Foreign Trade Policy-Ppt

Foreign Trade Policy Of India

A Presentation by Group 2Dharam Veer RP TripathiRitu Shukla(24) Vijay Kumar

Foreign Trade Policy•Legal mandate-Sec 5 of FTDR Act 1992•Para 2.4 of FTP gives powers to O/o DGFT to lay down procedures for import/export•FTDR 1992 replaced the earlier Act called Import and Export (Control) Act 1947•Frame work for Development and Regulation of Foreign Trade by facilitating imports into the country and taking measures to increase export from India and any other related matters •Under FTDR ,FTP is formulated and implemented

FTDR-1992

• IEC number mandatory for import/export

• License or authorization

• Search and seizure and penalties appellate provisions

• FTDR rules 1993

Foreign Trade Policy• Earlier yearly policies and then 3 year policy ,now 5 year

policy 2004-2009• Preamble-primary objective of trade is not earning of

more foreign exchange but to generate greater economic activity for an all around development of the country. Based on this belief, FTP has laid down two major objectives :

• To double India’s percentage share of global merchandise trade within the next five years.

• To Act as an effective instrument of economic growth by giving a thrust to employment generation. Some of the areas under specific thrust of the present FTP are agriculture, handicrafts, gems and jewelry, handloom, leather and marine sector.

Foreign Trade Policy

•In 2004 our exports were around 63 billion USD and in 2007-2008 we have exceeded 155 billion USD (2 ½ times)

•For 2008-09 projection was USD 400 billion (Total merchandise trade) and USD 525 billion including services

-Total trade in goods and services is around 50% of GDP.

-In 4 years 136 lakh new jobs were created(source FTP 2004-09 foreword By Commerce Minister)

FTP-General provisions

• All export and import is generally free without any control of Government with some exceptions

• FTP released by office of DGFT normally has 3 important publications:– Foreign Trade Policy.– Handbook of procedures– ITC (HS) classification-items at 8 digit level-free restricted and

state enterprise

FTP-pre requisites of import/exports • IEC to be issued by DGFT offices (some exempt categories)

• IEC application with PAN no., banker certificate and statutory declaration

• Application – to DGFT offices

• RCMC if any export benefits are required

Export Promotion Schemes

•Export Promotion Capital Goods Scheme (EPCG).

•Duty Exemption/remission Scheme (DES).

•Export Oriented Unit Scheme (100% EOU Scheme).

•Special Economic Zone (SEZ Scheme).

•Status Holder Scheme.

Export Promotion Capital Goods (EPCG) Scheme

•Import of Capital Goods (CG) at concessional basic customs duty of only 3%

•Export obligation equivalent to 8 times of duty saved on import of CG. (5 times for agro, cottage and tiny sector and 6 times for SSI)

•Export obligation is required to be fulfilled within 8 years (extendable to 12 years)

Duty Exemption and Remission Schemes

•Duty Exemption Schemes -import of inputs and raw materials required for exports, are allowed duty free, for use in the export production. AAS and DFIA

•Duty Remission Scheme -remission of duty on the inputs used in the export production after the exports DEPB and DBK

•AAS-called advance license earlier. permits duty free import (basic custom duty, additional custom duty, education cess, anti dumping duty and safe guard duty) on inputs after a/c for wastages .

•SION (any example)

DFIA and DEPB•DFIA similar to AAS but with one major difference only i.e. after E.O. is fulfilled authorization or material imported against is transferable whereas in AAS it is with AU condition.

•DEPB- to neutralize the incidence of custom duty on the imports contained in the export product

•DEPB rates notified by DGFT

•DEPB rate is expressed as a % age of FOB

•DEPB credit used to pay basic and additional customs duty (scheme up to may 2009)

Other Schemes•DBK- Draw back rate are fixed by the Customs Departments on all India basis (New rates from 1/09/2008)-1300 products

•Very popular scheme. DEPB and DBK compete with each other. In DEPB it is credit and in DBK it is cash.

•100% EOU scheme- provide duty free and control free regime of export production without putting any restrictions about location of the unit (many benefits like exemption from IT,100% earnings in EEFC,50% sales in DTA)

Other schemes

• SEZ scheme-under SEZ Act 2005

• basically a foreign territory within the country, as far as different taxes and duties are concerned (lots of benefit)

• Status Scheme-Export House, Star Export House, Trading House, Star Trading House and Premier Trading House –policy allows certain benefits

Exports and Imports-General conditions• Export policy –part of FTP-8 digit classification-

free ,restricted and state enterprise-conditions on exports

• Imports-with WTO –MFN and NT clauses

• Imports subject to all domestic laws like hazardous wastes (Amendment) Rules 2003, Standards of Weights and Measures, (Package Commodities) Rules 1977, standards enforced by Bureau of Indian Standards (BIS) –presently 68 items, Meat Food Products Order 1973, Prevention of Food Adulteration Act (PFA Act) etc.

EDI in DGFT

•All 34 offices are fully computerised and connected

•EDI fully functional with custom offices

•50,000 DEPB scrips and around 1,00,000 AA’s issued totally upon online filing of applications

•Digital signature and EFT functioning for last 4 years

•DEPB and AA and shipping bills online transferred between DGFT and customs offices.

•Linking with banks is at fairly advanced stage and with that imports/exports can be paperless.

WTO Regime

• WTO came in existence in 1995

• Trade in open and transparent manner-4 pillars.

• Protection only through tariffs, continuous reduction in tariffs, MFN and NT

• QR removal started

QR Removal ScheduleTotal number of tariff lines (1.4.96)Total number of tariff lines (1.4.96) 1020210202

Tariff lines without QR (1.4.96)Tariff lines without QR (1.4.96) 61616161

No of QRs removed in 1996-97No of QRs removed in 1996-97 488488

No of QRs removed in 1997-98No of QRs removed in 1997-98 391391

No of QRs removed in 1998-99No of QRs removed in 1998-99 894894

No of QRs removed in 1999-2000No of QRs removed in 1999-2000 714714

No of QRs removed in 2000-01No of QRs removed in 2000-01 715715

No of QRs removed in 2001-02No of QRs removed in 2001-02 6666

QR Removal Schedule

No of QRs removed in 2002-03No of QRs removed in 2002-03 7070

No of QRs removed in 2003-04No of QRs removed in 2003-04 1010

No of QRs removed in Foreign Trade Policy No of QRs removed in Foreign Trade Policy (2004-05)(2004-05)

4141

No of QRs removed in 2005-06No of QRs removed in 2005-06 77

No of QRs removed in 2006-07No of QRs removed in 2006-07 88

Items RestrictedItems Restricted 415415

Items ProhibitedItems Prohibited 5353

Items under State TradingItems under State Trading 3333

• Edible products of wild animals• Other products of wild animals

• Feathers• Ossein & bones• Ivory powder• Sinews & tendons• Fats of bovine animals• Fish liver oil (other than cod liver)• Animal Enzymes (rennet)• Tiger, cat & fur skins• Worked ivory

• Domestic & wild birds• Beef , unprocessed pig meat products

Prohibited Products/ Categories-examples

• Live Animals & Fish• Animal Products

• Edible offal• Meat of bovine animals• Turtle eggs, birds nest• Worked tortoise shell, pearl, bone, coral• Stuffed animals, birds

• Plant Products• Fresh & chilled potatoes• Seeds of spice plants, fruits & peas• Fresh ginger• Cereals & oilseeds of seed quality• Poppy & Opium • Sandalwood

Restricted Products/ Categories-examples

• Cereals• Wheat• Rye• Oats• maize

• Copra/ Coconut• Petroleum oils

• Boiling point spirits• Natural gasolene liquid• Superior kerosene oil (SKO)• Aviation turbine fuel (ATF)

• Urea

STE Imports-examples

Scheme PerformanceScheme India’s export share

Advance Authorisation 15%

DEPB 30%

Duty Drawback Around 30%

EOU/ EHTP/ SEZ 18%

ASCM

• Prohibited subsidies• Contingent upon export performance

• Contingent upon the use of domestic over imported goods.

• Exception: Exemption or remission of duty on the inputs (which are physically incorporated or Oil, fuel, energy, catalyst) used in the export production permitted.

Foreign Trade Policy Schemes

• Advance Authorisation: • compatible and defensible since it exempts duty on

inputs used in export production• DFRC:

• Problem with transferability but can be argued from the angle of remission

• DEPB:• Major issue is of non proof of use of imported inputs

in export production (is a notional remission)

Foreign Trade Policy Schemes

• EPCG:

• Capital goods are not considered as inputs

• Duty concession is contingent on export performance

• The new scheme has no nexus and permits export of alternate goods

Other Trade Defense Mechanism• Increase in customs duty within bound rates• Anti-dumping/Anti-subsidy/safeguard measures

etc.• NPM/ NTMs• Standards

Return of Economic Nationalism• With recession looming large, increasingly nations turning

to economic nationalism• Economic Nationalism – the urge to keep jobs and capital

at home, closing economy so as to protect the interests of the nation

• Potential to push the world into depression( Reed smoot and Hawley’s protectionist policies in 1930’s pushed America further into depression)

• Threat to International trade & globalized economy promoted by WTO

Why Economic Nationalism is a worry for International Trade & Finance

• May impose restriction on availability and access to foreign finance sources (as grip of nationalism is tightest in banking) – In France & Britain, politicians demanding that banks

given bailout packages must lend at homeordomestic borrowers

• May impose restrictions on access to offshore labour market and affect outsourcing– Britain demand for “ British Jobs for British workers”– France : 1 million workers stayed away from work on

29th Jan demanding jobs be provided only to domestic workers

– US has imposed restrictions on hiring on HB1 Visa, Britain has also imposed similar restrictions

Why Economic Nationalism is a worry for International Trade & Finance

• May severely affect foreign trade– ‘ Buy American ‘ - Demand for use of American materials only in

public works in the $ 800 billion stimulus package- likely to affect emerging countries

– World trade likely to shrink for the first time since 1982

– Net private sector capital flows to the emerging markets likely to fall to $165 billion from a prak of $929 billion in 2007

– IMF says world growth to grind at a virtual halt– World growth is projected to fall to just ½ percent in 2009(when measured

in terms of purchasing power parity). , its lowest rate in 60 years (source IMF ‘s Update to its World Economic Outlook, released on January 28 )

– World bank estimates puts it to 0.9%

– Global growth is projected to rebound in 2010 to 3.0 percent

Conclusion

• The Foreign Trade policy especially of developing countries have undergone drastic changes since WTO came into existence

• Opening of world trade and end to tariffs and barriers

• Foreign Trade increased by leaps n bounds especially of India & China

• Integration of world markets has led the world economy bear the brunt of the US Recession

• Rise of Economic Nationalism may threaten the world with depression

• Need for stronger international policy response to the crisis

• Banking sector must be unclogged to get economies moving again

• What is required is co-ordination among nations(Foreign Trade Policy responses) , forbearance(embracing of open markets even if some foreigners will benefit) and greater role of multilateral organizations.

Important Websites

• www.nic.in/eximpol -official website of DGFT

• www.commin.nic.in –official website of Ministry of Commerce

• www.ieport.com –a comprehensive website giving everything new on imports and exports. All notifications/ PNs/clarifications etc by DGFT/CBEC/RBI and latest news about foreign trade are available at this site

Thank You !