LEGISLATION

♣ Foreign Trade is regulated by ministry of commerce and industry.

♣ Director General of Foreign Trade handles full administration (DGFT).

♣ FTP is 5 years policy prepared under Foreign Trade Development & Regulation (D &R) Act 1992.

♣ Ministry and DGFT administered the FTP in formulation, control and supervisory. In administration of FTP DGFT takes help of Central Board of Indirect taxation and Customs (CBIC), RBI and State VAT Dept.

Also Read  – A Brief Understanding on Foreign Trade Policy (2015-20)- Part II

♣  CBIC:

(i) CBIC Comes under the Ministry of Finance

(ii) It has two departments namely customs and Central & GST facilitates in implementing the policy of GST.

(iii) Custom authority follows the policy formed by DGFT while clearing the Goods.

(iv) Central GST authorities needs to be involved for all matters of export where goods have to be cleared without payment.

♣ RBI: RBI is the nodal bank in the country which formulate the policies related to management of money, including payments and receipts of foreign exchange. It also monitors the receipt and payments of export and import. It also works under the Ministry of Finance.

♣ VAT: Since Vat is payable on some domestic goods but not on export goods, formalities within state VAT department assumes importance in ensuring tax free import.

Foreign Trade Development & Regulation (D &R) Act 1992. It Provide development and regulation of foreign trade by

• Facilitating Import into or

• Augmenting/Promoting export from India

Foreign Trade Policy • It is a set of guidelines and procedures and regulatory requirements issued or laid down by the central government in the matters related to the export and import of goods and services. It is also called EXIM Policy.

Announced in every five year with annual updation.

Objects • Developing Expert Potential (Board of trade recommend to the DGFT the where is the potential of which goods)

• Improving Export Promotion

• Encouraging foreign trade & creating favourable Balance of Payment

Guiding Principle of formulation of FTP 2015 • Generation of Employment and increasing value addition in the country, in keeping with Make in India Vision.

• Focus on improving and ease of doing business (Less compliances and formalities), Trade facilitation centre, simplifying procedures (Payment challan, Bill of entry, invoice), extensive use of e governance move towards the paperless working.

• Encouraging e-commerce export of specified product.

• Steps to encourage manufacture and export by SEZ, EOQ, STP, EHTP, and BTP

• Duty Credit Scrip to (a) encourage manufacture and export od specified product in specified b) export of specified services

• Special efforts to resolve quality complaints and trade dispute. The various measures taken in the said direction.

• The number of mandatory documents required for export and import of goods have been reduced to 3 each.

• The facility of 24 X 7 custom clearances on specified port.

Administration of Foreign Trade Policy • FTP is formulated, controlled and supervised by the DGFT.

• DGFT is an attached office of Ministry of commerce and Industry.

• Role of DGFT

i) Issue authorisation (license) for import and export.

ii) Grant Import Export Code (IEC)

iii) Order of DGFT is Final and binding in respect of Interpretation of FTP and Classification of any item in ITC.

iv) Authorities involved with DGFT: RBI, CBIC and State VAT.

CONTENT OF FOREIGN TRADE POLICY (FTP) 15-20

FTP (15-20) notified by the central government as on 1st April, 2015. This policy has been extended till this 31st March 2021. This policy contains the following:

1. Handbook of Procedure:

  • HBP 2015-20 containing 9 chapters, covering procedural aspects of policy.
  • This has been notified by the DGFT on 01.04.2015
  • It is amended from time to time as per requirements

2. Appendices and Aayat Niriyat Form (AANF):

  • Containing various appendices and forms relating to the export and imports

3. Input Output Norms (SION-Standard Input Output Norm)

  • Standard Input-Output norms (SION) various products are notified from time to time.
  • Based on SION exporters are provided the facility to make duty free import of input required for manufacture of export of products under the duty exemption scheme like advance authorisation and duty free import authorisation scheme (DFIA)

4. Indian trade classification code Based on Harmonised system of coding (ITC (HS)

  • The Export Import Policy regarding import or export of a specific item is given in Indian trade classification code Based on Harmonised system of coding (ITC (HS))
  • ITC-HS Coding was adopted in India for import-export operation
  • Indian custom usage 8 digit ITC -HS codes to suit the national trade requirements.
  • Schedule I Import: It describes the rules and guidelines related to Import Policies. Prohibited goods, Free Goods, Restricted Goods
  • Schedule II Import: It describes the rules and guidelines related to Export Policies. Most of the goods are free goods except certain restriction on few goods.

AUTHORITIES RELATED TO THE FOREIGN TRADE

1. Director General of Foreign Trade (DGFT)

  • Reginal Authority (RA)(Branches of DGFT): Authority competent to grant an authorisation under FT (D & R) Act. It is working under the control of DGFT

2. Committee:

  • Norms Committee: It fixes/modify SION under all scheme
  • EPCG Committee: It determines nexus of capital goods and benefit under EPCG.

3. Board of Trade

BOT has been constituted to advise government on policy measures for increasing:

  • Export
  • Review export Performance
  • Review Policy
  • Procedures for imports and exports
  • Examine issue relevant for Promotion of Indian Foreign Trade
  • Commerce and industry minister will be the chairman of BOT
  • Government shall also nominate 25 persons, of whom at least 10 will be expert in trade policy

4. Export Promotion Council (EPC)

EPCs are non-profit autonomous organisation (No control of Government) under the Companies Act or the Societies Registration Act, as the case may be

  • These have been set up to promote and develop export of the country.
  • They assist and guide exporters.
  • Their main is to project India’s image abroad as a reliable supplier of high quality of goods and services.

REGISTRATION CUM MEMBERSHIP CERTIFICATE (RCMC)

  • Exporter has to obtain RCMC from EPC or Commodity Board.
  • Mandatory: If Exporter intends to obtain export incentive scheme then RCMC is mandatory.
  • Optional: If exporter does not intend to obtain Export Incentive scheme than RCMC is optional

SOME IMPORTANT CONCEPT

IMPORT-EXPORT CODE • It is unique 10 digit code issued by DGFT.

• IEC is mandatory for export and import of Goods and services in case specifically exempt.

• Permanent Account Number is the pre requisite of IEC.

• Only one IEC can be issued against a single PAN

DGFT has decided to use income tax PAN as IEC number i.e. IEC will be issued by DGFT with the difference that it will be alpha numeric (instead of 10 digit at present) and will be same as PAN of an entity.

With the introduction of GST and GSTIN would be used for the purpose of:

(i) Credit flows of IGST on import of goods, and

(ii) Refund or rebate of IGST related to export of goods.

It has been decided that the importer/exporter would need to declare only GSTIN (wherever registered with GSTN) at the time of import and export of goods. For residuary categories, UIN issued by GSTN authenticated by DGFT would be used. For others common number will be notified by the DGFT.

• AN application for IEC is to be made manually to the Registered Authority of DGFT or alternatively it can be filed in Form ANF 2A and shall be accompanied by prescribed documents.

• In case of the STPI/ EHTP/BTP units the regional offices of the DGFT having jurisdiction over the district in which the registered/head office of the STPI units is located shall issue or amend the IECs.

AUTHORISATION • Meaning: Permission to export and import as per the provisions of FTP.

• Terms and condition of authorisation: Every authorisation shall be valid for prescribed period of validity and shall contain such terms and conditions as may be specified by Regional Authority (RA) which may include:

1. Quantity description and Value of goods;

2. Actual User condition;

3. Export Obligation;

4. Minimum value addition to be achieved;

5. Minimum export/import price;

6. Bank Guarantee/Legal undertaking/Bond with custom authority/RA;

7. Validity period of export import as specified in Handbook procedure

• Authorisation not a right: No person can claim authorisation as a right and DGFT or RA shall have power to refuse to grant or renew the same in accordance with the provision of FT (D&R) Act and rules made thereunder and FTP.

STATE TRADING ENTERPRISES • STEs are governmental & non-governmental enterprises including marketing board which deals with goods for export/or import. Eg sugar pulses certain chemicals petroleum product.

• Any good, import or export of which is governed through exclusive or special privileges (grant of subsidy) granted to the STEs, may be imported and exported by STEs as per conditions specified in ITC(HS).

• DGFT may however grant authorisation to any other person to import or export any of these goods.

• Example of STE in India:

The Food Corporation of India exclusively authorised for import of most cereals. The State Trading corporation of India Limited (Government of India Enterprise)

STATUS HOLDER • Status holder are business leaders who have excelled in international trade and have successfully contributed to the country foreign trade.

• All exporters of the country having an import-export code number shall be eligible for the recognition as a status holder.

• Status recognition depends upon the export performance.

• An application shall be categorised as status holder upon achieving export performance during current and previous two financial year, as indicated below:

Status of Export performance FOB/FOR value* In (US $) (Export performance in at least 2 year out of 4 years)
1 star export house 30,00,000
2 star export house 2,50,00,000
3 star export house 10,00,00,000
4 star export house 50,00,00,000
5 star export house 200,00,00,000

• Clubbing Provision for determining status:

i. Holding Company export and subsidiary export can be clubbed.

ii. Export of EOU unit/SEZ units can be clubbed with its DTA units.

• Privilege of status holder: Status holder are granted certain benefits like:

i. Authorisation and custom clearance for both export and import are on self-declaration basis.

ii. Fixation of output norms (SION) are on priority i.e. within 60 days

iii. Exemption from compulsory negotiation of documents through banks. The remittance receipts, however would be continued to be received through banking channels.

iv. Exemption from furnishing bank guarantee scheme under FTP

v. Two star and above export houses shall be permitted to establish export warehouses.

vi. Three star and above export houses shall be entitled to get benefit of accredited client programme (APEC) as per the guideline of CBEC.

vii. Status holder shall be entitled to export freely exportable items (excluding gems and jewellery, articles of gold and precious metals) on free cost basis for export promotion subject to annual limit as below:

a) Annual limit of 2% of average annual realisation during preceding 3 years licensing years for all exporters (excluding the exporters for the following sector: 1 Gems and Jewellery Sector, 2. Article of gold and precious metal sector)

b) Annual limit of Rs 1 crore or 2% of average annual realisation during preceding 3 years licensing years, whichever is lower`1 for all exporters (for exporters of the following sector: 1 Gems and Jewellery Sector, 2. Article of gold and precious metal sector)

STANDARD INPUT AND OUTPUT NORMS (SION) Concept of SION

• It is standard norms which define the amount of input/output required to manufacture unit of output for export house.

• SION is notified by the DGFT in handbook (VOL 2)

• The DGFT from time to time issue notification for fixation or addition of SION for different export product.

VALUE ADDITION • It is calculate as follows except jems and jewellery sector:

VA = [(A-B) X 100]/B

A= FOB Value of export realised or FOB value of supply received.

B= CIF value of import covered by authorisation plus any other imported material used on which benefits of duty drawback is claimed or intended to be claimed.

Important points to be noted:

If some items are supplied free of cost by foreign buyer, its notional value will be added in the CIF value of import and FOB value of export for the purpose of calculating value addition.

Exports to SEZ units/ supplies to developer / co developers irrespective of currency realisation, would be covered.

EXPORT CREDIT AGENCIES w.e.f. 5-12-2017 Export Credit Agencies (ECAs) are policy instrument for government to support exports. ECAs support export by insurance, guarantee, and also direct lending, Export credit agency like Export Credit Guarantee Corporation of India Limited (ECGC) provides credit insurance support to export and import credit lending.

Covers issued by ECGC to exporters, protect against losses arises out of payment failure due to insolvency or default of buyer or due to political risks. Export can diversify their market in addition to protecting existing markets through such cover. ECGC also supports Medium and long term (MLT) exports including project export.

Exim Bank is other ECA in the business of lending for MLT export and fronting the government line of credit.

2) ECGC indemnify losses of exporters in export trade due to insolvency or default of buyer additionally losses to the political risk like war, sudden import restriction, Promulgations of law or decree after the shipment has been effected are also covered.

Some of the anti-dumping measures or non-tariff barriers introduced after shipment has been made will come under the political risks. In such cases risks are protected by ECGC.

Also Read-

Brief Understanding on Foreign Trade Policy (2015-20)- Part III

A Brief Understanding on Foreign Trade Policy (2015-20)- Part II

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