Benefits of foreign trade policy an overview

Foreign Trade PolicyForeign Trade Policy

Foreign Trade Policy 2009-14
• Framed by DGFT under Ministry of Commerce (MoC)
• Announced once in 5 years; annual supplements every year for changes
and on-course corrections.
• FTP and HBP represents broad policy frame work; lucid narration, leaving
room for interpretations/doubts.
• Implemented through Notifications of DoR through Customs, Excise and• Implemented through Notifications of DoR through Customs, Excise and
Service Tax authorities, for Union taxes.
• State Govt. frames policy in line with the broad frame-work of the policy.
• FTP, HBP, PN, Notification issued by DGFT should not be read in isolation
• Re-validation with DoR Rules/Notifications and State law essential in order
to revalidate the provision and to avoid un-certainty.

Foreign Trade Policy 2009-14
Back-drop:
• Policy unveiled at the back-drop unprecedented global slow-down started in the year
2008-09.
• India witnessing contraction in demand in traditional export markets,
• 4 Quarters of fall in exports, though domestic market largely unaffected
• Exports goes up from US$ 168 Bio (2008) from US$ 63 Bio (2003-04) and India’s
share of global trade grew from 0.92% in 2003 to 1.64% in 2008.
Objective of FTP 2009-14
• Develop/Improve export potential and performance,
• Boost foreign trade and earn valuable foreign exchange
• Arrest and reverse declining trend of exports
• Double India's exports of goods and services by 2014 .
• Double India's share in global merchandise trade by 2020
• Tapping of alternate export markets
• Improvement in infrastructure related to exports;
• Bringing down transaction costs
• Providing full refund of all indirect taxes and levies

Area Covered
Promotional Measure
Foreign Trade Policy
EPCG

Promotional Measure
(Chapter – 3 of FTP)
1. Export and trading Houses Status
2. Served From India Scheme (SFIS)
3. Vishesh Krishi and Gram Udyog Yojana ( VKGUY )
4. Agri. Infrastructure Incentive Scrip
5. Focus Market Scheme (FMS)
6. Incremental Exports Incentivisation Scheme (IEIS)
7. Focus Product Scheme (FPS)
8. Market Linked Focus Products Scheme (MLFPS)
9. Status Holder Incentive Scrip (SHIS)

1.Export and Trading Houses Status
• Eligibility:
Manufacturer exporters, Merchant exporters,
Service providers, Export Oriented Units (EOU),
Special Economic Zones (SEZ), Agri-Export
Zones (AEZ), Electronic Hardware Technology
Parks (EHTP), Software Technology Parks (STP)
and Bio-technology Parks (BTP) shall be eligibleand Bio-technology Parks (BTP) shall be eligible
for status under FTP
• Status Category:
– Status category is recognized depending
upon export performance.
– Export performance will be calculated based
on the FOB value of export proceeds realized
during current and previous three years (Total
4 years)
– For export house (EH) status, export
performance is necessary in at least two out
of four years.

S No. Status Category Export FOB/FOR Value in
Rs.
1 Export House (EH) 20 Crs
2 Star Export House (SEH) 100 Crs
• Status Category
2 Star Export House (SEH) 100 Crs
3 Trading House (TH) 500 Crs
4 Star Trading House (STH) 2,500 Crs
5 Premier Trading House (PTH) 7,500 Crs
• Conditions for Grant of Status:
Transfer of export performance from one to another is not permitted.
Exports made on re-export basis shall not be counted for recognition;
Exports made by subsidiary of a limited company shall be counted towards export
performance of limited company for recognition only if limited company has a majority
share holding in subsidiary company;

• Advantages:
– Authorization and Customs Clearances for both imports and exports on self-
declaration basis;
– Fixation of Input-Output norms on priority within 60 days;
– Exemption from compulsory negotiation of documents through banks. Remittance /
Receipts, however, would be received through banking channels;
– Exemption from furnishing of BG in Schemes under FTP;
– SEHs and above shall be permitted to establish Export Warehouses, as per
DoR guidelines
– For status holders, a decision on conferring of ACP Status shall be communicated
by Customs within 30 days from receipt of application with Customs.
– As an option, for Premier Trading House (PTH), the average level of exports
under EPCG Scheme shall be the arithmetic mean of export performance in last
5 years, instead of 3 years.
Cont...

• Advantages:
– Status Holders of specified sectors shall be eligible for Status Holder Incentive Scrip
(SHIS).
– Status Holders of Agri. Sector shall be eligible for Agri. Infrastructure Incentive Scrip
under Vishesh Krishi Gram Udyog Yojana (VKGUY).
• Procedure:
• Procedure:
– Application for Status recognition shall be filed in ANF 3A by 31st March of the current
year with Jurisdictional RA / Development commissioner (DC)
– All newly issued Status Certificate shall be valid from 1st April of the year during which
application for recognition was filed;
– All Status Certificate shall be valid for 5 years. (Status certificate beyond 31/03/2014
shall continue to remain in force, in case provision of FPT (2009-14) continue to
recognize the status;
– Existing status holders who have applied for renewal before expire of their status, shall
have a grace period of 6 months, pending finalization of application for grant.

2. Served From India
Scheme (SFIS)
• Objective:
To accelerate growth in export of services to create a powerful
and unique ‘Served from India’ brand.
• Eligibility:
– Service exporters who has free Forex earning of Rs.10
lacs and above in the Financial Year. For individual service
providers - Rs.5 lacsproviders - Rs.5 lacs
– Eligible services (wef.Jan’2011) listed in Appendix-41 of HBP
Vol-1; Appexdix-10 for prior periods.
– Forex earned through international Credit card and through
instruments as permitted by RBI for rendering of services shall
be considered for computation of Duty Credit Scrip.
• Ineligibility:
– Forex inflow on account of –
• Debt or equity participation
• Donations
• Repayment of Forex loans

– Financial Services:
• Raising of foreign currency loan;
• Realization of export proceeds for clients;
• Issuance of foreign equity through ADRs / GDRs or other similar instruments;
• Issuance of Forex bonds
• Sales of securities and other financial instruments;• Sales of securities and other financial instruments;
• Any other receivable not connected with the service rendered.
– Earned through contract / regular employment abroad;
– Payment for services received from EEFC account;
– Forex turnover by healthcare or educational institutions, like equity participation,
donations etc.
– Supplies made to or export from SEZ / EOU / EHTP / STPI / BTP etc
– Export of goods;
– Forex earned for services provided in other two countries, not touching India at all.

• Entitlement:
– Duty credit scrip equivalent to 10% of NET Free Foreign exchange earned.
• Utilization:
– Imported/Indigenous procurement of any capital goods including spares, Office
equipments and professional equipments, office furniture and consumables of
the Service sector business.
the Service sector business.
– Service provider who are also engaged in manufacturing activity, allowed to
use SFIS scrip for importing / domestic sourcing of ‘Capital Goods’ including
spares for manufacturing.
– Duty credit scrip in case of hotels, clubs having residential facility of minimum 30
rooms, golf resorts and stand-alone restaurants having catering facilities, may
also be used for import of consumables including food items and alcohol.
• Transferability:
– SFIS scrip subject to ‘Actual user condition’ and hence not transferable.
– Transferability within group company is permitted.

• Procedure:
– Application in ANF-3B, for SFIS to be filed with Regional Authority (RA) on
monthly, quarterly, half yearly or annual basis at the option of the applicant.
– Periodicity to be opted with the first application
– Last date for filing application, within 12 months of the respective month,
quarterly, half yearly or annual basis at the option of the applicant.
quarterly, half yearly or annual basis at the option of the applicant.
– Applications filed after the expire date up to two years would be considered
subject to ‘late-cut’ ranging from 2% to 10% of the scrip value.
– SFIS utilization for Mfg activity – subject to endorsement by RA

• Objective:
To compensate high transport
cost and offset other dis-
advantage, in order to promote
export of-
– Agricultural produce and their
value added products;
3. Vishesh Krishi and Gram Udyog
Yojana (VKGUY)
value added products;
– Minor forest produce and their
value added variants;
– Gram Udyog products; and
– other Notified products

• Entitlement:
– Products listed under Appendix-37A are eligible for VKGUY @ 5% of the FOB
value of exports, earned in Forex.
– Some Flowers and Fruits, listed in table 1 of Annedix-37A, eligible for
additional 2%.
• Ineligible:
Yojana (VKGUY)
• Ineligible:
– Export of imported goods
– Export originating in other countries and trans-shipped through India
– Deemed Exports
– SEZ Exports and SEZ products exported through DTA units
– Items restricted or prohibited for exports

• Utilization:
– For payment of duty on import or indigenous procurement of inputs or goods
including capital goods, except certain goods as listed Appendix-37B of HBP
Vol-1;
– Payment Service tax;
– Excise duty and service tax paid through the scrip, CENVATable;
Yojana (VKGUY)
– Excise duty and service tax paid through the scrip, CENVATable;
– Payment of duty against imports under EPCG scheme.
VKGUY duty credit scrip and goods imported would be freely transferable.
• Procedure:
– Application in form ANF-3C along with prescribed documents to be filed with
concerned RA.
– Application to be filed within 12 months
– Applications filed after the expiry date up to two years would be considered
subject to late cut ranging from 2% to 10% of the scrip value.

• Eligibility & Entitlement:
– Status Holders exporting products under Chapter-1 to 24
– Scrip equal to 10% (incl. VKGUY) of FOB value of exports
– Total incentive for all Status Holders – Rs.100 Crore p.a.
– Transferability:
– Non-transferable except for supporting Mfrs. and status
holders in Food parks.
4. Agri-Infrastructure Incentive Scrip
holders in Food parks.
• Imports allowed:
– Cold storage units, pre-cooling and mother storage units
– Pack houses
– Reefer Van/containers
– Other capital items as per Appendix 37F
• Procedure:
– Zonal office, CLA, New Delhi shall be licensing authority
– Allocation of scrip would be proportionate to the eligible
claims of the individual applicants.

• Objective:
To offset high freight cost and other externalities to select
international markets to enhance India’s export
competitiveness in these market.
• Eligibility:
Export of all products to Countries listed in Table 1, 2 and 3
of Appendix 37C of HBP Vol1 is eligible under the scheme.
• Ineligibility:
– Supplies made to SEZ;
– Service Exports;
– Precious and Semi Precious stones export ex: Diamond, gold, silver etc;
– Ores and concentrates, of all types and in all forms;
– Cereals and Sugar of all types
– Petroleum products;
– Meat & Meat products and Milk & Milk products;

• Ineligibility:
– Re-export of imported goods as defined in para 2.35 of FTP;
– Export through transshipment;
– Deemed export;
– Export made by SEZ units or SEZ products through DTA units;
– Restricted or prohibited items.
• Entitlement:
– Countries covered under Table 1 and 2 of Appendix 37C shall be entitled for
duty Credit scrip equivalent to 3% of the FOB value of export in free foreign
exchange.
– Countries covered under Table 3 of Appendix 37C shall be entitled for Duty
Credit scrip equivalent to 4% of the FOB value of export in free foreign
exchange.

• Utilization:
– For import / indigenous procurement of inputs or goods including capital
goods, except certain goods as listed Appendix-37B of HBP Vol-1;
– Payment Service tax;
– Excise duty and service paid through the scrip is available as CENVAT credit;
– This scrip can also be utilised for payment of duty against imports under EPCG
scheme.
FMS Duty Credit Scrip and items imported against it would be freely transferable.
• Procedure:
– Application in form ANF 3C along with prescribed documents to be filed with
concerned RA along with Proof of landing and other documents..
subject to ‘late-cut’ ranging from 2% to 10% of the scrip value.
– Proof of loading in designated market to be given.

6. Incremental Exports
Incentivisation Scheme (IEIS)
• Objective:
The objective of this scheme is to incentivize incremental exports.
• Eligibility:
– Benefit under this scheme is available on incremental exports :–
• For Jan 2013 to March 2013 over Jan 2012 to March 2012;
• For April 2013 to March 2014 over April 2012 to March 2013;• For April 2013 to March 2014 over April 2012 to March 2013;
– The scheme is region specific and will cover export to USA, Europe and Asian
countries,except Singapore, UAE and Hong Kong.
– 53 Latin American/African Countries added for 2013-14
– This scheme is available for FY 2012-13 & FY 2013-14 only.
• Ineligibility:
– Export performance cannot be transferred from any other IEC Code;
– Export of imported goods or export made through transshipment;
– Export from SEZ / EOU / EHTP / STPI / BTP / FTWZ;
– Deemed exports, Service exports, Third party export;
– Precious and Semi Precious stones export ex: Diamond, gold, silver etc;

• Ineligibility:
– Ores and concentrates, of all types and in all forms;
– Cereals of all types
– Sugar of all types and forms
– Petroleum products;
– Meat & Meat Products and Milk & Milk Products– Meat & Meat Products and Milk & Milk Products
– Supplies to SEZ, Singapore, UAE and Hong Kong.
– If no export in 2011-12 and 2012-13, no benefit in 2013-14
• Entitlement:
– An IEC holder would be entitled for a duty credit scrip @2% of the incremental
Export achieved during the period Jan’13 to Mar’13 compared to the same
period of the last year and April’13 o March’14 over same period last year.
– Benefit available, over and above other benefits under Chapter 3 of EPCG.
• Utilization:
– For import / indigenous procurement of inputs or goods including capital goods
except certain goods as listed Appendix-37B of HBP Vol-1;

• Utilization:
– Import or indigenous procurement of inputs, goods including capital goods
– Payment service tax;
scheme.
IEIS Duty Credit Scrip and items imported against it would be freely transferable.
• Procedure:
– Application in form ANF-3F along with prescribed documents to be filed with
concerned RA.
– Applications filed after the expire date upto two years would be considered
– Proof of lading in designated market to be given.

• Objective:
To promote export of products which have high export intensity/employment
potential, so as to off-set infrastructure inefficiencies and other costs involved in
marketing of these products.
• Eligibility:
– Export of products listed in Table 1 of Appendix 37D of HPB vol-1.
– Sale to SEZ units also eligible.
• Ineligibility:
– Deemed export;
Cont...

• Entitlements:
– Products covered under Table 1 of Appendix 37D of HBP Vol-1 eligible for Duty
Credit Scrip @ 2% to 5% of FOB value.
– Certain products / Sectors enumerated in Appendix 37D are eligible for bonus
benefit of additional 2%.
• Utilization:• Utilization:
goods except certain goods as listed Appendix-37B of HBP Vol-1;
– This scrip can be also be used for payment service tax;
scheme.

FPS Duty Credit Scrip and items imported against it would be freely transferable.
• Procedure:
concerned RA.
– Application to be filed within 12 months– Application to be filed within 12 months
– Applications filed after the expire date upto two years would be considered

8. Market Linked Focus Products Scheme
(MLFPS)
• Objective:
To incentivize export of products and sectors of high export intensity stock
employment potential.
• Eligibility:
– products listed in Table 2 of Appendix 37D of HBP vol -1.
(Certain products not covered under FMS and FPS are covered under this scrip.)(Certain products not covered under FMS and FPS are covered under this scrip.)
• Ineligibility:
– Deemed export;
• Entitlements:
2% of FOB of exports of specified products to the specified markets.
Cont...

8. Market Linked Focus Products Scheme
(MLFPS)
• Utilization:
goods except certain goods as listed Appendix-37B of HBP Vol-1;
– Payment service tax;
scheme.
MLFPS Duty Credit Scrip and items imported against it would be freely transferable.
• Procedure:
concerned RA along with Proof of landing and other documents.

(upto FY 2012-13)
• Objective:
Promote investment in up-gradation of technology.
• Eligibility:
– Leather sectors excluding finished leather, Textile and jute sector;
– Handicrafts, Engineering sectors, Plastics, Basic chemicals,– Handicrafts, Engineering sectors, Plastics, Basic chemicals,
– Rubber products, Paints, Varnishes, Glass and glassware, Plywood and allied
products, ceramic & refractory, Paper & paperboards,
– Books, Publications and printing, animal by-products,
– Graphite products, electronics, sports goods and toys,
– Engineering products of iron & steel, pipes and tubes and ferro-alloys.

(up to FY 2012-13)
• Ineligibility:
– Applicants availed ZERO duty EPCG during FY 2010-11, FY 2011-12 and FY
2012-13.
– Export of imported goods;
– Exports through trans-shipment originating from a third country
– Deemed Exports
– Exports of SEZ and SEZ products through DTA units
– Items prohibited for exports.

(up to FY 2012-13)
• Entitlements:
– 1% of FOB value of exports during FY 2009 -10 to FY 2012-13.
– SHIS is over and above of all other benefits under chapter 3 of FTP.
• Utilization:
For import and indigenous procurement of capital goods including spares up to
10% of the scrip value.10% of the scrip value.
– Subject to actual user condition;
– Transferable within status holder under the specified sectors ;
– Transferable to group companies.
• Procedure:
– Application in form ANF-3E along with prescribed documents to be filed with
concerned RA.
– Application to be filed within 12 months .

Export Promotion Capital Goods Scheme
(EPCG)

Export Promotion Capital Goods
(EPCG)
• Feature:
– Zero Duty EPCG Scheme allows import of Capital goods (CG) for pre-
production, production and post production at ZERO customs duty;
– CG includes CKD / SKD imports, software systems, spares, tools, jigs,
fixtures, dies and moulds;
– Spares, moulds, die, fixtures, tools, jigs and refractory for initial lining for existing– Spares, moulds, die, fixtures, tools, jigs and refractory for initial lining for existing
P&M (imported, under EPCG or otherwise) allowed.
– For Status holders who has exports in the last 2 years can avail of the EPCG for
annual requirement, subject to ceiling of 50% of the FOB value of exports in the
preceding financial year;
– EPCG is subject to actual user conditions until export obligation is completed;
– Permissible to procure CG from Indigenous source; Supplies to EPCG holder by
an ingenious supplier would be eligible for deemed export benefit;

• Feature:
– EPCG authorization holders can opt for technological up-gradation of existing
imported CG subject to -
• Minimum time period for application – 4 years from earlier EPCG issue date;
• EO up to 50% on the earlier EPCG should be fulfilled;
• EO would be re-fixed for the balance as well as the new CG over a period
(EPCG)
• EO would be re-fixed for the balance as well as the new CG over a period
of 6 years @ 6 times of the duty saved;
• This benefit can be availed once and the minimum import should be 10% of
the existing investment in P&M;
• CG imported under this scheme should be new and technological
superior to the earlier CG as certified by Chartered engineer.
– Project import concession can also be simultaneously processed so that duty
payment if any would be the difference between EPCG and project import
concession.

• Eligibility:
– Manufacture exporters with or without supporting manufacturer (s)/ vendor
(s), merchant exporters tied to supporting manufacturer (s) and service
providers;
– Service providers, those are designated / certified as Common Service
Provider (CSP) by the DGFT, Department of commerce or State Industrial
Service recipients
(EPCG)
Infrastructural Corporation – Service recipients to comply with EO condition;
– Exporters availing SHIS in that year, would not be eligible for ZERO Duty
EPCG unless they SHIS benefit has been surrendered / refunded;
– Second hand CG shall not be permitted under this scheme;
– The exports shall be physical exports. However ‘deemed exports’, supplies to
SEZ / Developers / Co-developers counted towards EO irrespective of currency
of realization.

• Export Obligations (EO):
– EO shall be fulfilled by export of goods manufactured / service provided by the
applicant;
– EO shall be over and above the Average (Arithmetical mean) Export achieved
by the applicant in the preceding three years;
– For indigenously sourced CG, the EO would be reckoned with reference to
Notional Customs duty saved; However EO will be reduced by 10%;
(EPCG)
Notional Customs duty saved; However EO will be reduced by 10%;
– EO equivalent to 6 times the duty saved, within 6 years from the authorization
issue date;
– If CVD paid in cash, the same would not be considered for EO, if CENVAT
benefit not availed;
– Import of spares, mould, jigs etc for an imported CG under EPCG or otherwise
would be allowed subject to ceiling of 10% of existing CG Value – EO restricted
to 50% (benefit not applicable for import of spares for indigenous procured CG)
– Spares, moulds jigs etc can be imported without 10% restriction, but EO
would be 100%

• Export Obligations (EO):
– Shipments under AAS, DFRC, DFIA, DDB, Incentive Scheme under chapter 3 of
FTP is also be counted for EO under EPCG;
– EO can be fulfilled by supply of ITA bound products into DTA provided
realization in Forex;
– Royalty payment received in Forex for R&D services counted against EO;
– BIFR companies allowed EO extension as per the rehabilitation package;
(EPCG)
– BIFR companies allowed EO extension as per the rehabilitation package;
– Units located in Arunachalam, Assam, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura and J&K are eligible for lower EO of 25% of the
specific EO;
– For Calculation of Average EO, exports being counted for specific EO in
respect of unredeemed EPCG, would not be considered;
– Exports in fulfillment of Advance authorization Scheme and Duty Free Import
Authorization scheme, would be eligible for EPCG EO fulfillment;
– Minimum 50% of the EO should be completed within first 4years and
remaining in last 2years.

• Non-compliance with EO:
– Where EO of the first 4years is not completed, the authorization holder liable to
pay the customs duty on the un-fulfilled EO together with interest, unless
the EO period is extended by the RA.
(EPCG)
• Incentive for fast-track companies:
The EPCG holder fulfilled 75% or more of specific EO and 100% of the average
EO in 3 or less years, will be eligible for waiver of the balance obligation.

• Procedures:
– Application for authorization to be made to RA in ANF 5A along with prescribed
documents;
– Nexus Certification by Independent Chartered Engineer in Appendix - 32A.
– Installation Certificate to be obtained from Jurisdictional central excise authority,
within 6 months of imports (for spares installation certificate within 3years);
(EPCG)
– Installation certificate from independent chartered engineer, if the importer is not
registered with central excise;
– EPCG Scheme is available for an EOU/SEZ, while converting into to a DTA unit
subject to NOC from Development Commissioner;
– Indigenous sourcing of CG subject to ‘invalidation’ by RA.;
– Souring of CG from overseas or domestic under lease is permissible;
– Export through third party is allowed
– If merchant exporter is EPCG holder, Name of supporting manufacture should be
indicated in the Authorization

• Procedures:
– The shipping bill should contain EPCG authorization number and date
– A report of fulfillment of EO should be submitted with the RA, by 30th of April
every year;
– Automatic enhancement of 10% of CIF value of import allowed without
endorsement by RA.
(EPCG)
– EPCG for annual requirement: -
• Authorization will be issued with specific duty saved amount and
corresponding EO;
• Applicant to indicate the products proposed to be exported under this
authorization;
• Authorization holder required to submit nexus certificate from a chartered
engineer to the customs authority at the time of clearance of CG with a copy
to RA concerned, along with a copy of BOE.

• Post Export EPCG:
– Available to exporters, who intend to import CG on payment of applicable
customs duty in cash and choose to opt for this;
– Basic customs duty paid on CG shall be remitted in the form of Freely
transferable duty credit scrip;
– Specific EO under this scheme is 85% of the applicable Specific EO;
(EPCG)
– Specific EO under this scheme is 85% of the applicable Specific EO;
– This scrip can be used for payment of customs duty on import or excise duty
on indigenous procurement;
– RA shall issue the authorization specifying –
• “Not for imports” on the body on the authorization;
• Average EO if any;
• Specific EO @85% of the applicable Specific EO.

• Post Export EPCG:
– The export obligation period shall start form the authorization issue
date.
– On completion of exports, exporter to file application for issue of
Freely referable scrip in Form ANF-5B along with other documents
such as duty paying Challan, Nexus and Installation certificate etc.
(EPCG)
such as duty paying Challan, Nexus and Installation certificate etc.
– RA shall issue the certificate taking into account the basic customs
duty paid equivalent to proportionate EO fulfilled.

Benefits of foreign trade policy an overview

Benefits of foreign trade policy an overview

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