Foreign Trade Policy 1

Foreign trade policy2009 - 2014S.CLEMENT

GENESISUp to 1945 Defence of India Rules1946 lapse of DIR1947 Import & Export( control) Act 19471985 Import & Export Policy1992 Foreign Trade(DEV &Regulation) Act1991 BOP CRISIS1992 1992-97 PLICY( for 5 yrs)1997 economic recession in China/Srilanka/Pakistan

GENESIS1997-2002 EXIM PPOLICYService exports recognizedEPCG O duty reduced from 20 cr to 2 cr for sectors like chemicals/plastic/textile etcOmbudsman in ports

Policy implementationSec 5 of Foreign Trade (DEV & Reg) Act 1992Announced by MOCIImplemented by DGFTPolicy covers exportability & importability of goods and services in ITC(HS)Procedures and formats in in Hand book of procedures in VOL I & II

ITC (HS)HS Code List or India Harmonised Code System Code.ITC-HS Codes or better known as Indian Trade Clarification based on Harmonized System of Coding was adopted in India for import-export operations. Indian custom uses an eight digit ITC-HS Codes to suit the national trade requirementsIndian custom uses an eight digit ITC-HS Codes to suit the national trade requirements. ITC-HS Codes Schedules ITC-HS codes are divided into two schedules. ITC(HS) Import Schedule I describe the rules and guidelines related to import policies where as Schedule II describe the rules and regulation related to export policies. Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The total number of chapters in the schedule I is 98. The chapters are further divided into sub-heading under which different HS codes are mentioned. Export Policy Schedule II of the ITC-HS code contain 97 chapters giving all the details about the guidelines related to the export policies.

ITC Major Code Classification

Animals & Animal Products Vegetable Products Animal Or Vegetable Fats Prepared Foodstuffs Mineral Products Chemical Products Plastics & Rubber Hides & Skins Wood & Wood Products Wood Pulp Products Textiles & Textile Articles Footwear, Headgear Articles Of Stone, Plaster, Cement, Asbestos Pearls, Precious Or Semi-Precious Stones, Metals Base Metals & Articles Thereof Machinery & Mechanical Appliances Transportation Equipment Instruments - Measuring, Musical

Foreign trade Policy 2004-09ObjectivesDouble the % of share n the global trade from 0.8%(04) to 2%(09) ( USD 61.84 bn to 195 bn.). Stimulate economic growth for employment generation in rural and semi urban centres

Objective Focused product -To promote export of products having large employment potential in rural and semi urban areas. The scheme allows duty credit facility @ 2.5% of FOB value of exports to 50% of export turnover of notified products such as value added fish,leather, stationery items, fire works, sports goods, handlooms and handicraft items.Focus market identifying market segment on the basis of demand for Indian products.Penetration of strategic markets by indian products where our presence is low. Duty free credit @ 2.5%

strategyUnshackling of controlsSimplifying procedures to reduce transaction costCreating base for global hub for manufacturing and servicesImprovement in infrastructureIdentification of for special focus areasTechnological up gradation to attain world standards- import of capital goods/equipmentRevamping of Board of trade Role Embassies- activate for export promotion for trade intelligence/enquiry dissemination

Special focus initiativesSector with significant export prospects coupled with potential for employment generation in rural and semi urban centreThreshold limit for towns of excellence is reduced from Re 1000 to 250 cr for for handloom,handicrafts,agriculture & fisheries. For others it is Re 1000 cr.Such towns will get preference in infrastructure development.

Special focus areasAgricultureHandloomsHandicraftsLeather & Foot wear

FTP - 2009 - 2014Sharma not sure of recovery, sets $200-b figure by March 2011

FTP 2009 -2014The Foreign Trade Policy 2 009-2014 (FTP), incorporating provisions relating to export and import of goods and services, shall come into force with effect from 2 7th August, 2 009 and shall remain in force up to 31st March,2014 unless otherwise specified. All exports and imports up to 2 6th August 2 009 shall be accordingly governed by the FTP 2004-2009.

Journey so farIn the last five years our exports witnessed robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-04. Our share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates. Our share of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008. Indias total share in goods and services trade was 0.92% in 2003; it increased to 1.64% in 2008. On the employment front, studies have suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years.

What is in for future?The short term objective of our policy is to arrest and reverse the declining trend of exports and To provide additional support especially to those sectors which have been hit badly by recession in the developed world. MOCI would like to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. up to 2014, the country should be able to come back on the high export growth path of around 25% per annum.By 2014, we expect to double Indias exports of goods and services. The long term policy objective for the Government is to double Indias share in global trade by 2020.

Special FocusWith a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification,Technological Upgradation &Support to status holders.Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time

FTP 2009-14The focus market scheme has been extended to 26 new markets, which includes 16 in Latin America and 10 in Asia-Oceania. The government also introduced a new market-linked focus product scheme where incentives will be given to export of select items to 13 identified markets like Egypt, Kenya, Nigeria, South Africa, Tanzania, Australia and New Zealand.The policy also sought to ensure that dollar credit needs of exporters are met in a timely manner by setting up a committee, including finance secretary, commerce secretary and the Indian Banks Association (IBA) to monitor credit flow

FTP 2009 -14To help the industry upgrade technology, the policy introduced a scheme for importing capital goods at zero duty for identified sectors like engineering, chemicals, electronic products, pharmaceuticals, textiles, handicrafts, plastics and leather and leather products, subject to an obligation to carry out specified amount of exports. The existing export promotion capital goods (EPCG) scheme allows import of machinery at 3% duty against an export obligation. Status holding exporterswhose exports are over and above specified levelswill be allowed additional duty credit scrips for import of capital goods for personal use at lower import duties. The discount will be equivalent to 1% of the exports made in the previous year. The government has also announced continuation of the DEPB scheme beyond December 31, 2009, to December 31, 2010, and the enhanced ECGC cover till March 2010. The extension will help exporters in taking pricing decisions over an extended period of time

Export Promotion Capital Goods Scheme (EPCG)Zero duty EPCG scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at zero Customs duty.It is subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date.The scheme will be available for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products;

Duty Entitle Pass Book Scheme (DEPB) Objective of DEPB is to neutralise incidence of customs duty on import content of export product. ComponentScheme of customs duty on fuel appearing as consumable shall also be factored in the DEPB rate. Component of Special Additional Duty shall also be allowed under DEPB (as brand rate) in case of non-availment of CENVAT credit. Neutralisation shall be provided by way of grant of duty credit against export product.An exporter may apply for credit, at specified percentage of FOB value of exports, made in freely convertible currency.DEPB and / or items imported against it are freely transferable.

MARKET AREA INITIATIVE

Under MAI scheme, Financial assistance is provided (MAI) for export promotion activities on focus country, focus product basis. Financial assistance is available for Export Promotion Councils (EPCs), Industry and Trade Associations (ITAs), Agencies of State Government,Indian Commercial Missions (ICMs) abroad and other national level institutions/eligible entities as may be notified.A whole range of activities can be funded under MAI scheme. These include, amongst others, i. Market studies/surveys, ii. Setting up of showroom / warehouse,iii. Participation in international trade fairs, iv. Displays in International departmental stores,v. Publicity campaigns, vi. Brand promotion,vii. Reimbursement of registration charges forpharmaceuticals and expenses for carrying out clinicaltrials etc., in fulfillment of statutory requirements inthe buyer country,viii. Testing charges for engineering products abroad,ix. Assistance for contesting Anti Dumping litigationsetc.Each of these export promotion activities can receive financial assistance from Government ranging from 25% to 1 00% of total cost depending upon activity and implementing agency.

Market Development Assistance Under MDA Scheme, financial assistance is provided Assistance (MDA) for a range of export promotion activities implemented by EPCs and Trade Promotion Organizations on the basis of approved annual action plans. Assistance includes, amongst 31 others, participation ini. Trade Fairs and Buyer Seller meets abroad or in India, ii. Export promotions seminars.iii. Financial assistance with travel grant is available to exporters traveling to focus areas, viz., Latin America, Africa, CIS region, ASEAN countries, Australia and New Zealand. In other areas, financial assistance without travel grant is available.

Status Holders Applicant shall be categorized depending on his total FOB(FOR - for deemed exports) export performance during current plus previous three years (taken together) upon exceeding limit below. For Export House (EH) Status, export performance is necessary in at least two out of four years (i.e., current plus previous three years).Merchant as well as Manufacturer Exporters, Service and Trading Houses Providers, Export Oriented Units (EOUs) and UnitsStatus located in Special Economic Zones (SEZs), Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio- Technology Parks (BTPs) shall be eligible for status.Status Category Export Performance FOB / FOR Value - (Rupees in Crores)

Export house 20Star Export house100Trading house 500Star trading house 2500Premier Trading house 7500

Privileges of status holdersA Status Holder shall be eligible for privileges as under:(i) Authorization and Customs Clearances for both imports and exports on self-declaration basis;(ii) Fixation of Input-Output norms on priority within 60 days; Different standard Input Output Norms(SION) for different industries such as chemical, electronics etc.(iii) Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels;(iv) 100% retention of foreign exchange in EEFC account;

Privileges of status holders(v) Exemption from furnishing of BG in Schemes underFTP(vi) SEHs and above shall be permitted to establish Export Warehouses subject to government norms.(vii) For status holders, a decision on conferring of ACP Status shall be communicated by Customs within 3 0 days from receipt of application with Customs.(viii) 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 last5 years, instead of 3 years.(ix) Status Holders of specified sectors shall be eligible for Status Holder Incentive Scrip under Para 3 .16 of FTP.(x)Status Holders of Agri. Sector (Chapter 1 to 24 ) shall be eligible for Agri. Infrastructure Incentive Scrip under VKGUY - Para 3.13.4 of FTP.

Agriculture and Village Industry

(a) Vishesh Krishi and Gram Udyog Yojana(b) Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ.(c) Import of restricted items, such as panels, are allowed under various export promotion schemes.(d) Import of inputs such as pesticides are permitted under Advance Authorisation for agro exports.(e) New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.(f) Certain specified flowers, fruits and vegetables are entitled to a special duty credit scrip, in addition to the normal benefit under VKGUY.

Handlooms

(a) Specific funds are earmarked under MAI / MDA Scheme for promoting handloom exports.(b) Duty free import entitlement of specified trimmings and embellishments is 5 % of FOB value of exports during previous financial year.c) Duty free import entitlement of hand knotted carpet samples is 1 % of FOB value of exports during previous financial year.(d) Duty free import of old pieces of hand knottedcarpets on consignment basis for re-export after repair is permitted.(e) New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.(f) Machinery and equipment for effluent treatment plants is exempt from customs duty.

Handicrafts (a) Duty free import entitlement of tools, trimmings and embellishments is 5 %of FOB value of exports during previous financial year. Entitlement is broad banded, and shall extend also to merchant exporters tied up with supporting manufacturers.(b) Handicraft EPC is authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable.(c) Specific funds are earmarked under MAI & MDA Schemes for promoting Handicraft exports.(d) CVD is exempted on duty free import of trimmings, embellishments and consumables.(e) New towns of export excellence with a reduced threshold limit of Rs 150 crore shall be notified.(f) Machinery and equipment for effluent treatment plants are exempt from customs duty.(g) All handicraft exports would be treated as special Focus products and entitled to higher incentives.

AGRICUTURENew scheme Special Agricultural Produce scheme for promoting export of flowers/fruits/vegetables & minor forest produceDevelopment of AEZDuty free imports under EPCGTowns of excellence threshold limit @ 250 crImport of seeds/bulbs, tubers & planting material liberalized

Special agricultural produce scheme(Vikesh Krishi and Gram Udyog Yojana)Objective promote export of fruits, vegetables, flowers & minor forest produceEntitlement duty free credit @3. 5% of FOB of exports for each licensing year from 1.04.04.Imports allowed inputs or goods including capital goods permitted Centvat/duty drawback- additional customs and excise duty can be adjusted against Centvat or DDB

HANDLOOMSSpecial funds for MAI ( Market Access Initiative) / MDA (Market Development Assistance) for promoting handloom exportsDuty free entilement(5% of FOB value of exports) for trimmings & embellishmentsDuty free import @ 1% for hand knotted carpet samplesDuty free import of old pieces offhand knotted carpets for re exportNew towns of excellence Kannor/Karur/Madurai/Kekhra

HANDICRAFTSNew Handicrafts SEZ for procuring from cottage sector and exportingDuty free import entitlement @ 5%for trimmings and embellishmentHandicraft Export Promotion Council to import trimmings ,embellishment & consumableson behalf of exporters for whom direct imports is not viableCVD exemption for trimmings ,embellishment Duty free import of commercial samples up to Re 10000New towns of excellence - Jodhpur

LEATHER & FOOT WEARDuty free entitlement for imports @ 5%Exemption from basic customs duty for machinery and equipment for Effluent Treatment Plants Re-export of unsuitable imported materials such as raw hides & skins and wet blue leather is permited.CVD exemption for lining and interlining material

GEMS & JEWELLERYImport of gold of 18c & above under replenishment schemeDuty free entitlement for consumablesDuty free entitlement of samples up to Re 100,000.

Procedural simplificationExporters with turnover of 5 cr & good track record exempted from BG (for customs) to reduce transaction costExemption from service taxValidity of licences/enetilements increased to 24 monthsNumber returns to be filed is reducedEnhanced delegatory powers for zonal DGFTTier bound introduction of EDI

Other iniativesImport of second hand goods with out age restrictionSetting up of Services promotion export councilTo map up opportunities for key service rpoviders like engineering,multimedia,software developers etcDevelopment of Pragati maidan -develop into world class complex for exhibition/conference etc .Common facilities centre for use by home based service providers

Other iniativesFree Trade & Ware housing zones- to facilitate import and export of goods and services with freedom to carry out trade transactions in free currency for making a global trading hub.100 % FDI permitted to develop such zones.

Other initiativesLEGAL AID- for deserving exporters on the basis of export promotion council for meeting cost of legal expeses connected with trade related mattersGrievance Redressal for speedy disposal of trade and industryServed from India Scheme - objective is to accelerate service exports. Service providers with exchange earning of atleast Re 10 lacs in the preceding financial yr are eligible for duty credit entitlement

Other intiativesMarket access Initiative (MAI) financial assitance for medium term export promotion to be used by export promotion councils, state government, industry and trade associations etcFor market studies, setting up of show room, sales promotion campaigns , participation international fairs, brand promotion etc

Other initiativesMarket development assistance (MDA)Available for exporters with export turnover up to Re 5 crMeant for export promotion activities such as participation trade fairs, buyer seller meet, export promotion seminars,travel abroad to Focus area such as lation american countries, ASEAN, Australia, & New Zealand.

Export Oriented Units100 % CREDIT TO EEFCImport of goods on self declaration basisIT benefit on plant & machinery shall be extended to DTA units on conversion to EOUExemption from service taxTextiles and garments disposal of residual material up to 2 % of CIF or quantity on payment of duty on transition value

Special Economic ZonesSEZ duty free enclave and deemed foreign territory of trade operations and duties and tariffsDeemed foreign territory for operations and tariffs. Goods and services going to SEZ treated as exports and goods from DTA as importsSEZ can import from DTA / Bonded Houses with out payment of dutyPeriod of realization with out time limit

SEZIncentives for Developers of SEZ Foreign Direct Investment (100%) allowed Income Tax benefit 100% in 1st 5 years & 50% in next 2 years Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs Exemption from Service tax for development, operation and maintenance of SEZs Exemption from Service TaxAllocation of power to SEZ from central quota

SEZ incentives for developers .Authorized to provide and maintain services like water, electricity,security, restaurants and recreation centers on commercial lines.

SEZ- CRITERIA FOR APPROVALSSEZ size not to be less than 1000 hectares Sector specific SEZ can be set up in lesser areaUnits to be approved under the SEZ Scheme At least 25% area in integrated SEZ to be earmarked as processing area