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  • 1. INTERNATIONAL TRADE LESSON 19: EXPOR T- IMPORT POLICY OF INDIAExport Import Policy of India ment (Ministry of Commerce). India’s EXIM policy, in general,• Introduction aims at developing export potential, improving export perfor- mance, encouraging foreign trade and creating favourable• Meaning balance of payments position.• General Objectives. Legal Framework for Foreign Trade of IndiaExport-Import Policy 1997-2000 In India, the legal framework for the regulation of foreign trade• Objective. is mainly provided by the Foreign Trade (Development and• Highlights. Regulation) Act, 1992, Garments Export Entitle-ment Policy: 2000-2004, Export (Quality Control and Inspection) Act, 1963,• Implications. Customs and Central Excise Duties Drawback Rules, 1995,Export-Import Policy 2002-2007 Foreign Exchange Management Act, 1999 --and the Customs• Objective. and Central Excise Regulations.• Highlights. The main objective of the Foreign Trade (Development and• Implications. Regulation) Act is to provide for the development and regula- tion of foreign trade by facilitating imports into, andIntroduction augmenting exports from India. This Act has replaced theTrade policy governs exports from and imports into a country. earlier law namely, the imports and Exports (Control) Act1947.It is one of the various policy instruments used by a country to A comparison of the nomenclature of the two Acts makes itattain her goals of economic develop-ment. This policy is thus, very dear that there is a shift in the focus of the law fromformulated keeping in view, the national priorities for economic control to development of foreign trade. This shift in the focusdevelopment and the international commitments made by the is the outcome of the emphasis on liberalisation andcountry. It is essential that the entrepreneurs and the export globalisation as a part of the process of economic reformsmanagers understand the trade policy as it provides the vital initiated in India since June 1991.inputs for the formulation of their business growth strategies. The application of the provisions of the Foreign TradeIn India, the trade policy Le., export-import policy is formu- (Development & Regulation) Act 1992 has been exempted forlated by the Ministry of Commerce, Government of India in certain trade transactions vide Foreign Trade (Exemption fromterms of section 5 of the Foreign Trade (Development and application of Rules in certain cases) Order 1993Regulation) Act,1992Besides, the Government of India alsoannounced on January 30,2002 a Medium Term Export General Objectives of the Exim Policystrategy, to guide the formulation the Export-Import Policy: Government control import of non-essential items through an2002 - 07 with the, objective of achieving a share of 1 % in import policy. At the same time, all-out efforts are made toworld trade by the end of 2006 - 07 from the present I share of promote exports. Thus, there are two aspects of trade policy;0.6% (2000 - 01). The text of this strategy is given as Appendix the import policy which is concerned with regulation andVII at the end of the book. The present Export - Import Policy management of imports and the export policy which iswas announced on 31.3.2002 for a period of 5 years with effect concerned with exports not only promotion but also regula-from 1.4.2002 to 31.3.2007 co-terminus with Tenth Five Year tion. The main objective of the Government policy is toPlan. It covers both the trade in merchandise and services. The promote exports to the maximum extent. Exports should bepresent chapter explains legal framework affecting foreign trade promoted in such a manner that the economy of the country isof India particularly with reference to Export-Import Policy; not affected by unregulated exports of items specially needed2002 - 2007. It also discusses the preferential trading arrange- within the country. Export control is, therefore, exercised inments affecting exports and imports of India. respect of a limited number of items whose supply position demands that their exports should be regulated in the largerMeaning interests of the country. In other words, the policy Aims atThe foreign trade of India is guided by the Export-Import(Exim) Policy of the government of India arid is regulated by (i) Promoting exports and augmenting foreign exchangethe Foreign Trade (Development and Regulation) Act, 1992. earnings; andExim Policy contains various policy decisions taken by the (ii) Regulating exports wherever it is necessary for the purposesgovernment in the sphere of foreign trade, i.e., with respect to of either avoiding competition among the Indianimports and exports from the country and more especially exporters or ensuring domestic availability of essentialexport promotion measures, policies and procedures related items of mass consumption at reasonable prices.thereto. It is prepared and announced by the Central Govern- © Copy Right: Rai University11.675.3 141
  • 2. The government of India announced sweeping changes in the c. To enhance the technoloca1 strength and efficiency ofINTERNATIONAL TRADE trade policy during the year 1991. As a result, the new Export- Indian agriculture, industry and services, thereby, Import policy came into force from April I, 1992. This was an improving their competitiveness. important step towards the economic reforms of India. In d. To generate new employment. Opportunities and order to bring stability and continuity, the policy was made for encourage the attainment of internationally accepted the duration of 5 years. In this policy import was liberalised and standards of quality. export promotion measures were strengthened. The steps were e. To provide quality consumer products at reasonable prices. also taken to boost the domestic industrial production. The more aspects of the export-import policy Highlights of the Exim Policy 1997-2002 (1992-97) include: introduction of the duty-free Export a. Period of the Policy Promotion Capital Goods (Epcg) scheme, strengthening of the • This policy is valid for five years instead of t}:1ree Advance Licensing System, waiving of the condition on export years as in the case of earlier policies. It is effective from proceeds realisation, rationalisation of schemes related to 1st April 1997 to.31st March 2002. Export Oriented Units and units in the Export Processing b. Liberalisation Zones. The thrust area of this policy was to liberalise imports and boost exports. • A very important feature of the policy is liberalisation. The need for further liberalisation of imports and promotion • It has substantially eliminated licensing, quantitative of exports was felt and the Government of India announced restrictions and other regulatory and discretionary the new Export-Import Policy (1997, 2002). This policy has controls. All goods, except those coming under further simplified the procedures and reduced the interface negative list, may be freely imported or exported. between exporters and the Director General of foreign Trade c. Imports Liberalisation (Dgft) by reducing the number of documents required for • Of 542 items from the restricted list 150 items have export by half. Import has been further liberalised and efforts been transferred to Special Import Licence (SIL) list and have been made to promote exports. remaining 392 items have been transferred to Open The new Exim Policy 1997-2002 aims at consolidating the gains General Licence (OGL) List. made so far, restructuring the schemes to achieve further d. Export Promotion Capital Goods (EPCG) Scheme liberalisation and increased transparency in the changed trading • The duty on imported capital goods under EPCG environment. It focusses on the strengthening the domestic scheme has been reduced from 15% to 10%. industrial growth and exports and enabling higher level of • Under the zero duty EPCG Scheme, the threshold employment with due recognition of the key role played by the limit has been reduced from Rs. 20 crore to Rs. 5 crore SSI sector. It recognises the fact that there is no substitute for for agricultural and allied! Sectors growth, which creates jobs and generates income. Such trade activities also help in stimulating expansion and diversification e. Advance Licence Scheme of production in the country. The policy has focussed on the • Under Advance License Scheme, the period for export need to let exporters concentrate on the manufacturing and obligation has been extended from 12 months to 18 marketing of their products globally and operate in a hassle free months. environment. The effort has been made to simplify and • A further extension for six months can be given on streamline the procedure. payment of 1 % of the- value of unfulfilled exports. The objectives will be achieved through the coordinated efforts f. Duty Entitlement Pass Book (DEPB) Scheme of all the departments of the government in general and the • Under the DEPB, an exporter may apply for credit, as a ty1inistry of Commerce and the Directorate General of Foreign specified percentage of FOB value of exports, made in Trade and its network of Regional Offices in particular. Further freely convertible currency. it will be achieved with a shared vision and commitment and in the, best spirit of facilitation in the interest of export.“ • Such credit can be can be utilised for import of raw materials, intermediates, components, parts, packaging Objectives of the Exim Policy 1997-2002 materials, etc. for export purpose. The principal objectives of the EXIM Policy 1997 -2002 are as g. Special Import Licence (SIL) :- under: - • 150 items from the restricted list have been transferred a. To accelerate the economy from low level of economic to SIL. activities to high level of economic activities by making it a globally oriented vibrant economy and to derive • SIL on exports from SSIs has been increased from 1 % to 2%. maximum benefits fro~ expanding global market opportunities. • Export houses and all forms of trading houses are b. To stimulate sustained economic growth by providing eligible for additional SIL of 1 % on exports of access to essential raw materials, intermediates, products from SSIs from North Eastern States. components,’ consumables and capital goods required for augmenting production. © Copy Right: Rai University 142 11.675.3
  • 3. • Additional SIL has been declared for exploration of • Under the zero duty EPCG Scheme, the threshold level INTERNATIONAL TRADE new markets and for export of agro products. has been reduced from Rs. 20 crore to Rs. 5 crore for • The SIL entitlement of exporters holding ISO 9000 agriculture and allied sectors. certification has been? Increased from 2% to 5% of the Implications of the Exim Policy 1997 - 2002 FOB value of exports. The major implications of the EXIM Policy 1997-2002 are :-h. Export Houses and Trading Houses (a) Globalisation of Indian Economy :- • The EXIM policy 1997-02 (Amount In Rs. Crores) For 2000-01 Period proposed to prepare a framework Fob Criterion Nfe Criterion for globalisation of Indian Annual FOB value Annual FOB value economy. Average FOB of export Average FOB of export • This is evident from the very first value of export made value of export made objective of the policy, which states made during during made during during “To accelerate the economy from preceding 3 preceding preceding 3 preceding low level of economic activities to- licensing licensing licensing years licensing high level of economic activities by years years making it a globally oriented Eh 15 22 12 18 vibrant economy and to derive Th 75 112 62 90 maximum benefits from expanding global market opportunities.” Sth 375 560 312 450 • The Indian economy has been Ssth 1125 1680 937 1350 exposed to more foreignThe criteria for recognition of export houses and all forms of competition. The regime of hightrading houses has been modified. protection is gradually’ vanishing.(i) Deemed Exports . • It means, in order to survive, Indian • Deemed exports facilities have been extended to oil companies will have to pay due attention to and gas sectors in addition to power sector. cost reduction, improvement in quality, delivery schedules and after sales service.(j) Software • At the same time, Indian industry’s have also been • Software units can undertake exports using data given an opportunity to globalise their business by communication links or through courier service. allowing them to import machineries and raw materials • Import of computer systems has been brought under from abroad on liberal terms. the purview of EPCG scheme. . (a) Impact on the Indian Industry :-(k) Computerisation of DGFT Offices • In the EXIM policy 1997-02, a series of reform • By 1998, most DGFT transactions will be on line so as measures have been introduced in order to give boost reduce paper work and avoid delay in disposal of to India’s industrial growth and generate employment applications. opportunities in non-agricultural sector.(l) SSI Units • The reduction of duty from 15% to 10% under EPCG • SIL on exports from ‘SSls has been increased from scheme will enable Indian firms to import capital 1 % to 2%. goods. This will improve the quality and • ‘ Export houses and all forms of trading houses are productivity of the Indian industry. eligible for additional SIL of • However, liberalisation of imports by transferring 542 • 1 % on exports of products from SSls from North items from restricted list to OGL and SIL list would eastern States. adversely affect the growth of, consumer goods industry in India, as most of .these items are • Reduction of threshold level to Rs. 5 crore from Rs. consumer goods items. 20 crore under EPCG scheme will benefit SSls. (b) Impact on Agriculture Many encouraging steps have been(m) Agriculture Sector taken in order to give a boost to Indian agricultural sector. • Double weightage ‘will be given for agro exports in • Double weightage for agro exports while calculating the calculating the eligibility for export houses and all eligibility for export houses and all forms of trading forms of trading houses. houses. • Additional SIL of 1 % has been declared for export of • Additional SIL of 1 % for export of agro products. agro products. • EOUs’ and units in EPZs in agriculture and allied • EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the domestic sectors can sell 50% of their output in the tariff area (DTA) on payment of duty. domestic tariff area (DT1) on payment of duty. © Copy Right: Rai University 11.675.3 143
  • 4. • Under .the zero duty EPCG Scheme, the threshold The main policy provisions are given in the policy documentINTERNATIONAL TRADE level has been reduced from Rs. 20 crore to Rs.. 5 crore entitled “Export -Import Policy 2002-2007”. An exporter will for agriculture and allied sectors. have to refer to the Handbook of Procedures Volume-I to (c) Impact on. Foreign Investment .:. know the procedures, the agencies and the documentation required to take advantage of a certain provision of the policy. • In order to encourage foreign investment in India, the There is a para-by-para correspondence between the Policy and EXIM policy 1997-02 has permitted 100% foreign the Handbook of Procedures Volume-I. Thus, if an exporter equity participation in the case of 100% EOUs, and finds that para 6.2 of the policy is relevant for his business units set up in EPZs. enterprise then he should also refer to the corresponding para • Due to liberalisation of procedural formalities, foreign of the Handbook of Procedures Volume- I to know precisely companies may bee attracted to set up manufacturing what is to be done t01ake advantage of the policy provision. units in India. The Handbook of Proce-dures Volume-II provides a very vital • Full Convertibility of Indian Rupee on revenue information as regards the standard input-output norms in account would also give a fillip to foreign investment regard to items of export from India. Based on these norms, in India. exporters are provided the facility to make duty-free import of (d) Impact on Quality Upgradation inputs required for manufacture of export products under the Duty Exemption Scheme/Duty Remission Scheme. The policy • The SIL entitlement of exporters holding ISO 9000 regarding import or export of a specific item is given in the certification has been increased from 2% to 5% of the document entitled “ITC (HS) Classifications of Export - FOB value of exports. Import Items”. • This would encourage Indian industries to undertake In addition to these policy documents, an export enterprise research and development programmers and upgrade should also refer to the various policy circulars and trade notices the quality of their products. issued by various regulatory authorities deal-ing with different • Liberalisation of EPCG scheme would encourage aspects of foreign trade. One can refer to these notices either by Indian industries to import capital goods and improve visiting the relevant web site of the authority concerned or by quality and increase productivity of goods. referring to various trade magazines which circulate them. (e) Impact on Self-reliance Objectives of The Export- Import Policy 2002 - 2007 • One of the long-term objectives of the Indian The export-import policy 1997-2002 carried forward the process planning is to become self- reliant. This objective is of liberalization and globalization set in motion by the process well reflected in the EXIM Policy 1997-02. of economic reforms initiated since June, 1991. These reforms • The policy aims at encouraging domestic sourcing of had aimed at restructuring the Indian economy to increase the raw materials, so as to build up a strong domestic productivity and competitiveness of foreign trade enterprises in production base. order to achieve a higher rate of growth in exports. It also • In order to achieve this the policy has also extended the enabled the foreign trade grow in an environment of liberaliza- benefits given to exporters to deemed exporters. This tion from licensing procedures, quantitative restrictions, would lead to import substitution. discretionary bureau-cratic controls and cumbersome documen- tation procedures. The present Export-Import-Policy: • Oil, power and natural gas sectors have also been 2002-2007 aims at facilitating the growth in exports to attain a brought under the purview of deemed exports. share of at least 1 % of global merchandise trade by the end of However, the globalisation policy of the government may harm 2006-07. Specifically, main objectives of the present policy are as the interests of SSls and cottage industries, as they may not be follows: able to compete with MNCs. 1). To stimulate sustained economic growth by providing Export- Import Policy 2002 - 2007 access to essential raw ma- terials,intermediates, The Export- Import Policy: 2002 - 2007 deals with both the components, consumables and capital goods required for export and import of merchandise and services. It is worth augmenting production and providing services. mentioning here that the Export -Import Policy: 1997 - 2002 2). To enhance the technological strength and efficiency of had accorded a status of exporter to the business firm export- Indian agriculture, indus-try and services, thereby ing services with effect from1.4.1999. Such business firms are improving their competitive strength while generating new known as Service Providers. employment opportunities and encourage the attainment The Export- Import Policy has been described in the following of internationally accepted standards of quality; and documents: 3). To provide consumers with good quality products and • Export- Import Policy: 2002- 2007 services at internationally competitive prices while at the • Handbook of Procedures Volume I same time creating a level playing field for the domestic producers • Handbook of Procedures Volume II • ITC(HS) Classification of Export- Import Items © Copy Right: Rai University 144 11.675.3
  • 5. Features of Exim Policy (c) Small Scale Industry INTERNATIONAL TRADEUnion Commerce and Industry Minister Mr. Murasoli Maran With a view to encouraging further development of centres ofannounced the Exim policy for the 5 year period (2002-07) on economic and export excellence such as Tirpur for hosiery,March 31, 2002. The main thrust of the policy is to push India’s woollen blankets in Panipat, woollen knitear in Ludhiana,exports aggressively by undertaking several measures aimed at following benefits would be available to small-scale sector.augmenting exports of farm goods, the small scale sector, • EPCG facility for the common service providers intextiles, gems and jewellery, electronic hardware etc. Besides these areas.these, the policy aims to reduce transaction cost to trade • Market Access Initiative (MAl) for creating focusedthrough a number of measures to bring about procedural technological services and marketing abroad to thesimplifications. In addition, the Exim policy removes quantita- recognised associations of units in SSI.tive restrictions (QRs) on exports, except a few sensitive items. • Entitlement for Export House Status at Rs. 5 crore1. Special Economic Zones (SEZs) instead of Rs.15 crore for others.(a) Offshore Banking Units (OBUs) shall be permitted in (d) Leather Special Economic Zones Duty free imports upto 3% of f.o.b. value combined to leather (SEZs). garments has been extended to all leather products.(b) Units in SEZ would be permitted to undertake hedging of (e) Textiles commodity price- risks, provided such transactions are • Sample fabrics permitted duty free within the 3% limit undertaken by the units ‘on stand- alone basis. for trimmings and embellishments.(c) Units in SEZ shall be permitted External Commercial • Additional items such as zip fasteners, inlay cards, Borrowings (ECBs) for a tenure of less than three years. eyelets, rivets, toggles, Velcro tape, cord and cord(d) Four existing EPZs have been converted into SEZs and 13 stopper included in input output norms. New SEZs have • Duty Entitlement Passbook (DEPB) rates for all kinds already been given approval. of blended fabrics permitted.2. Employment Oriented Measures:- Exim (2002-07) policy (f) Gem and Jewellery :- initiated a number of measures which would help • Import of rough diamonds is allowed freely at 0% employment orientation. Among them were the following: customs duty.(a) Agriculture • Licensing regime for rough diamond is being • Removal of quantitative and packaging restrictions on abolished. wheat and its products, • Value addition norms for export of plain jewellery • Butter, pulses, grain and flour of barley, maize, bajra, reduced to 7% and for all merchandised unstudded ragi and jowar. jewellery to 3%. • Removal of restrictions on export of all cultivated • Personal carriage of jewellery allowed through (other than wild) varieties of seed, except jute and Hyderabad and Jaipur airport as well. onion. Technology Oriented • 20 Agricultural Export Zones have been notified. (a) Electronic Hardware • Transport subsidy for export of fruits, vegetables, floriculture, poultry and dairy products. • Conversion of the Electronic Hardware Technology Park (Ehtp) into zero duty regime under the ITA • 3% special DEPB rate for primary and processed foods (Information Technology Agreement)-I exported in retail packaging of 1 kg. or less. • Net Foreign Exchange as Percentage of Exports(b) Cottage Sector and Handicrafts :- (Neep) to be made positive in 5 years. • An amount of Rs. 5 crore under Market Access • No other export obligation for units in Ehtp. Initiative (MAl) has been earmarked for promoting cottage sector exports coming under the Khadi and (b) Chemicals and Pharmaceuticals :- Village Industries Commission (KVIC). • 65% of DEPB rate for pesticides formulations. • Market Access Initiative (MAI) scheme for the • No limit on export of samples. . development of website for virtual exhibition of • Reimbursement of 50% of registration fees on products from the handicrafts sector. , registration of drugs. • Entitlement for Export House Status at Rs. 5 crore (c) Projects: instead of Rs.15 crore for others. • Free import of equipment and other goods used • Entitlement to duty free imports of an enlarged list of abroad for more than one year. items as embellishments upto3% of FOB value of exports. © Copy Right: Rai University11.675.3 145
  • 6. Growth Oriented • The percentage of physical examination of exportINTERNATIONAL TRADE (a) Strategic Package for Status Holders: cargo has already been reduced to less than 10% except for a few sensitive destinations. • Licence, certificate, permissions. and customs clearances for both imports and exports on self-declaration basis. • Fixation of special brand rate of drawback within 15 days. • Priority finance for medium and long term capital requirement as per conditions notified by the RBI. (c) Banks • Exemption from compulsory negotiation of documents • Direct negotiation of export documents to be through banks, However, the remittance would continue permitted. to be received through banking channels. • 100% retention in Exchange Earners Foreign Currency • 100% retention of foreign exchange in Exchange Earner’s (EEFC) accounts. Foreign Currency 1EEFC) account. • Enhancement in normal repatriation period from 180 • Enhancement in normal repatriation period from 180 days days to 360 days.’ to 360 days, Trust Based (b) Diversification of Markets :- (a) Import and export of samples to be liberalised for • Setting up of “Business Centre” in Indian missions encouraging product up gradation abroad for visiting Indian exporters/businessmen.. (b) Penal interest rate for bonafide defaults to be brought • ITPO portal to host a permanent virtual exhibition of down from 24% to 15%. Indian export products. (c) No penalty for non-realisation of export proceeds in • Focus Latin American Countries (LAC) has been respect of cases covered. by ECGC insurance package. extended upto March 2003. (d) No seizure of stock in trade so as to disrupt the • Focus Africa has been launched for developing trade manufacturing process affecting delivery relations with the Sub-Saharan African region. The schedule of exporters. exporters exporting to these markets shall be given (e) Foreign Inward Remittance Certificate (FIRC) to be Export House Status. on export of Rs. 5 crore. accepted in lieu of Bank Realisation • Links with the Commonwealth of Independent States Certificate for documents negotiated directly. (CIS) countries to be revived. (f) Optional facility to convert from one scheme to another (c) North Eastern States, Sikkim and Jammu and Kashmir :- scheme. In case the exporter is denied the benefit under • Transport subsidy for exports to be given to units one scheme, he shall be entitled to claim benefit under located in North East, Sikkim and-Jammu and some other scheme. Kashmir so as to offset the disadvantage of being far (g) Newcomers. to be entitled for licences without any from ports. verification against execution of Bank Guarantee. (d) Neutralising High Fuel Cost:- Duty Neutralisation Instruments • Fuel costs to be rebated for all export products. This (a) Advance Licence would enhance the cost competitiveness of our export products. • Duty Exemption Entitlement Certificate (DEEC) book to be abolished. Redemption on the basis of Procedural Reforms Shipping Bill and Bank Realisation Certificate. (a) Dgft • Withdrawal of Advance Licence for Annual • The new 8 digit commodity classification for imports Requirement (AAL) scheme. The exporters can avail introduced by the Director General of Foreign Trade Advance Licence for any value. (DGFT) would also be adopted by the Customs and (b) Duty Entitlement Passbook (DEPB) Scheme :- Director: General of Commercial Intelligence and Statistics (DGCI&S) shortly. This will eliminate the • Value cap exemption granted on 429 items to continue. classification disputes and hence reduce transaction • DEPB rates slashed on 8 out of 10 items. costs and time. • Reduction in rates only after due notice. • The maximum fee limit for electronic application under • No Present Market Value (PMV) verification except on various schemes has been reduced from Rs. 1.5 lakh to specific intelligence’ Rs. 1.00 lakh. • Same DEPB rate for exports whether as CBUs or in • Same day licensing introduced in all regional offices. CKD/SKD form. . (b) Customs • DEPB for transport vehicles to Nepal in free foreign • Adoption and harmonisation of the 8 digit Indian exchange. Trade Classification (ITC) Harmonised System (HS) code. © Copy Right: Rai University 146 11.675.3
  • 7. (c) Export Promotion Capital Goods (EPCG):- competitiveness, the following facilities have been extended INTERNATIONAL TRADE • EPCG licences ‘of Rs. 100 crore or more to have 12 to this sector :- year export obligation period with 5 year moratorium • Incentives such as Market Access Initiative (MAl), duty period. free imports upto 3% of FOB value of exports, • Export obligation fulfillment period extended from 8 EPCG facility, etc. years to 12 years in respect of units in Agricultural • Entitlement for Export House Status at Rs. 5 crore Export Zones and in respect of companies under the instead of Rs.15crore for others. These steps would revival plan of BIFR. . encourage units in cottage industries to develop their • Supplies under Deemed Exports to be eligible for export potentiality. export obligation fulfilment along with deemed export (d) Implications on Small Scale Industry :- With a view to benefit encourage further development of centres of economic andImplications of The Exim Policy 2002- 07 export excellence as Tripura for hosiery, woollen blankets inThe implications of the EXIM Policy 2002-07 are as follows :- Panipat, woollen knitwear in Ludhiana, the following benefits have been made available to the small scale sector :-(a) All-round Development of Indian Economy:. The Exim • Common service providers in these areas shall be 2002-07emphasises all-round development of Indian entitled for facility of EPGC Scheme. . economy by giving due weightage to different sectors of the economy. That is why. the policy has been described as • Availability of Market Access Initiative Scheme for creating focused technological services and marketing • Employment Oriented. abroad. • Technology Oriented. • Entitlement for Export House Status at Rs. 5 crore • Growth Oriented. . instead of Rs.15 crore for others. • This has also been reflected in its objectives :- These steps would lead to development of new centres of • To facilitate sustained growth in exports. economic and export excellence. • To stimulate sustained economic growth. (e) Implications on Gem and Jewellery Industry :. Having • To enhance the technological strength and efficiency of already achieved leadership position in diamonds, the Indian agriculture, industry and services. Exim. Policy 2002-07 aims at achieving a quantum jump on jewellery exports as well. In order to achieve this, the • To generate new employment opportunities following steps have been taken in the new Exim Policy • To attain internationally accepted standards of quality. • Import of rough diamonds is allowed freely at 0% • To provide consumers with good quality goods and custom duty. services at internationally competitive prices. • Abolition of licensing regime for rough diamonds(b) Implications on Agricultural Sector :- Agriculture being the would help the country emerge as a major international backbone of Indian economy, the EXIM policy has centre for diamonds. initiated a series of measures for its growth and • Value addition norms for export of plain jewellery development, especially for promotion of exports from reduced to 7% and for all merchandised unstudded agricultural sector. jewellery to 3% • Removal ‘of quantitative and packaging restrictions on •Personal carriage of jewellery allowed through certain agricultural products and on export of all Hyderabad and Jaipur airports as well. cultivated varieties of seed would give a major boost to (f) Implications on Industrial Sector the export of these items. • Identification of 20 “Agricultural Export Zones would • Liberalisation of EPCG scheme would help Indian help in development industries to promote. quality up gradation and would also enable sick units to revive. • Of specific geographical areas for export of specific products. • Extension of repatriation period for realisation of export proceeds from180 days to 360 days -would help • Extension of export obligation fulfilment period from Indian industries to be more competitive in offering 8 years to 12 years in respect of units in Agricultural liberal payment terms to foreign importers. Export Zones. • Licence, certificate, permissions and customs clearances • Other measures such as transport subsidy, 3% special for both imports and exports on self-declaration basis, DEPB rate, would definitely give a fillip to exports priority finance for medium and long term capital’ from agricultural sector. requirement and 100% retention of foreign exchange(c) Implications on Development of Cottage Industries :. The in Exchange Earner’s Foreign Currency (EEFC) small scale sector, alongwith the cottage and handicraft account would definitely benefit Indian industries and sector, has been contributing to more than half of the would encourage Indian producers to enter the export total exports of the country. In recognition of the export field. performance of these sectors and to further increase their © Copy Right: Rai University11.675.3 147
  • 8. • Exemption from compulsory negotiation of • Fixation of special brand rate of drawback within 15INTERNATIONAL TRADE documents through banks would help exporters to days. save bank charges. • Reduction. in percentage of physical examination of • Transport subsidy for exports from units located in export cargo to 10%. North East, Sikkim and Jammu and Kashmir would • Penal interest rate for bonafide defaults to be brought offset the disadvantage of being far from ports. down to 15%. (g) Diversification of Indian Industrial Sector :- In order to • No penalty for default where payment is covered by promote Indian industries to diversify their business and ECGC policy. markets, the following measures have been taken in the • No seizure of stock in trade. . Exim Policy 2002-07 • Same day licensing introduced in all regional offices. • Setting up of “Business Centre” in Indian missions abroad would enable India exporters and businessmen • Newcomers to be entitled for ljcences against execution to visit abroad. of Bank Guarantee. • Launching of Focus LAC (Latin American Countries) • Optional facility to convert from one scheme to in Novernber 1997 has greatly accelerated Indian trade another scheme. with Latin American countries. Extension of this Questions Bank programme upto March 2003 would enable Indian Q.1. What is an EXIM Policy? What are its objectives? exporters to consolidate the gains of this programme. Q.2. What are the objectives of EXIM policy 1997-02 ? • There is a tremendous potential for trade with the Sub- Saharan African region. Launching of Focus Africa Q.3. Explain the major highlights of EXIM policy 1997-02. programme would help exporters to diversify their Q.4. Explain the effect of EXIM Policy 1992-97 on the exports to these markets. . following:- • Permission granted to External. Commercial (i) Foreign Exchange. (ii) Technology Upgradation. (iii) Borrowings (ECBs) for tenure of less than three years Export Promotion. in SEZs would provide opportunities for accessing Q;5. What are the objectives of EXIM policy 2002-07 ? .. working capital loan for these units at internationally Q.6. Explain the major highlights of EXIM policy 2002-07. competitive rates. Q.7. Explain the implications of the EXIM Policy 2002-07. (h) Implications on Technology Upgradation :- Terms Used in EXIM Policy • Conversion of Electronic Hardware Technology Park (Ehtp) into zero duty regime under the ITA Notes. (Information Technology Agreement)- I would give • Special Economic zones (SEZs) encouragement to setting up of more units in EHTP. • Agriculture Export zones. (AEZs) • Liberalisation of import and export of samples would • Negative List for Exports. encourage product upgradation. • Open general Licence. • Liberalisation of EPCG scheme would encourage • Export Obligations. Indian industries to import capital goods and improve quality and increase productivity of goods. • Counter Trade. • This would also encourage Indian industries to Note on Special Economic Zones (Sezs) undertake research and development programmes and Special Economic Zones (SEZs) Scheme in India was conceived upgrade the quality of their products. by the Commerce and Industries Minister Murosoli Maran (i) Implications on Procedural Formalities :- Various during a visit to Special Economic Zones in China in 1999. The procedural simplifications would reduce transaction costs scheme was announced at the time of annual review of EXIM and save time. Some of such steps include :- Policy effective from 1.4.2000. The basic idea is to establish the zones as areas where export production could take place free • Adoption of a new 8 digit commodity classification for from all roles and regulations governing imports and exports imports by Customs and Director General of and to give them operational flexibility. Commercial Intelligence and Statistics (DGCI&S) would eliminate the classification disputes and hence Special Economic Zone (SEZ) is a specifically delineated duty reduce transaction costs and time. free enclave, which shall be deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. . • Reduction of the maximum fee limit for electronic application under various schemes from Rs. 1.51akh to Features of Special Economic Zones (Sezs) Rs. 1.00 lakh. (a) Goods going into the SEZ area from DTA shall be treated • Foreign Inward Remittance Certificate (FIRC) to be as. deemed exports and the domestic suppliers are. eligible accepted in lieu of Bank Realisation Certificate for for deemed export benefits. Similarly, goods coming from documents negotiated directly. the SEZ area into DTA shall be treated as if the goods are being imported. © Copy Right: Rai University 148 11.675.3
  • 9. (b) SEZ units may be set up (or manufacture of goods and INTERNATIONAL TRADE 2000-2001 2001-2002 2002-2003 rendering of services, production, processing, Zone (Rs millions) (Rs millions) (Rs. millions) c:l.8sembling, trading, repair, remaking, reconditioning, re- Kandla SEZ 5278.90 4759.80 7292.90 engineering including making of gold, silver or platinum jewellery and articles thereof. SEEPZ, SEZ 51937.00 52256.00 60830.20(c) Foreign Direct Investment (FDI) upto 100% is allowed Cochin SEZ 3043.00 2585.00 2704.20 through automatic I route for all manufacturing activities except arms and ammunition, items of defense Surat SEZ 622.80 3118.60 2807.10 equipments, narcotic. And psychotropic substances, Noida SEZ 10342.00 9804.10 10011.70 hazardous chemicals, brewing of alcoholic drinks, cigarettes and tobacco. Madras SEZ 6908.40 7625.90 8191(d) Procurement of raw materials and exports of finished products are exempted from central levies Vishakhapatnam 2190.80 2530.20 3572.7 SEZ(e) The entire production of the units in the SEZs must be. exported and DTA sales is permitted 5199.70 9236.30 5123.90 Faltz SEZ only on the payment of full applicable customs duties. Total : 85523.00 91895.50 100533.70(e) SEZ units are eligible for a corporate tax holiday upto 2010, under the I . provisions of section 10A of the Special Economic Zones- Legal Prospective Income Tax Act. Eligibility(f) SEZ units can retain 100% of their exports proceeds in (a) Special Economic Zone (SEZ) is a specifically delineated Exchange Earner’s Foreign Currency (EEFC) account. duty free enclave and shall be deemed to be foreign territory(g) Realisation of exports proceeds extended to 12 months for the purposes of trade operations and duties and tariffs from the date of export. (b) Goods and services going into the SEZ area from DTA(h) State Trading Enterprises Policy will not apply to SEZ shall be treated as exports and goods coming from the manufacturing units. SEZ area into DTA shall be treated as if these are being(i) Creating special windows under existing rules and imported regulations of the Central Govt. and State Govt. for SEZ (c) SEZ units may be set up for manufacture of goods and is developing a framework rendering of services(j) State Government have a lead role in the setting up of Export and Import of Goods SEZ. (a) SEZ units may export goods and services including agro-Special Package’s for Sezs in The Exim Policy 2002-07 products, partly processed goods, sub-assemblies and(a) Offshore Banking Units (OBUs) shall be per1Ilitted in components except prohibited items of exports in ITC Special Economic Zones (SEZs). (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of(b) Units in SEZ would be permitted to undertake hedging of Special Chemicals, Organisms, Materials, Equipment and commodity price-risks, provided such transactions are Technologies (SCOMET) shall be subject to fulfillment of undertaken by the units on stand- alone basis.. the conditions indicated in the ITC (HS) Classification of(c) Units in SEZ shall be permitted External Commercial Export and Import Items. SEZ units, other than trading/ Borrowings (ECBs) for a tenure of less than three years. service unit, may also export to Russian Federation in(d) Four existing EPZs namely, Kandla, Santacruz, Kochin Indian Rupees against repayment of State Credit/Escrow and Surat have been converted SEZs and 13 New SEZs Rupee Account of the buyer, subject to RBI clearance, if have already been given approval. any.Export Performance Of The Four Functional Sez (b) SEZ unit may import/procure from the DTA withoutExport performance of the four functional SEZ are as given payment of duty all types of goods and services, includingbelow capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS). However, any permission required for import under any other law shall be applicable. Goods shall include raw material for making capital goods for use within the unit. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients. (c) Sez units may procure goods required by it without payment of duty, from bonded warehouses in the DTA © Copy Right: Rai University 11.675.3 149
  • 10. set up under the Policy and/or under Section 65 of the Dta Sales and SuppliesINTERNATIONAL TRADE Customs Act and from International Exhibitions held in (a) Sez unit may sell goods, including by-products, and India. services in DTA in accordance with the import policy in (d) Sez units, may import/procure from Dta, without force, on payment of applicable duty. payment of duty, all types of goods for creating a central (b) Dta sale by service/trading unit shall be subject to facility for use by units in SEZ. The Central facility for achievement of positive NFE cumulatively. Similarly for software development can also be accessed by units in the units undertaking manufacturing and services/ trading Dta for export of software activities against a single LOP, DTA sale shall be subject to (e Gem & Jewellery units may also source gold/ silver/ achievement of NFE cumulatively. platinum through the nominated agencies (c) The following supplies effected in DTA by SEZ units will (f) Sez units may import/procure goods and services from be counted for the purpose of fulfilment of positive NFE: Dta without payment of duty for setting up, operation and (i) Supplies made to bonded warehouses set up under the maintenance of units in the Zone Policy and/or under Section 65 of the Customs Act. Leasing of Capital Goods (ii) Supplies to other EOU/SEZ/ EHTP/ STP units (a) Sez unit may, on the basis of a firm contract between the provided that such goods are permissible for procurement parties, source the capital goods from a domestic/foreign by units leasing company. In such a case the SEZ unit and the (iii) Supplies against special entitlement of duty free import of domestic/ foreign leasing company shall jointly file the goods. documents to enable import/ procurement of the capital (iv) Supplies of goods and services to such organizations goods without payment of duty. which are entitled for duty free import of such items in Net Foreign Exchange Earning (Nfe) terms of general exemption notification issued by the SEZ unit shall be a positive Net Foreign exchange Earner. Net Ministry of Finance. Foreign Exchange Earning (NFE) shall be calculated cumula- (v) Supply of services (by services units) relating to exports tively for a period of five years from the commencement of paid for in free foreign exchange or for such services production according to the formula given in Appendix -14-II rendered in Indian Rupees which are otherwise considered of the Handbook (Vol-I) as having been paid for in free foreign exchange by RBI. Monitoring of Performance (vi) Supplies of Information Technology Agreement (ITA-1) (a) The performance of SEZ units shall be monitored by the items and notified zero duty telecom/electronic items Unit Approval Committee indicated in the Appendix 14-II of Handbook. (b) The performance of SEZ units shall be monitored as per Export through Status Holder the guidelines given in Appendix 14-II of Handbook SEZ unit may also export goods manufactured/software (VolI). developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/ Legal Undertaking STP unit. The unit shall execute a legal undertaking with the Develop- ment Commissioner concerned and in the event of failure to Inter-unit Transfer achieve positive foreign exchange earning it shall be liable to (a) SEZ units may transfer manufactured goods, including penalty in terms of the legal undertaking or under any other law partly processed/semi-finished goods and services from for the time being in force. one SEZ unit to another SEZ/EOU/ EHTP/STP unit. Approvals and Applications (b) Goods imported/procured by a SEZ unit may be (a) Applications for setting up a unit in SEZ other than transferred or given on loan to another unit within the proposals for setting up of unit in the services sector same SEZ which shall be duly accounted for, but not (except software and IT enabled services, trading or any counted towards discharge of export performance other service activity as may be delegated by the BOA), shall (c) Capital goods imported/procured may be transferred or be approved or rejected by the Units Approval Committee given on loan to another SEZ/EOU/ EHTP/ STP unit within 15 days as per procedure indicated in Annexure to with prior permission of the Development Commissioner Appendix 14-II of Handbook (Vol-I) . In other cases and Customs authorities concerned. approval may be granted by the Board of Approval. (d) Transfer of goods in terms of sub-paras (a) and (b) above (b) Proposals for setting up units in SEZ requiring Industrial within the same SEZ shall not require any permission but Licence may be granted approval by the Development the units shall maintain proper accounts of the transaction. Commissioner after clearance of the proposal by the SEZ Sub- Contracting Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits. (a) Sez unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/ EHTP/ STP, with the annual © Copy Right: Rai University 150 11.675.3
  • 11. permission of Customs authorities. Subcontracting of eligibility criteria of that Scheme and standard conditions INTERNATIONAL TRADE part of production process may also be permitted abroad for exit indicated in Appendix 14-II of Handbook (Vol-I). with the approval of the Development Commissioner. Export Through Exhibitions/ Export Promotion Tours/(b) Sub-contracting by SEZ gems and jewellery units through Export Through Show Rooms Abroad /Duty Free Shops:- other SEZ units or EOUs or units in DTA shall be subject Sez, Units May to following conditions. (a) Export goods for holding/ participating in exhibitions(i) Goods, finished or semi finished, including studded abroad with the permission of Development jewellery, taken outside the zone for sub- contracting shall Commissioner. be brought back to the unit within 30 days. No cut and polished diamonds, precious and semi-precious stones (b) Personal carriage of gold/ silver/ platinum jewellery, (except precious and semi precious stone having zero duty) precious, semi-precious stones, beads and articles. shall be allowed to be taken outside the zone for sub- (c) Export of jewellery is also permitted for display/ sale in contracting. the permitted shops set up abroad(ii) Receive plain gold/silver/platinum jewellery from DTA in (d) Display/sell in the permitted shops set up abroad or in the exchange of equivalent quantity of gold/silver/ platinum, show rooms of their distributors/agents as the case may be, contained in the said jewellery. (e) Set up show rooms/retail outlets at the International(iii) SEZ units shall be eligible for wastage as applicable for Airports. sub-contracting and against exchange Personal Carriage of Export/ Import Parcel(iv) The DTA unit undertaking job work or supplying jewellery Import/ export through personal carriage of gem and jewellery against exchange of gold/silver/platinum shall not be items may be under-taken as per the procedure prescribed by entitled to export benefits. Customs. Import/export through personal carriage for units,(c) All units, including gem and jewellery, may sub-contract other than gem and jewellery unit , shall be allowed provided part of the production or production process through the goods are not in commercial quantity. other units in the same SEZ without permission of Export /Import by Post/ CourierCustoms authorities subject to records being maintained by Goods including free samples, may be exported/imported byboth the supplying and receiving units. airfreight or through Foreign Post Office or through courier,(a) Sez units other than gems and jewellery units may be subject to the procedure prescribed by Customs. allowed to undertake job-work for export, on behalf of Disposal of Rejects/Scrap/ Waste/ Remnants Dta exporter, provided the finished goods are exported Rejects/scrap/waste/remnants arising out of production directly from SEZ units. For such exports, the DTA units process or in connection therewith may be sold in the DTA on will be entitled for refund of duty paid on the inputs by payment of applicable duty. No duty shall be payable in case way of Brand Rate of duty drawback. scrap/waste/ remnants/ rejects are destroyed within the Zone(b) Scrap/waste/remnants generated through job work may after intimation to the Custom authorities or destroyed outside either be cleared from the job worker’s premises on the SEZ with the permission of Custom authorities. Destruc- payment of applicable duty or returned to the unit. tion as stated above shall not apply to gold, silver, platinum,(c) SEZ units engaged in production/processing of diamond, and precious and semi precious stones. agriculture/horticulture products, may on the basis of Replacement/ Repair of Goods annual permission from the Customs authorities take out inputs and equipments to the DTA farm subject to the (a) The general provisions of Policy relating to export of procedure indicated in replacement/ repaired goods shall apply equally to SEZ units, save that, cases not covered by these provisions shallAppendix 14-II of The Handbook (Vol-I) be considered on merits by the DevelopmentExit From Sez Scheme Commissioner.(a) SEZ unit may opt out of the scheme with the approval of (b) The goods sold in the DTA and found to be defective may the Development Commissioner. Such exit from the be brought back for repair/ replacement under intimation scheme shall be subject to payment of applicable Customs to Development Commissioner. and Excise duties on the imported and indigenous capital (c) Goods or parts thereof, including gem stones and precious goods, raw materials etc. and finished goods in stock. In metal components for jewellery making, on being case the unit has not achieved positive NFE, the exit shall imported/ indigenously procured and found defective or be subject to penalty, that may be imposed by the otherwise unfit for use or which have been damaged or adjudicating authority under Foreign Trade (Development become defective after import/ procurement may be and Regulation) Act, 1992. returned and replacement obtained or destroyed. In the(b) SEZ unit may also be permitted by the Development event of replacement, the goods may be brought back Commissioner, as one time option, to exit from SEZ from the foreign suppliers or their authorised agents in scheme on payment of duty on capital goods under the India or the indigenous suppliers. Destruction shall prevailing EPCG Scheme, subject to the unit satisfying the however not apply to gem stones and precious metals. © Copy Right: Rai University 11.675.3 151
  • 12. (d) Goods may be transferred to DTA/abroad for repair/ (b) Import/ procure goods without payment of Customs/INTERNATIONAL TRADE replacement, testing or calibration, quality testing and R & Excise duty D purpose under intimation to Customs authorities and (c) Exemption from Service tax subject to maintenance of records. (d) Exemption from CST. Management of Sez Difference Between Sezs and Epzs (a) SEZ will be under the administrative control of the The main difference between the SEZ and the EPZ is that the Development Commissioner. SEZ is an integrated township with fully developed infrastruc- (b) All activities of SEZ units within the Zone, unless ture on international standards whereas EPZ is just an otherwise specified, including export and re-import of industrial part. In fact, all existing EPZs have been asked to goods shall be through self certification procedure convert themselves into SEZs. However, some units are not Setting up of SEZ in Private/Joint/ State Sector interested in the conversion on account of the sale into DTA at concessional rate of duty is not available in SEZs. The Govern- A SEZ may be set up in the public, private, joint sector or by ment has asked such units to move out to the Domestic Tariff state Government as per details indicated in Appendix 14-II of Area (Dta). the Handbook(Vol-I). Samples:-SEZ units may, on the basis of records maintained by A Note Agriculture Export Zones (Aezs) them, and on prior intimation to Customs authorities:- Agricultural. Export Zones (AEZs) have been set up by. the Ministry of Commerce, GOI, with a view to promote agricul- (a) Supply or sell samples in the DTA for display/ market tural exports from the country and provide remunerative promotion on payment of applicable duties; returns to the farming community in a substantial manner. (b) Remove samples without payment of duty, on furnishing Further, with the intention to give primacy to promotion of a suitable undertaking to Customs authorities for bringing agricultural exports, it has been decided to identify product the goods back within a stipulated period specific Agricultural Export Zone from geographically contigu- (c) Export free samples, without any limit, including samples ous area. made in wax moulds, silver mould and rubber moulds State Governments may identify product specific Agri export through all permissible mode of export including through zone for end to end development for export of specific couriers agencies/post products from a geographically contiguous area. State Govern- Sale of Un-Utilised Material/ Obsolete Goods ment may evolve a comprehensive package of services provided (a) In case an SEZ unit is unable, for valid reasons, to utilize by all State Government Agencies, State Agricultural Universities the goods, including capital goods and spares, it may and all institutions and agencies of the Union Government for dispose them in the DTA in accordance with the import intensive delivery in these zonesSuch services which would be policy in force and on payment of applicable duties or managed and co-ordinated by State Government would include export them provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related research & (b) Capital goods and spares that have become obsolete/ development, etc. APEDA will supplement, within its surplus may either be exported or disposed of in the DTA schemes and provisions, efforts of State Governments for on payment of applicable duties. The benefit of facilitating such exports. depreciation, as applicable, will be available in case of disposal in DTA. Objective (c) No duty shall be payable in case capital goods, raw material, In a fast changing international trade environment and with a consumables, spares, goods manufactured, processed or view to providing remunerative returns to the farming commu- packaged and scrap/waste/ remnants/rejects are destroyed nity in a sustained manner, efforts will be made to provide within the Zone after intimation to the Custom authorities improved access to the produce/ products of the Agriculture or destroyed outside the Zone with the permission of and Allied sectors in the international market. Custom authorities. However destruction shall not apply Epcg Scheme to precious and semi precious and precious metals Agriculture exporters shall be eligible for the facility of EPCG (d) SEZ unit may be allowed by Customs authorities scheme as described in Chapter-6 of the Policy. The export concerned to donate imported/ indigenously procured obligation shall be determined in accordance with paragraph 6.2 computer and computer peripherals without payment of of the Policy but the licence holder shall not be required to duty, two years after their import/procurement and use by maintain the average level of exports as specified in sub the units, to recognized non-commercial educational paragraph 6.5(v) of the Policy. institutions, registered charitable hospitals etc as per the Such exporter shall have the facility to move or to shift the details given in Appendix 14-II in Handbook (Vol-I) capital goods within the zone provided he maintains accurate Entitlement for SEZ Developer: - For development, operation record of such movements. However such equipments shall and maintenance of infrastructure facilities in SEZs, the not be sold or leased by the licence holder. This facility shall also developer shall be eligible for the following entitlements be available to service providers, setting up common (a) Income tax exemption as per 80 IA of the Income Tax Act. infrastructural facilities such as sorting, grading, polishing, © Copy Right: Rai University 152 11.675.3
  • 13. packaging, cold storage, transport equipment/ refrigerated vans, Some Important Agricultural Export Zones INTERNATIONAL TRADEvapour treatment heat treatment plant, X-ray screening facilityetc. Location Name of Location Name of product (s) Product (s)The units setup in the notified Agriculture Export Zone shall West Pineapple Maharashtra Grapes &be entitled to the benefits available under the scheme. A service Bengal Grape Wineprovider in the Agriculture Export Zone may import equip- Karnataka Gherkins Tripura Pineapplement under the EPCG scheme for supplying services to Uttaranchal Lychee Uttar Mangoesagriculture exports. The export obligation may be offset by the Pradeshservice provider by earning foreign exchange in lieu of services Punjab Vegetables Maharashtra Mangoesrendered. Uttar Potatoes Jammu AppleDuty Exemption/Remission Scheme Pradesh &Kashmir Punjab Potatoes Tamil Nadu Flowers(a) The agriculture exporter shall be entitled to the facility for Andhra Mangopulp Madhya Potatoes, import of inputs like fertilizers, pesticides, insecticides, pradesh & Fresh Pradesh Onions & packing material etc. under Advance Licence/DFRC/DEPB Vegetables Garlic scheme as given in Chapter-7 of the Policy subject to the eligibility criteria and conditions enumerated under the scheme. AEZ would be identified by the State Government, who may(b) The agriculture exporter shall be eligible for recognition as evolve a comprehensive ‘package of services provided by all Export House/Trading House/Star Trading House/ State Government agencies, State agricultural universities and. all Super Star Trading House on achieving the performance institutions and agencies of the Union Government for level as mentioned below. intensive delivery in these zones. Category Average FOB Average NFE Such services, which would be managed and co- FOB Value NFE Earned ordinated by the State Government, would include Value During Earnings During provision of pre-harvest and post-harvest treatment During The Made During The and operations; plant protection, processing, packag- The Preceding The Preceding ing, storage and related research and development, etc. Preceding Licensing Preceding Licensing Agricultural and Processed Food Products Export Three Year, In Three Year, In Development Authority (APEDA) will supplement, Licensing Rupees Licensing Rupees within its schemes and provisions, efforts of the State Years, In Years, In Governments for facilitating such exports. Rupees Rupees Facilities for Units Located In Aezs (1) (2) (3) (4) (5) (a) The agriculture .exporters are entitled to Export 4 Crores 6 Crores 3 Crores 5 Crores import of capital goods under EPCG House Scheme... (b) The agricultural exporters are entitled to Trading 20 Crores 30 Crores 15 Crores 25 Crores imports of inputs like, fertilizers, pesticides, House insecticides; packing materials, etc., under Advance Licence, Duty Free Replenishment Star Trading 100 Crores 150 Crores 75 Crores 125 Crores Certificate (DFRC) and Duty entitlement House Passbook (DEPB) Schemes. Super Star 300 Crores 450 Crores 225 Crores 375 Crores A Note on Negative List of Exports 2002-07:- Trading The negative list consists of goods the import or House export of which is either .prohibited, restricted through licensing or otherwise to be canalised throughIn addition to the double weightage available under paragraph a designated government agency. The negative list of exports, as12.7, the double weightage on FOB or NFE on the export of per the Exim Policy 2002-07, contains the following fouragriculture product for recognition as status holders shall be categories of export itemsavailable. (a) Prohibited Items :- The prohibited items are completelyInformation Requirements banned from exports. The following categories of. itemsA database on agricultural products and markets including are banned from exports :-aspects of commercial intelligence relevant to exports will be • All forms of wild animals including their parts andestablished. Assistance shall be provided to the exporters, products.growers’ organisations, trade association for conducting • Special chemicals as notified by the DGFT.surveys/ feasibility studies, market studies etc. • Exotic birds as notified by the DGFT. © Copy Right: Rai University11.675.3 153
  • 14. Beef.INTERNATIONAL TRADE • • Sea shells, as specified. Items Canalising Agency Onions (Except • Human skeleton. Export permitted through Banglore Rose • Peacock tail feathers including handicrafts and articles onion and Specified STEs made there of. • Manufactured articles and shavings of Shed Antlers of Krishnapuram Chital and Sambhar. onion) Tribal Cooperative Marketing • All items of plants as specified by the DGFT. Niger Seeds Federation of India(TRIFED), • Tallow, fat and/or oils of any animal origin excluding NEW Delhi. fish oil. • Sandalwood items as notified by the DGFT. National Agriculture Coopertive • Red sanders wood in any form. Marketing Federation Of India (NAFED) • .. • “,” Gum Karaya Tribal Coopertives Marketing (b) Restricted Items :- The restricted items are allowed for Federation of India (TRIFED), exports under special licence issued by the DGFT. Some of New Delhi. restricted export items are as follows:- Metals and Minerals Trading Iron ore, Corporation (MMTC) • Dress materials, ready-made garments, fables or textile manganese ore, it’s wit imprints of excerpts or verses of the Holy and Chrome ore. Quran. • Horses - Kathiawadi, Marwari and Manipuri breeds. , Crude oil Indian oil Corporation Limited. • Fresh and frozen silver prom frets of weight less than 300 gms. (d) Freely Exportable Items :- The freely exportable items, can be exported without an export licence or permission from • Paddy (Rice in husk). ‘ the DGFT. However, export of such items is subject to • Seaweeds of all types. , certain procedures or conditions. • Fodder including wheat and rice straw. Procedures or Conditions • Chemical fertilizer of all types. Item Description • Whole human blood and all products derived from it. No objection certificate • Silkworm, silkworm seeds and silkworm cocoons. Military stores as notified by from the Department of • Deoiled groundnut cakes containing more than 1% oil. DGFT Defence Production and (c) Canalised Items :- The canalised items can be, exported supplies. without an export licence through designated State’ Trading Enterprises (STEs). Some of the canalised items are Exotic birds, Such as bangali Subject to Pre-shipment finches, White finches and inspection; Zebra finches. Bones and bone products Subject to a certificate from Chemicals and Allied Products Export ,Promotion Council Basmati Rice Subject to registration of contracts with the Agricultural and processed Food products export Development Authority (APEDA) A Note on Open General Licence (Ogl) List Open General Licence (OGL) list contains those items, which can be exported without any restrictions or licensing formalities to all permitted destinations. The following four OGLs are in operation :- © Copy Right: Rai University 154 11.675.3
  • 15. (a) OGL No.1 :- Applies to export by land to any country (b) Compensation Deal: Under this arrangement, the seller INTERNATIONAL TRADE adjacent to India and having no sea port of its own. receives a part of the payment in cash and the .rest in(b) OGL No.2 :- Applies to export of bonafide samples. products.(c) OGL No.3 :- Applies to the items that can be exported on (c) Buy Back: Under the buy back agreement, the supplier of fulfilment of the conditions against each of the items. plant, equipment or technology agrees to purchase goods manufactured with that equipment or technology.I(d) OOL No.4:. Applies to items that can be exported directly by the canalising agency mentioned against each items. (d) Counter purchase : Under the counter purchase agreement, the seller receives the full payment in cash but agrees toA Note on Export Obligation spend an equivalent amount of money in that countryExport obligation means the obligatioI1 of the importer to within a specified period.undertake export of product or products in term of quantity,value or both, as may be prescribed or specified by the licensing (d) Trade-for-Debt or Debt-for-Goods. A loan or creditor competent authority in order to compensate for the imports obtained by the government is paid for (fully or partially)undertaken. in goods or services of the debtor country. (e) Offset. Foreign suppliers commit to introduceObjectives of Export Ob1igation investments, technology transfer, training and skills(al The main objective of export obligation is to compensate upgrade, research and development, donation or other for the outflow of foreign currency due to imports similar products that will promote the industrial and undertaken under certain schemes such as EPCG scheme. economic growth of the country as well as provide(b) The EPCG scheme enables the Indian exporters to import employment opportunities, support social and civic capital goods at 5% customs duty subject to export programs, generate/save foreign exchange, and fund and obligation. support environmental projects for sustainable growth.Advantages of Export Obligations Checklist for Counter-Trade(a) Accessibility to imported raw materials and capital goods Counter-trade and barter are trading techniques used by subject to export obligation would enhance the countries with a limited supply of foreign currency, but which competitiveness of Indian exporters in terms of quality up need to import goods. Instead of paying in precious hard gradation. currency, the customer asks to pay in goods. In many cases these will not be goods for which there are already established trading(b) Due to, export obligation, importers will be required to patterns, rather they will be goods that would not otherwise be export compulsorily. This would increase exports and exported. This will mean that there is unlikely to be a means of would generate foreign exchange for the economy. pricing them (as there would be, for example, for a fixed grade A Note on Counter Trade of a mineral).Counter trade is a form of international trade in which certain • Use a lawyer to write the agreementsexport and import transactions are directly linked with each • Use a counter-trade specialist (e.g a commodity trader withother and in which import of goods are paid for by export of counter-trade expertise)goods, instead of money payments; • Insure the risk of the trader’s insolvencyIn the modern economies, most transactions involve monetarypayments and receipts, either immediate or deferred. As against • Arrange payment for sales of the customer’s (exported)this, counter trade refers to a variety of unconventional product before you lose control of your goodsinternational trade practices which link exchange of goods, • Use an escrow account for receipts, and export goods to thedirectly or indirectly, in an attempt to dispense -with currency value of the amount of hard currency in escrow (foreigntransactions. exchange permission for the escrow account may be neededThe Philippine International Trade Corporation (PITC) is from the buyer’s country)tasked with countertrade, an international transaction premised • Ask the customer to provide a government guarantee foron some form of reciprocity. It is used to leverage government any shortfall of the amounts expected from the proceedsimportation with trade and investments to be provided by of sale counter-traded goods, especially if you areforeign suppliers. committing resources to make goods to orderCounter trade helps government offices or other local institu- • Insure the risk of non-honoring of the governmenttions by facilitating the introduction of investments, technology guaranteetransfer, research and development, donations, specialized • Obtain political risk cover on the buyers country in relationtraining/skills and related activities without additional cost to to the risk of frustration of your export contract and onthe government. the frustration of the import contract .Forms of Counter Trade(a) Barter: Barter refers to direct exchange of goods against goods of equalvalue, with no money and no third party involved in it. © Copy Right: Rai University11.675.3 155
  • 16. Question BankINTERNATIONAL TRADE Q.1 Write a note on the Negative List of Export. Q.2 Write a brief note on canalisation of exports. Q.3 Explain Niche Marketing as an export strategy. Q.4 Write note on the Open General Licence (OGL). Q.5 Write note on the Special Economic Zones. Q.6 Write note on the Agriculture Export Zones. © Copy Right: Rai University 156 11.675.3