Foreign Trade Policy (FTP)
? Policy which was earlier termed as Exim policy is now termed as ‘Foreign Trade Policy’.
? It contents: Handbook of procedures (HBP), Standard input-output norms (SION) i.e. for duty exemption scheme, Classification of export & import items, Handbook of DEPB etc.
? It is a policy for regulating import and export of goods and services.
? It covers duty remission/exemption schemes for promotion of exports.
o Administration by DGFT:
FTP is controlled and supervised by DGFT (Director General of Foreign Trade).
Central Govt. can appoint DGFT.
FTP empowers DGFT to specify procedures to be followed by importer, exporter and licensing authority.
DGFT issues ‘authorisation’ for import/export.
‘Authorisation’ means a permission of foreign trade i.e. import/export.
Decision of DGFT is final.
Authorisation issued by DGFT or clarification issued by DGFT cannot be challenged even by custom authorities.
Electronic filing of application is permitted – Digital signature has been introduced.
If application is filed:
? After last date but within 6 months after it – Late cut/Late fees is 2%
? Delay between 6 months and 1 year – 5%
Every importer/exporter must obtain an ‘Import Export Code Number’ (IEC) from DGFT.
Application to DGFT for IEC with fees of Rs. 250
Application fees of import/export authorisation is not payable if application is by Govt., local authority, charitable or missionary purpose for import of goods, or import of goods (other than motor vehicle) for personal use.
Import/Export without IEC is not permitted.
[Module – Page 212 – Import/Export Authorisation – Read]
o Export Promotion Councils (EPC):
Export promotion councils have been set up to promote and develop export of the country.
EPC are non-profit autonomous organisations, registered as ‘Companies’ or ‘Registered Societies’.
EPC for EOU & SEZ units has also been constituted.
Some agencies like Coffee Board, Tea Board, Tobacco Board etc. are also considered as EPC and these are financially supported by Govt.
Exporter has to obtain Registration Cum Membership Certificate (RCMC) from EPC.
Membership of EPC is compulsory to get export incentives.
RCMC is valid for 5 years.
Exporter should submit ‘quarterly’ export returns to EPC.
Import Trade Classification (Harmonised System) notified by DGFT.
Gives item wise policy for import of various articles.
List is based on HSN system.
Policy in respect of each item is given against each item, in following categories –
? Free – no restriction on imports.
? Prohibited goods.
? Restricted through authorisation
? Importable through State Trading Enterprises (STE) by anyone on obtaining ‘Authorisation’ from DGFT.
o Policy for Import of goods:
Import of textile material using prohibited dyes is not permitted.
New cars can be imported only from country of manufacture. They should be right hand drive, with speedometer in KM.
Import of alcoholic beverages (liquor) will be as per mandatory requirements stipulated by State Govt.
Imports of Second Hand capital goods are freely permitted (except computers, because it requires authorisation) without actual user condition. Duty can be paid through DEPB credit.
Prohibited items – wild animals, their parts, ivory, fats/oil of animal origin, fish, pig fats, mutton tallow and animal rennet. These cannot be imported even on obtaining an ‘authorisation’.
Import of silver and gold and coins is free subject to RBI regulations.
Articles can be imported for export without an authorisation, if item is freely importable.
Repairs abroad and re-import – without authorisation.
Import of gifts is permitted when goods are freely importable. Gifts up to Rs. 10,000 are exempt from custom duty.
Import of live stock, live stock products and poultry products are prohibited.
Samples up to Rs. 1,00,000 can be imported by all exporters without duty (Rs. 3,00,000 for gem & jewellery).
Bona fide ‘commercial samples’ and ‘prototypes’ up to Rs. 10,000 are exempt from customs duty if imported by post or in aircraft or by courier service.
[Module – Page 214, 217 – General Restrictions – Read]
o Restrictions on Exports:
Prohibited goods for export – same as imports.
Items related to conservation of our natural resources, are mainly prohibited.
Gifts up to Rs. 5,00,000 can be exported without authorisation.
If goods exported were found to be defective/damaged or unfit, can be replaced free of charge by exporter, provided that, such replaced goods shall not under restricted category.
SCOMET items – export of ‘Special Chemicals, Organisms, Materials, Equipments and Technologies’ are either prohibited or restricted. Application for license for exporting these items is to be made to DGFT. Application will be considered by Exim Facilitation Committee (EFC).
General System of Preferences (GSP) – Under this scheme, developed countries extend tariff concessions to developing countries on unilateral basis.
Global System of Trade Preferences (GSTP) – Under this scheme, tariff concessions are exchanged among developing countries who have signed agreement. Some 46 countries are members of GSTP. Certificate of origin is required to be obtained from Export Inspection Council (EIC).
Asia-Pacific Trade Agreement (APTA) – Bangladesh, Sri Lanka, South Korea, India and China are exchanging tariff concessions under APTA. Certificate of origin is required to be obtained from Export Inspection Council (EIC).
Export Promotion Schemes
[Module – Page 220 to 232 – Read if possible]
? Advance Authorisation: (not transferable)
Inputs required manufacturing export products can be imported without payment of custom duty under ‘Advance Authorisation’.
Advance Authorisation can be granted to ‘merchant exporter’ or ‘manufacturer exporter’ to import raw material. (Merchant exporter means a person engaged in trading activity and exporting or intending to export goods)
Raw material can be imported before export of final product; the authorisation for this purpose is called ‘Advance Authorisation’.
Advance Authorisation is issued to allow duty free import of inputs with normal allowance for wastage.
Duty free import, of mandatory spares up to 10% of CIF value of authorisation, which are require to be exported.
Goods can be exported after submission of application to licensing authority.
Advance Authorisation will be for actual user only. It is not transferable, even after completion of export obligation.
Export should be within 24 months from date of issuance of authorisation.
Advance Authorisation can be revalidated for 6 months on payment of composition fee of 2% of duty saved on all unutilised imported items.
Further extension of 6 months can be obtained on payment of 5%...
No extension beyond 36 months.
Extension has to be obtained from licensing authority i.e. DGFT
EOU/SEZ/EHTP/BTP/STP can supply goods against Advance Authorisation.
? DEPB Scheme: (transferable)
Duty Entitlement Pass Book Scheme is similar to Cenvat Credit scheme.
The exporter gets credit when he exports the goods.
The credit can be utilised for payment of custom duty on imported goods.
The objective of the scheme is to neutralised incidence of customs duty on the import content of export product.
Exporter can have either DEPB or duty drawback and not both.
Under this scheme, exporter will be granted duty credit on the basis of notified entitlement rates i.e. notified by DGFT (a percentage of FOB)
Credit could not be used for payment of custom duty on capital goods.
Credit can be used for payment of basic custom duty as well as CVD. Also be used for payment of special CVD of 4%.
The credit can be transferable to another person. (Freely transferable)
DEPB is valid for 24 months for import.
The scheme is available to both manufacturer and merchant exporters.
Who cannot avail DEPB?
? Goods manufactured in customs bonded warehouse.
? Goods exported against discharge of export obligation under Advance Authorisation.
? EOU, SEZ, STP, BTP or EHTP units
? Export of goods of foreign origin, unless there is manufacture or processing.
? Exports made under specified paras of FTP.
DEPB is not actionable claim. It is sort of money which can be used either by dealer or anybody else. Hence it is not ‘goods’. (But it is freely tradable and it is taxable under sales tax).
? DFIA: (transferable)
Duty Free Import Authorisation.
The scheme is said to contain features of ‘Advance Authorisation’ and DFRC scheme.
Material imported under DFIA will be transferable after fulfillment of export obligation.
In case of DFIA, 20% value addition is required, except in case of ‘gem and jewellery’ sector.
DFIA is issued to allow duty free import of inputs used in manufacture of export product.
DFIA is issued on the basis of SION.
In case of some deemed exports, DFIA is available to sub-contractors also.
Cenvat credit will not be available in respect of inputs.
Drawback will be available only in respect of duty paid material, used in goods exported as per drawback rate fixed by Ministry of Finance.
? EPCG Authorisation:
Under ‘Export Promotion Capital Goods’ scheme, an authorisation holder can import capital goods, at concessional rate of custom duty of 5%.
Capital goods can be imported for pre-production, production and post-production including CKD/SKD of capital goods.
The export obligation will be 8 times of the duty saved.
Capital goods required for retailers having minimum area of ‘1,000 sqM’ is permissible.
However, second hand capital goods of Indian origin are not permitted.
Merchant exporter can also import capital goods under EPCG scheme if the capital goods are installed in the factory of their supporting manufacturer.
Importer has to fulfill export obligation equal to 8 times of duty saved on imported capital goods to be fulfilled over a period of 8 years.
50% obligation should be fulfilled in first 6 years and balance 50% in next 2 years.
SSI units will have export obligation equal to 6 times of duty saved.
In respect of EPCG authorisation for Rs. 100 crore or more, the export obligation required to be fulfilled over a period of 12 years.
EPCG authorisation can be clubbed for discharge of export obligation.