature developed by the World Customs Organization (WCO).

§ It comprises about 5,000 commodity groups; each identified by a 6 digit code, arranged in a legal and logical structure and issupported by well-defined rules to achieve uniform classification.

§ The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international trade is classified in terms of the HS.


§ The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.

§ The Harmonized System is governed by "The International Convention on the Harmonized Commodity Description and Coding System".

q Classification System in India:§ Indian product classification system is based on

World Customs Organization’s [WCO] Harmonized System, and this system is known as ‘Indian Trade Classification based on Harmonized System [ITC (HS)].


q ITC (HS) Classification of Export and Import items§ 8 digit code

§ Total chapters – 1 to 98

§ Classification SystemHS Code System provides classification for products of particular class from primary forms to finished forms, i.e. from raw materials to consumer goods.


§ Importability and Exportability of productsHS code helps us to understand the importability/exportability of the item. It is decided with the help of following four categories:

• Prohibited – Not permitted to be imported or exported

• Restricted – Imports or exports subject to licensing or stipulated conditions

• Items subject to State Trading Enterprises [STEs] –imported/exported exclusively through specific agency]

• Freely permissible – without any restriction [earlier was known as OGL]

§ Examples for Importability

FreePolypropylene 3902 10 00

Polymers of propylene or of other olefins, in primary forms

3902

POLICY ITEM DESCRIPTIONEXIM CODE

Free Of polymers of propylene3917 22 00

Tubes, pipes and hoses, and fittings (for example, joints, elbows, flanges), of plastics

3917


Free Of polymers of ethylene3923 21 00

Articles for the conveyance or packing of goods of plastics-Sacks and bags (including cones)

3923


§ In respect of exports following examples are noteworthy.

§ Extract of Schedule II of ITC (HS) Classification, Export Policy, Table – B.

Not permitted to be exported

ProhibitedPeacock Tail Feathers

kg0505 90 10 37

Export Policy

Name of restriction

Item Description

Unit Tariff Items HS Code

Sl. No.


Extract of Schedule II of ITC (HS) Classification, Export Policy, Table – B.

Export through MMTC Limited

STEIron ore other than those specified under Free Category

Kg2601 11 00 73

Exports permitted under Licence

RestrictedWheat Seeds (wild variety)

Kg1001 90 10 49

Export Policy

Name of restriction

Item Description

Unit Tariff Items HS Code

Sl. No.


§ Using the same code one can find Customs and Excise Duties by referring to Customs Tariff and Excise Tariff. For e.g.

EC- Education Cess @2%SHEC – Secondary and Higher Education @1%

Customs Tariff

8.24%

CVD [incl EC & SHEC]

7.5%

BCD

4%

SPL. CVD

21.523%Polypropylene 3902 10 00

TOTAL [incl EC & SHEC]

ITEM DESCRIPTION

EXIM CODE


{Add: EC- Education Cess @2% and SHEC – Secondary and Higher Education @1%}

§ One should read General Notes, Section Notes, Chapter Notes and Case Laws for further information in case of doubt.

Excise Tariff

8%

Rate of Duty

Polypropylene 3902 10 00

ITEM DESCRIPTIONEXIM CODE


q Handbook of Procedures Vol. II

and

q Schedule of DEPB rates

will be discussed later along with Chapter 4-Duty Exemption/Remission Schemes

Government’s Objectives and Strategies for FTP 2009-14

Objectives

q The short term objective § to arrest and reverse the declining trend of exports § to provide additional support especially to those sectors which

have been hit badly by recession in the developed world. § to set a policy objective of achieving an annual export growth

of 15% with an annual export target of US$ 200 billion by March 2011.

§ In the remaining three years of this FTP i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum.

§ By 2014, we expect to double India’s exports of goods and services.

q The long term objective § to double India’s share in global trade by 2020.

Strategies

q The objectives are proposed to be met by adopting the following strategies:§ the Government would follow a mix of policy measures

including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world and diversification of export markets.

§ Improvement in infrastructure related to exports; bringing down transaction costs, and providing full refund of all indirect taxes and levies, would be the three pillars, which will supportus to achieve this target.

§ Endeavour will be made to see that the Goods and Services Tax rebates all indirect taxes and levies on exports.

Glossary commonly used

Act Foreign Trade (Development & Regulation) Act, 1992 (No. 22 of 1992)

FT (D&R)

Free On BoardFOB

Foreign Exchange Inward Remittance Certificate

FIRC

Federation of Indian Export Organisation

FIEO

Export Promotion Capital Goods

EPCG

Export Promotion CouncilEPC

Export Obligation PeriodEOP

Export ObligationEO

Electronic Fund TransferEFT

Exim Facilitation Committee

EFC

Electronic Data InterchangeEDI

Department of RevenueDoR

Department of CommerceDoC

Director General of Foreign Trade

DGFT

Countervailing DutyCVD

Cost, Insurance & FreightCIF

Customs Clearance PermitCCP

Bank Realisation CertificateBRC

Bank GuaranteeBG

Aayaat Niryaat FormANF

Glossary commonly used

Towns of Export ExcellenceTEE

Standard Input Output NormsSION

Special Economic ZoneSEZ

Regional AuthorityRA

Norms CommitteeNC

Market Development AssistanceMDA

Market Access InitiativeMAI

Legal Under TakingLUT

Indian Trade Classification (Harmonised System) Classification for Export & Import Items, 2004-2009

ITC (HS)

Important Provisions-Chapter-wise

Chapter 1A-Legal Framework

Chapter 1A – Legal Framework

q Para 1.2 - Duration 27th August, 2009 upto 31st March, 2014

q Para 1.3 – AmendmentsCentral Government reserves right in public interest to make any amendments by notification to FTP in exercise of powers conferred by Section 5 of FT(D&R) Act.

q Para 1.4 – Transitional Arrangements

Chapter 1B- Special Focus Initiatives

Chapter 1B – Special Focus Initiativesq Para 1B.1

With a view to continuously increase percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for § Market Diversification, § Technological Upgradation, § Support to status holders, § Agriculture, § Handlooms, § Handicraft, § Gems & Jewellery, § Leather, § Marine, § Electronics and IT Hardware manufacturing Industries, § Green products, § Exports of products from North-East, § Sports Goods and § Toys sectors.

Chapter 1C-Board of Trade

Chapter 1C – Board of Trade

q Board of Trade [BoT]

§ To advise the Government on Policy measures;

§ To review export performance of various sectors;

§ To examine the existing institutional framework for imports & exports and suggest practical measures;

§ To review the policy instruments and procedures for imports & exports;

§ To examine issues which are considered relevant for promotion ofIndia’s foreign trade, and to strengthen the international competitiveness of Indian goods and services; and

§ To commission studies for furtherance of the above objectives.

Chapter 2 – General Provisions regarding Imports and Exports of

Foreign Trade Policy

Chapter 2 – FTP

q Para 2.1 – Exports and Imports free unless regulated

q Para 2.2 – Compliance with Laws Exporter and importer will have to comply with § FTDRA, the Rule and Orders made thereunder§ Terms and Conditions of Licence/ Certificate/ Permission/

Authorisation granted

q Para 2.3 – Interpretation of Policy § Questions or doubts arise in respect of interpretation of policy

are to be referred to the DGFT whose decision will be final and binding.

§ The request can be made as per Appendix 28 of HBPv1.

q Para 2.6 - Principles of RestrictionDGFT may, through a notification, adopt and enforce any measure necessary for:-i Protection of public morals.

ii Protection of human, animal or plant life or health.

iii Protection of patents, trademarks and copyrights and the prevention of deceptive practices.

iv Prevention of use of prison labour.

v Protection of national treasures of artistic, historic or archaeological value.

vi Conservation of exhaustible natural resources.

vii Protection of trade of fissionable material or material from which they are derived; and

viii Prevention of traffic in arms, ammunition and implements of war.

q Para 2.8 - Terms and Conditions of a licence/ Certificate/Permission/AuthorisationEvery Authorisation is valid for the period of validity specified in the Licence/ certificate/ permission and they contain specified terms and conditions by the Regional authority which may include:(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) Minimum export/import price.

q Para 2.9 – Authorisation/Licence/Permission not a Right

q Para 2.11 – State Trading § Any goods, the import or export of which is governed through

exclusive or special privileges granted to State Trading Enterprise(s), may be imported or exported by the State Trading Enterprise(s) as specified in the ITC(HS) Book subject to the conditions specified therein.

§ The State Trading Enterprise(s) can make purchases or sales involving imports or exports solely in accordance with commercial considerations, including price, quality, availability, marketability, transportation and other conditionsof purchase or sale.

q Para 2.12 – Importer-Exporter Code Number [IEC]No export or import can be carried out without Importer Exporter Code Number unless specifically exempted.

q Para 2.15 – Trade with Russia under Debt-Repayment Agreement

q Para 2.17A- Scrap/Waste in SEZSEZ Unit/ Developer/Co-developer are allowed to dispose off waste/scrap/remnants [including metallic waste and scrap] into DTA on payment of applicable duties.

q Para 2.18 – Import of Samples § As per the HBPv1 provisions

q Para 2.19 – Import of Gifts Import of freely permissible items as ‘gift’ is permitted. If the item is not freely permissible importable item, CCP from DGFT has to be obtained for importation of the same.

q Para 2.24 – Sale on High Seas

q Para 2.25 – Import under Lease Financing No permission is required from Regional Authority [RA]

q Para 2.26 – Clearance of Goods from CustomsThe goods already imported/shipped/arrived, in advance, but not cleared from Customs may also be cleared against an Authorisation issued subsequently.

q Para 2.27 – Execution of BG/LUTIn order to safeguard the revenue interest, bank guarantee is insisted upon against the authorisation § by customs in case of direct importor § by DGFT in case of local procurement

q Para 2.28 – Private / Public Bonded Warehouses for Imports

q Para 2.34 – Third Party ExportsAllowed.

q Para 2.35 - Export of Imported GoodsFreely permissible imported goods can be exported in same or substantially same form without Authorisation.

q Para 2.37 – Export of Replacement GoodsExporter can replace exported goods or parts free of charge, if found defective / damaged or otherwise unfit for use, subsequently.

q Para 2.38 – Export of Repaired Goods§ Exported goods or parts can be imported for repairs and re-

exported subsequently. § No authorisation for such activity is required.

q Para 2.40 – Denomination of Export Contracts§ Export Contracts and Invoices to be denominated in Freely

Convertible Currency or INR. However, export proceed must realised in freely convertible currency only.

§ Export proceeds can be realized in rupees provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan.

§ Contracts for which payments are received through the Asian Clearing Union (ACU) shall be denominated in ACU Dollar.

§ Export contracts and Invoices can be denominated in Indian rupees against EXIM Bank/ Government of India line of credit.

q Para 2.43 – Export Promotion Councils§ The basic objective of Export Promotion Councils is to promote

and develop Indian Exports. § Each Council is responsible for the promotion of a particular

group of products, projects and services as mentioned in Appendix-2 of HBPv1.

q Para 2.44 – Registration-cum-Membership Certificate [RCMC]§ Exporters, applying for

(i) an Authorisation 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 furnish Registration-cum-Membership Certificate (RCMC) granted by the respective Export Promotion Councils unless specifically exempted under the policy .

q Para 2.46 – Regularization of EO default and settlement of customs duty and interest through Settlement Commission

Settlement Commission in the Central Board of Excise and Customshas been empowered § To provide assistance to firms who have defaulted under the

Foreign Trade Policy for reasons beyond their control and

§ To facilitate the merger, acquisition and rehabilitation of sickunits.

q Para 2.48.1 - Exemption / Remission of Service Tax in DTAFor all goods and services which are exported from units in DTA and units in EOU / EHTP / STP / BTP, exemption / remission of service tax levied and related to exports shall be allowed

q Para 2.48.2 - Exemption from Service Tax in SEZUnits in SEZ shall be exempted from service tax.

q Para 2.48.3 - Exemption from Service Tax on Services received abroadFor all goods and services exported from India, services received / rendered abroad, wherever possible, shall be exempted from service tax.

q Para 2.49.2 – Grievance Redressal MechanismGrievance Redressal Committee was set up on 27.10.2004, for condoning § delays, § regularizing breaches by exporters in bonafide cases, § resolving disputes over entitlements, § granting extensions for utilization of Authorisations.

Chapter 2 – General Provisions regarding Exports and Imports of

Handbook of Procedures Vol.I

Chapter 2 – HBP

q Para 2.9.3 – Duplicate copy of IECIn case IEC is lost or misplaced application for duplicate copy of IEC can be made to the issuing authority along with an affidavit.

q Para 2.12 – Validity of Import Licence/Certificate/ Authorisation/Permissions/CCPs/Export LicenceThe validity of import/export Authorisation from the date of issue shall be as follows:

contd…….

24 monthsOthers including CCP and DEPB, unless otherwise specified

(iv)

Co-terminus with EOP of EPCG Authorisation.

EPCG Authorisation for Spares, refractories, catalyst and consumables

(iii)

36 monthsFor 3% EPCG Authorisations (other than spares)

(ii) b

9 monthsFor Zero duty EPCG Authorisations (other than spares)

(ii) a

24 monthsAdvance Authorisation / DFIA (including Advance Authorisation for annual requirement, and Replenishment Authorisation for Gem & Jewellery as per Chapter- 4 of FTP)

(i)

Contd….

Where an Authorisation expires during the month, such Authorisation shall be deemed to be valid until last day ofconcerned month.

12 months (However, EFC may decide to issue Export Authorisation for a longer duration in case of R&D studies based on recommendation of technical authority)

Export Licence / Authorisation

(vi)

24 months or Co-terminus with contracted duration of project execution, whichever is later.

Advance Authorisation / DFIA for deemed export (including Advance Authorisation for annual requirement)

(v)

q PARA 2.13 – Revalidation of Import/Export Licence/ Certificate/ Authorisation/ Permissions § Import Authorisation can be revalidated on merits,

for a period of six months from date of expiry of validity.

§ Export Licence may only be revalidated by RA concerned on recommendation of DGFT for six months at a time and maximum upto 12 months from date of expiry of validity.

§ Revalidation of transferable Authorisation and stock is not permitted.

q Para 2.14 – Duplicate Copies of Export-Import Licence/ Certificate/ Authorisation/ Permissions/CCPs

Where an authorisation is lost or misplaced, an application for grant of a duplicate copy thereof may be made along with a copy of an affidavit, as given in Appendix-24, to the Regional Authority which has issued the original licence/ certificate/ Authorisation/ permission.

Subject to verification from Customs Authorities, duplicate copy will be issued by RA.

q Para 2.16 – Identity Cards§ Required for collection of Authorisation and other documents

from DGFT Head Quarters and Regional Authorities.

§ Issued to the Proprietors/Partners/Directors and the authorised employees of the importers and exporter

§ Application to be made in Appendix-20A.

q Para 2.20 – Execution of Bank Guarantee/Legal Undertaking for Advance Authorisation/DFIA and EPCG Authorisation§ Before clearance of goods through Customs,

• Authorisation holder shall execute a BG / LUT with Customs Authorities, in case of direct import

and • In case of indigenous sourcing, the BG/LUT is to be

executed with concerned Regional Authority.

§ BG/LUT norms are prescribed under Customs Circular No. 58/2004 dated 31.10.04

q Para 2.21 – Certificate of Origin [CoO] § Certificate of Origin is important if there are duty concessions

in the importing Country depending on Certificate of Origin.

§ Certificate of Origin is the instrument to establish evidence onthe origin of goods imported into any country.

§ There are two categories of Certificate of Origin viz. (1) Preferential and (2) Non preferential.

q Para 2.21.1 – Preferential

§ The preferential arrangement/schemes under which India is receiving tariff preferences for its exports are

• Generalised System of Preferences (GSP), • Global System Of Trade Preferences (GSTP), • SAARC Preferential Trading Agreement (SAPTA), • Bangkok Agreement [now known as Asia-Pacific Trade

Agreement (APTA)], • India–Sri Lanka Free Trade Agreement (ISLFTA) and • Indo- Thailand Free Trade Agreement.

§ These arrangements/ agreements prescribe Rules of origin which have to be fulfilled for the exports to be eligible for the tariff preference.

q Para 2.21.1 – Preferential § Generalised System of Preferences (GSP)

GSP is a non contractual instrument by which industrialized (developed) countries unilaterally and on the basis of non reciprocity extend tariff concessions to developing countries.

§ Global System of Trade Preference (GSTP)• Under the agreement establishing Global System of Trade

Preference (GSTP), tariff concessions are exchanged among developing countries, who have signed the agreement.

• Presently, there are 46 member countries of GSTP and India has exchanged tariff concessions with 12 countries on a limited number of products.

• Export Inspection Council (EIC) is the sole agency authorised to issue Certificate of Origin under GSTP.

q Para 2.21.1 – Preferential § SAARC Preferential Trading Agreement (SAPTA)

Cus. Ntfn No. 105/1995 Dtd. 10.08.1995

§ Asia-Pacific Trade Agreement [earlier Bangkok Agreement]Cus. Ntfn No. 89/2006 Dtd. 01.09.2006

§ India-Sri Lanka Free Trade Agreement (ISLFTA)Cus. Ntfn Nos. 26/2000 Dtd. 01.03.2000

§ India Afghanistan Preferential Trade AgreementCus. Ntfn Nos. 76/2003 Dtd. 13.05.2003

§ Indo – Thailand Framework Agreement for Free Trade AreaCus. Ntfn Nos. 85/2004 Dtd. 31.08.2004

q Para 2.21.2 – Non-Preferential § The Government has also nominated certain authorised

agencies to issue Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to Simplification of Customs formalities, 1923.

§ These Certificates of Origin evidence the origin of goods and donot bestow any right to preferential tariffs.

q Para 2.25.1 - Payment through ECGC cover§ Payment through ECGC cover would count for benefits under

FTP.

q Para 2.25.2 - Payment through General/Private Insurance§ Amount of Insurance Cover for transit loss by General Insurance

and Private Approved Insurance Companies in India would be treated as payment realized for exports under various export promotion schemes.

q PARA 2.25.4 - RBI write-off on export proceeds realization [added in FTP 2009-14]§ Realisation of export proceeds shall not be insisted under any of

the Export Promotion Schemes under this Foreign Trade Policy, ifthe Reserve Bank of India (RBI) writes off the requirement of realization of export proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of export proceeds from the buyer. However, this would not be applicable in self-write off cases.

q Para 2.27-Import/Export of Samples:§ No authorisation is required for import of bonafide technical

and trade samples of restricted items§ Duty free import of samples upto Rs. 1,00,000/- for all

exporters except G&J sector. For G&J sector limit is Rs. 300,000.

§ Exports of bonafide trade and technical samples of freely exportable item are allowed without any limit

q Para 2.33-Import of Second Hand Capital GoodsImport of second hand capital goods including refurbished/reconditioned spares, except those of personal computers/laptops, shall be allowed freely, subject to specified conditions.

q Para 2.43 – Transfer of Imported Goods§ Freely importable goods can be transferred by sale or

otherwise by importer freely.

§ Transfer of imported goods, which are subject to Actual User condition under the Policy and have become surplus to the needs of the Actual User, shall be made only with the prior permission of the Regional Authority concerned.

q Para 2.52.1 - Free of Cost ExportsStatus holders are entitled to export freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs.10 lakh or 2% of average annual export realisation during preceding three licensing years whichever is higher.

q Para 2.54 - Furnishing of Returns in respect of Exports in non Physical form§ All exports made in non physical form by using communication

links including high speed data communication links, internet, telephone line or any other channel which do not involve Customs authorities has to be compulsorily reported on quarterly basis to concerned Export Promotion Council.

§ These provisions shall be applicable to all exporting units located anywhere in country including those located in STP, SEZ, EHTP and under 100% EOU scheme.

q Para 2.55 - Duty Free Import of R&D Equipment for Pharmaceuticals and Bio-technology Sector§ Duty free import of goods (as specified in the list 28 of Customs

notification No.21/2002 dated 1.3.2002, as amended from time to time) upto 25% of the FOB value of exports during the preceding licensing year, shall be allowed.

§ In respect of duty free import of R&D equipment, units not registered with Central excise shall be allowed to give Installation Certificate issued by an independent Chartered Engineer.

Chapter 3 – Promotional Measures

Promotional measures in the Department of Commerce [DoC]

Assistance to States for Infrastructure Development of Exports [ASIDE]

Market Access Initiative [MAI]

Market Development Assistance [MDA]

Assistance to States for creating infrastructure for development and growth of exports

Financial assistance for export promotion

activities on focus country,

focus product basis.

Financial assistance for a range of

export promotion activities implementedby Export Promotion

Councils [EPCs]

Promotional measures in the Department of Commerce [DoC]

q Under all the above schemes, DoC provide funds to the State Governments, Export Promotion Councils [EPCs] and other institutions like India Trade Promotion Organisation [ITPO] etc. for carrying out export promotion related activities. As far as EPCs are concerned, these activities include taking delegations of exporters to various countries, participation in international exhibitions and trade shows and buyer/seller meets.

q Some assistance is also provided to individual exporters known as MDA to help them market their products to relatively untapped markets.

Recognition of Performance

Export and TradingHouses [EH/TH]

Towns of Export Excellence [TEE]

Status Certificate withSpecial Privileges

Towns achieving prescribed threshold

limit of exports are accorded as

TEE

Export and Trading Houses [EH/TH]

q In order to reward performance by recognition, exporters are awarded status certificate based on their performance. The performance criterion is as under:

7500Premier Trading House (PTH)

2500Star Trading House (STH) 500Trading House (TH)

100Star Export House (SEH) 20Export House (EH)

Export Performance FOB / FOR Value

(Rupees in Crores)

Status Category

Performance to be taken cumulatively for preceding three and current year for qualification

Export and Trading Houses

q Eligibility: § Merchant as well as Manufacturer Exporters, § Export Oriented Units (EOUs), § Units located in Special Economic Zones (SEZs), § Electronic Hardware Technology Parks (EHTPs), § Software Technology Parks (STPs) and § Bio Technology Parks (BTPs)

Privileges

q Authorization and Customs Clearances for both imports and exports on self-declaration basis;

q Fixation of Input-Output norms on priority within 60 days;

q Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels;

q 100% retention of foreign exchange in EEFC account;

q Exemption from furnishing of BG in Schemes under FTP;

q SEHs and above shall be permitted to establish Export Warehouses, as per DoR guidelines.

Privileges

q Status Holders of specified sectors shall be eligible for Status Holder Incentive Scrip.

New scheme for Status Holders

Status Holder Incentive Scrip

Duty credit scrip @ 1% of FOB value of exports made during 2009-10 and 2010-11.

Eligible Sectors: Leather, Textile & Jute, Handicrafts, Engineering (excluding Iron & Steel, Nonferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships, Boats and Floating Structures), Plastics and Basic Chemicals (Excluding Pharma products)

Import allowed: Capital Goods – subject to Actual User Condition

Exclusions: Status holders availing benefit of Technology Upgradation Fund Scheme (TUFS)

Towns of Export Excellence [TEE]

q These are towns where export activities are concentrated.

q Due to economic recession and global slowdown, the threshold limit for recognition as Towns of Export Excellence is reduced from Rs. 1000 Crores to Rs. 750 Crores and from Rs. 250 Crores to Rs. 150 Crores for specified sectors (Handloom, Handicraft, Fisheries, etc.).

q Government aims to provide infrastructure in these TEEs.

Served from India Scheme

[SFIS]

VisheshKrishi and

Gram Udyog Yojana[VKGUY]

Focus Market Scheme

[FMS]

Duty Credit Scrip of 10%



Focus ProductScheme

[FPS]


Rewards/Incentive Schemes administered by DGFT

Rewards/Incentive Schemes administered by DGFTq These are all reward/incentive schemes which offer duty credit

scrips which can be utilised for payment of customs duties on permissible imports.

q This category covers different kinds of exporters and the incentives provided are also varying.

q Served from India Scheme [SFIS] is meant for service exporters whereas Vishesh Krishi and Gram Udyog Yojana [VKGUY] is for agriculture and value added products of agriculture plus goods produced and exported by tiny industries.

q Focus Market Scheme [FMS] and Focus Product Scheme [FPS] are related to market linked or product linked promotion strategies and incentives offered are primarily to offset cost disadvantages.

Served from India Scheme [SFIS]

q Non-transferable q Duty free import related to service sector business is allowed. q Local Procurement is allowed q Eligibility/Entitlement Criteria:

Minimum Forex earning of Rs.5 lakhs in the preceding financial year.

Individual service providers

10%

Minimum Forex earning of Rs.10 lakhs in the preceding financial year/current financial year.

All Indian Service providers of services listed in Appendix-10 of HBPv1

Entitlement in form of Duty Credit Scrip equivalent to % of forex earned during preceding financial year.

Eligibility Category

Vishesh Krishi and Gram Udyog Yojana [VKGUY]

q Objective: To promote § Agricultural produce and value added products, § Minor Forest Produce and their value added variants, § Gram Udyog Products,§ Forest Based Products,

q Eligible products are notified under Appendix 37A of HBPv1

q Duty Credit Entitlement:

Duty credit entitlement as a % of FOB value

Category

5%However, in case of DEPB claimed for packing material and Drawback Rate is upto 1%

3%If benefits under Chapter 4 are availed [Adv.Authon/DFIA/DEPB/Drawback]

Normal duty credit entitlement 5% + Addl. Duty credit entitlement 2% = Total 7%

Flowers, Fruits, Vegetables and Other Products

10% [provided that the total benefits for all status holders put together does not exceed Rs 100 Cr. ]

Agri. Infrastructure Incentive Scrip for Status Holders exporting agricultural products covered under ITC HS Chapters 1 to 24

5%Normal rate of duty credit under VKGYU

Focus Market Scheme [FMS]

q Export of all products to the notified countries.

q Entitlement – 3% of the FOB value of exports [w.e.f. 27.08.2009].

q List of Countries eligible for benefit under this scheme is given in Appendix 37C of HBPv1.

q Validity of FMS Duty Credit Scrip is 24 months. Revalidation is not allowed.

q In the New FTP 2009-14, 26 new countries have been notified, which are listed hereunder:

List of 26 Countries

BELIZEBJL249

SURINAMESRL238

BARBADOSBBL227

HAITIHTL216

NICARAGUANIL205

BAHAMASBSL194

PANAMAPAL183

COSTA RICACRL172

PUERTO RICOPRL161

Countries in Latin American Block

CountryCountry Code

Focus MarketCode

Sl. No.

Table 2: NEW FOCUS MARKETS

Contd…

LAOS (LAO PD REP)LAAS1126

SAMOAWSAS1025

VANUATU REPVUAS924

TUVALUTVAS823

TONGATOAS722

SOLOMON ISLANDSBAS621

PAPUA NEW GUINEAPGAS520

NAURU RPNRAS419

KIRIBATI REPKIAS318

FIJI ISFJAS217

DOMINICADML3116

ST. VINCENTVCL3015

ST. KITTS AND NEVISKNL2914

GRENADAGDL2813

GUYANAGYL2712

ST. LUCIALCL2611

ANTIGUAAGL2510

Focus Product Scheme [FPS]

q Eligibility: Exports of notified products [listed in Appendix 37D] to all countries (including SEZ units).

q Entitlement: as under

5% of FOB value of exports w.e.f. 27.08.2009

Toys and Sports Goods [Table 2 of New Appendix 37D]

EntitlementCategory of exports made w.e.f. 27.08.2009

Contd…

2% of FOB value of exports made w.e.f. 27.08.2009

Market Linked Focus Products [MLFPS] are now listed in Table 3 [OLD MLFPS products] or Table 5 [New MLFPS products] of New Appendix 37D


High-Tech Products Export Promotion Scheme given earlier in Appendix 37E is now given in Table 1 of New Appendix 37D [Sr. Nos. 64 to 76]


Other Special product(s)/sector(s) covered by Table 2 [Handmade Carpets and Handicraft Products] and Table 5 [New Handicraft products] of New Appendix 37D.


High Value Added Products now reflected in Table 1 of New Appendix 37D [Sr. Nos. 56 to 63]

Common Provisions

q Cenvat/Drawback available if CVD/Excise duty paid in cash or through debit under Duty Credit Scrip [DCS], except under SFIS.

q Govt. Reserves right to specify§ Ineligible export products or services or exports to such countries§ To change ceiling on DCS.§ Goods which can not be imported under the DCS.

q Telegraphic Release Advice (TRA) facility is available

q Free/restricted items under ITC HS are allowed to be imported, except items mentioned under Appendix 37B.

q Import under Lease financing is also allowed

Common Provisions

q Exclusivity of Entitlement: For a shipment, benefit under any one of schemes covered in Chapter 3 can alone be claimed, at exporter’soption.

q Transfer of Export Performance: not permitted.

q Single Port of Registration - After issue of DCS, but before registration with Customs, the Applicant can change the port of registration from RA concerned.

q Entitlement can be used for import from private / public bonded warehouse.

q Duty credit scrips can be utilised for payment of Customs Duties in case of EO defaults under Authorizations issued under Chapters 4 and 5 of this Policy. However, penalty / interest shall be required to be paid in cash.

Common Provisions

q Re-export of imported defective / unfit goods is allowed: § On re-exportation, fresh Scrip can be issued by concerned RA to

extent of 98% of debited amount with same port of registration and valid for a period equivalent to balance period available ondate of import

q Validity Period & Revalidation: Validity - 24 months. Revalidation not allowed.

q Last date of filing of application for Duty Credit Scrips:Applications for obtaining DCS shall be filed § within a period of twelve months from the date of export or § within six months from the date of realization or § three months from the date of printing / release of shipping bill,

whichever is later, in respect of shipments for which claim is being filed.

Summary

q Export promotion schemes under Chapter 3 are primarily additional benefits which can be used for cost competitiveness.

q These benefits are in the form of duty credit.

q Duty credit is transferable and can be sold in open market.

q Duty credit can be utilised for payment of Customs duty on permissible imports.

q SFIS scheme however is subject to actual user condition and hence can not be sold in open market.

Thought for the Day…Thought for the Day…

“You would achieve more, if you “You would achieve more, if you don’t mind who gets the credit.”don’t mind who gets the credit.”

@ Lois Lois McmasterMcmaster BujoldBujold

Mumbai - Head Off. A-203, Everest Chambers,Next to Star TV Office,Near Marol Naka, Andheri-Kurla Road,Andheri (East), Mumbai – 400 059.Tel: 022-28507615/28507329/65769126Fax: 022-28506419E-mail: [email protected]

Pune - Branch Off. EPI Centre, Opp. Indsearch,

Law College Road, Pune 411004.Tel: 020-65246159

Fax: 020-25465195 Email:

[email protected]

Sudhakar Kasture

Exim Institute[A Division of Helpline Impex Pvt. Ltd.]

intro, ftp 1,2,3-final

Business

gram udyog

asian clearing

freely convertible

actual user

state trading

special economic

software technology

duty credit