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WTO & Trade Issues - Foreign Trade Policy.pptx

  1. Foreign Trade Policy
  2. EXIM Policy On March 31, 2002, the Government announced a New Export-Import (EXIM) policy for 2002- 2007. Sharply export oriented rather than import liberalizing; the policy withdrew most of the earlier export restrictions and provided several incentives for the newly created Special Export Zones (SEZ’s). Exim Policy, also known as the Foreign Trade Policy is announced every 5 years by Ministry of Commerce and Industry, Government of India. It is updated every year on the 31st March and all the amendments and improvements in the scheme are effective from the 1st of April. Exim Policy deals in general provisions pertaining to exports and imports, promotional measures, duty exemption schemes, export promotion schemes, special economic zone programs and other details for different sectors.
  3. EXIM Policy Objectives of the Exim Policy: Government control import of non-essential items through the EXIM Policy. At the same time, all- out efforts are made to promote exports. Thus, there are two aspects of Exim Policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. The main objective of the Government’s EXIM Policy is to promote exports to the maximum extent. Exports should be promoted in such, a manner that the economy of the country is not affected by unregulated exports of items specially needed within the country. Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country.
  4. EXIM Policy Objectives of the Exim Policy: In other words, the main objective of the Exim Policy is: • To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. • To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production. • To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness. • To generate new employment. • Opportunities and encourage the attainment of internationally accepted standards of quality. • To provide quality consumer products at reasonable prices.
  5. India New Foreign Trade Policy 2015 - 2020. The Government of India, Ministry of Commerce and Industry announced New Foreign Trade Policy on 01st April 2015 for the period 2015-2020, earlier this policy known as Export Import (Exim) Policy. After five years foreign trade policy needs amendments in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position. The Export Import Policy (EXIM Policy) or Foreign Trade Policy is updated every year on the 31st of March and the modifications, improvements and new schemes becomes effective from April month of each year.
  6. EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME What is EPCG Scheme (Export Promotion Capital Goods Scheme)? This is a Scheme which enables an importer (being an export-oriented business) to import capital goods at zero rates of customs duty. However, the scheme is subject to an export value equivalent to 6 times of duty saved on the importation of such capital goods within 6 years from the date of issuance of the authorization. In simple words, there is a compulsion on the business to bring in foreign currency which is equal to 600 percent of duty saved on such importation measured in domestic currency. This is to be done within six years from availing the Export Promotion Capital Goods scheme. What are Export Promotion Capital Goods? Export Promotion Capital Goods are capital goods used in the production of goods which are exported to other countries. It includes machinery as well as spares. Hence, to qualify as Export Promotion Capital Goods, the commodity manufactured in India must be exported outside India.
  7. EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME What are the Capital Goods allowed under Export Promotion Capital Goods Scheme? The capital goods allowed under Export Promotion Capital Goods Scheme shall include spares (including reconditioned/ refurbished), fixtures, jigs, tool, molds and dies. Further, second-hand capital goods may also be imported without any restriction on age under the EPCG Scheme. Under this scheme of Foreign Trade Policy (FTP), importation of capital goods required for the manufacturing of export-oriented product specified in the Export Promotion Capital Goods Authorization is permitted at concessional/nil rate of duty. This scheme under Foreign Trade Policy allows technological up-gradation of the indigenous industry. Export Promotion Capital Goods (EPCG) Authorizations are issued by licensing authority – Director General of Foreign Trade (DGFT) based on the certificate issued by an Independent chartered engineer. Who would benefit from this Scheme? EPCG is intended for promoting exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters. Heavy exporters could benefit from this provision. However, it is not advisable to go ahead for this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the country, as it could become almost impossible to fulfill the obligations set under this scheme.
  8. EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME How to obtain an EPCG License? In order to obtain a License under EPCG scheme, it is a primary requirement to file an application with the licensing authority of Director General of Foreign Trade. The application shall be attached with the required documents along with the company and personal details. Documents required for EPCG License The issuing authority is the licensing authority – Director General of Foreign Trade (DGFT). ANF 5B is to be filled along with Self-certified copies of documents such as Import Export Code (IEC), Registration cum Membership Certificate (RCMC), Digital Signature, etc What is the export obligation under the scheme? The Importation of capital goods under the scheme of EPCG is subject to an export obligation which is equal to six times of duty saved, to be satisfied within 6 years from date of issue of EPCG authorisation. If a holder of the EPCG authorisation is unable to meet the stipulated export obligation, the importer of the capital goods is required to pay customs duties along with interest on it as prescribed.
  9. Duty Exemption/Remission Schemes Duty exemption schemes enable duty free import of inputs required for export production. Duty Exemption Schemes consist of (a) Advance Authorisation scheme (b) Duty Free Import Authorisation (DFIA) scheme A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in export product. Duty Remission Schemes consist of (a) Duty Entitlement Passbook (DEPB) Scheme (b) Duty Drawback (DBK) Scheme. Let’s look at each scheme in detail!!
  10. Duty Exemption/Remission Schemes Duty Exemption Schemes consist of Advance Authorization Scheme: The Advance Authorisation Scheme (AAS) is an incentive for exporters offered by the Indian government. It is provided through the Directorate General of Foreign Trade (DGFT) and incentivizes the import of additives and raw materials that are physically incorporated into a product that is bound for exports. They can be fuel, oil, power, or catalysts consumed in the production of the export items. Advance Authorisation makes the import of such inputs duty-free. The scheme also allows normal allowance for wastage of these inputs. Notification about the products to be included or excluded from the scope is released as and when required by the DGFT in the form of public notices. Advance Authorisation Scheme has been referred to as an ‘Advance License’ in some places as well.
  11. Duty Exemption/Remission Schemes Duty Exemption Schemes consist of Duty Free Import Authorisation (DFIA) scheme: DFIA is issued to allow duty-free import of inputs, fuel, oil, energy sources, the catalyst which are required for the production of the export product. Directorate General of Foreign Trade (DGFT), by means of Public Notice, may exclude any product(s) from the purview of DFIA. Duty-Free Import Authorisation is issued to allow duty-free import of inputs. Duty-Free Import Authorisation shall be issued on post export basis for products for which Standard Input Output Norms have been notified.
  12. Duty Exemption/Remission Schemes Duty Remission Schemes consist of Duty Entitlement Passbook (DEPB) Scheme: Duty Entitlement Passbook Scheme is an export encouragement scheme instituted by the Government of India to the Indian exporters in the year 1997. This scheme earlier constituted of 2 parts: • Pre- export DEPB- got abrogated in 2000 • Post- export DEPB- issued after the exports In post-export DEPB scheme, the exporter is given a DEPB at a pre-decided credit on the Freight on Board Value (FOB). The fundamental aim behind this scheme is to provide incentives in import and export policy of India and to nullify the basic custom duty rates on the import content of the commodities exported. Within the scheme, an exporter of the goods is entitled to claim credit which would be a fixed percentage of the value of the goods that are exported and is available at a rate of exported product which is decided and notified by the Director-General of Foreign Trade (DGFT).
  13. Duty Exemption/Remission Schemes Duty Remission Schemes consist of Duty Drawback (DBK) Scheme: Under Duty Drawback Scheme (DBK) relief of Customs and Central Excise Duties suffered on the inputs/components used in the manufacture of goods exported is allowed to Exporters. The admissible duty drawback amount is paid to exporters by depositing it into their nominated bank account. Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944, empower the Central Government to grant such duty drawback. The Duty Drawback Scheme allows exporters to get a refund on customs duty paid on imported goods, where those goods are: • to be treated, processed, or incorporated in other goods for export, or • are exported unused since importation The minimum claim per application for duty drawback is $100.
  14. Gems and Jewellery Scheme • Exporters of gems and jewellery can import / procure duty free input for manufacture of export products. Broadly gold jewellery, silver jewellery, platinum jewellery, if exported, would be eligible. Minimum value additions are prescribed for such exports. • The various schemes available to the exporters available are:  Advance Procurement / Replenishment of Precious Metals from Nominated Agencies  Replenishment Authorisation for Gems  Replenishment Authorisation for Consumables  Advance Authorisation for Precious Metals • Besides above schemes certain agencies are permitted to import diamonds to their laboratories without any import duty for the purpose of certification / grading reports, with a condition that the same should be re-exported with the certification / grading reports, as per the procedure laid down in Hand Book of Procedures. Also export of cut & polished diamonds for certification / grading with re-import facility at zero duty is also allowed. • Nominated agencies and their associates, with approval of Department of Commerce and Gem & Jewellery Export Promotion Council (GJEPC), may export gold / silver / platinum jewellery and articles thereof for exhibitions abroad.
  15. Gems and Jewellery Scheme • Private / Public Bonded Warehouses has been allowed to be set up in SEZ/DTA* for import and re-export of cut and polished diamonds, cut and polished coloured gemstones, uncut & unset precious & semi-precious stones, subject to achievement of minimum value addition of 5% by DTA units. *DTA (Domestic Tariff Area means the area which is not under customs bonded) • The Director General of Foreign Trade (DGFT)/Department of Commerce (DoC) monitors the transaction cost issues and implements various Export promotion schemes for the sector. Gems & Jewellery Export Promotion Council (GJEPC) under the DoC is an apex body to facilitate this sector. • Reserve Bank of India (RBI) is responsible for regulating the foreign exchange, an important ingredient for international trade. RBI issues various Master Circulars on EXIM policies and gold import from time to time.
  16. Special Economic Zones A special economic zone (SEZ) is an area in a country that is subject to different economic regulations than other regions within the same country. The SEZ economic regulations tend to be conducive to—and attract—foreign direct investment (FDI). FDI refers to any investment made by a firm or individual in one country into business interests located in another country. When a country or individual conducts business in an SEZ, there are typically additional economic advantages for them, including tax incentives and the opportunity to pay lower tariffs. Special economic zones (SEZs) are typically created in order to facilitate rapid economic growth by leveraging tax incentives to attract foreign investment and spark technological advancement. SEZs can also create a high level of bureaucracy due to their regulatory requirements. This can have the effect of funneling money away from the system, making it less efficient. The first SEZs appeared in the late 1950s in industrialized countries. They were designed to attract foreign investment from multinational corporations. The first was in Shannon Airport in Clare, Ireland.1 In the 1970s, SEZs were also established in Latin American and East Asian countries. The Special Economic Zone (SEZ) policy in India first came into inception on April 1, 2000. The prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports.
  17. Free Trade Warehousing Zones Free Trade Warehousing Zone is a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on. It is a deemed foreign territory within the geography of India for the purpose of tariff and trade. The Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 are the legal framework for FTWZ. Instructions are also issued by the Ministry of Commerce & Industries from time to time to clarify various operational aspects of FTWZ. Activities allowed inside the FTWZ include
  18. Free Trade Warehousing Zones Some other Features: • Export entitlement is available for supply of goods from Domestic Tariff Area (DTA) to FTWZ for authorised operations. The Unit or Developer can claim drawback or Duty Entitlement Pass Book in respect of goods procured from DTA • Inbound taxable services as well as those performed inside the FTWZ for use in authorized operations are exempt from service tax. Similarly, taxable services in relation to transportation of goods from Port to FTWZ or from one FTWZ to another FTWZ would also be exempt. • Customs duty is exempt when goods are imported into FTWZ for authorized operations.
  19. Star Export Houses Star export house is an Indian exporter who has excelled in international trade and successfully achieved certain minimum amount of export performance in two out of three financial years. To obtain star export house status, the exporter involved in export of goods or service must have a valid import export code (IE Code). On being recognised as a star export house, the exporter enjoys various benefits and privileges. Some of the benefits received include: • Authorisation and customs clearance for both imports and exports may be allowed on self- declaration basis. • Exemption from furnishing of bank guarantee for Schemes under Foreign Trade Promotion, unless specified otherwise. • Input-output norms maybe fixed on priority within 60 days by the Norms Committee.
  20. Star Export Houses Status Category: The applicant shall be categorized depending on his total FOB/FOR export performance during the current plus the previous three years.:
  21. Deemed Exports ‘Deemed Exports’ as defined in the Export and Import Polilcy, 1997-2002 means those transactions in which the goods supplied do not leave the country and the supplier in India receives the payment for the goods. It means the goods supplied need not go out of India to treat them as ‘Deemed Export’. There are many categories of supply of goods by the main/ sub-contractors which shall be regarded as "Deemed Exports" under this Policy, provided the goods are manufactured in India. Some of these categories include: • Supply of goods against Advance Licence/Advance Licence for annual requirement/DFRC* under the Duty Exemption /Remission Scheme; *DFRC (Duty free replenishment certificate) is issued to a merchant exporter or manufacturer exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty • Supply of goods to Export Oriented Units (EOUs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP); • Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme;
  22. Agri Export Zones • Under chapter 16 of Exim Policy 2001, a new concept of Agri Export Zone (AEZ) has been inserted by Govt. of India. The concept of agri export zone takes a comprehensive look at a particular produce/product located in a contiguous area for the purpose of developing and sourcing the raw materials, their processing/packaging, leading to final exports. • The entire effort is centred around the cluster approach of identifying the potential products, the geographical region in which these products are grown and adopting an end-to-end approach of integrating the entire process right from the stage of production till it reaches the market. • Measures to promote exports from Agri Export Zone include:  Financial Assistance: Both Central as well as State Government and their agencies are providing a variety of financial assistance to various agri export related activities, etc  Fiscal Incentives: The benefits under Export Promotion Capital Goods Scheme, which were hitherto available only to direct exporters, have now been extended to service exporters in the Agri Export Zones, exporters of value added agri products will be eligible for sourcing duty free fuel for generation of power, provided the cost component of power in the ultimate product is 10% or more and the input-output norms are fixed by the advance licencing committee of the DGFT, etc
  23. Target Plus Scheme The Target Plus Scheme as a part of Foreign Trade Policy was announced on 31.08.2004 w.e.f. 01.04.2004. The objective was to accelerate growth in exports by rewarding Star Export Houses with minimum threshold export turnover of Rs.10 crore in the previous year. The scheme provided for three slabs of entitlement of duty credit scrips 5%, 10%, 15% based on the following 3 conditions: • Where the percentage incremental growth of exports was above 20% but below 25% the duty credit entitlement was 5% of the incremental growth. • Where the percentage incremental growth was above 25% but below 100% the duty credit entitlement was 10% of the incremental growth. • Lastly where the percentage incremental growth was above 100% the duty credit entitlement was 15%. The scheme was in operation for the years 2004-05 and 2005-06