Foreign trade policy of india 2009 14

INDIA’S FOREIGN TRADE POLICY 2009-14

Dr. R. Jayaraj, UPES


What is Foreign Trade Policy?

The Union Commerce Ministry,

Government of India announces the integrated Foreign Trade Policy FTP in every five year. This is also called EXIM policy. This policy is updated every year with some modifications and new schemes. New schemes come into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy which was announced on August 28, 2009 is an integrated policy for the period 2009-14.


Objectives of Foreign Trade Policy 2009-14

1. To arrest and reverse declining trend of exports is the main aim of the policy. This aim will be reviewed after two years.

2. To Double India's exports of goods and services by 2014.

3. To double India's share in global merchandise trade by 2020 as a long term aim of this policy. India's share in Global merchandise exports was 1.45% in 2008.


5. Simplification of the application procedure for availing various benefits

6. To set in motion the strategies and policy measures which catalyze the growth of exports

7. To encourage exports through a "mix of measures including fiscal incentives, institutional changes, procedural rationalization and efforts for enhance market access across the world and diversification of export markets.

Objectives of Foreign Trade Policy 2009-14


Special Focus Initiatives

• With a view to continously 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.


Board of Trade

BOT has a clear and dynamic role in advising government on relevant issues connected with Foreign Trade.

BOT has following terms of reference: I. To advise Government on Policy measures for preparation and implementation of both short and long term plans for increasing exports in the light of emerging national and international economic scenarios; II. To review export performance of various sectors, identify constraints and suggest industry specific measures to optimize export earnings; III. To examine existing institutional framework for imports and exports and suggest practical measures for further streamlining to achieve desired objectives;


IV. To review policy instruments and procedures for imports and exports and suggest steps to rationalize and channelize such schemes for optimum use; V. To examine issues which are considered relevant for promotion of India's foreign trade, and to strengthen international competitiveness of Indian goods and services; and VI. To commission studies for furtherance of above objectives.

Commerce & Industry Minister will be the Chairman of the Board of Trade (BOT). Government shall also nominate upto 25 persons, of whom at least 10 will be experts in trade policy. In addition, Chairmen of recognized EPCs and President or Secretary-Generals of National Chambers of Commerce will be ex-officio members. BOT will meet at least once every quarter.


• Aim in General

• The policy aims at developing export potential, improving export performance, boosting foreign trade and earning valuable foreign exchange. FTP assumes great significance this year as India's exports have been battered by the global recession.

• A fall in exports has led to the closure of several small- and medium-scale export-oriented units, resulting in large-scale unemployment.


• Targets:

• Export Target : $ 200 Billion for 2010-11

• Export Growth Target: 15 % for next two year and 25 % thereafter.


• EPCG Scheme:

1. Obligation under EPCG scheme relaxed.

2. To aid technological upgradation of export sector, EPCG Scheme at Zero Duty has been introduced.

3. Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced by 50%.

• Re-fixation of Annual Average

Export Obligation:

Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14. Support for Green products and products from North East extended.

(EPCG) Export promotion on capital Goods: 1. Allows import of capital goods for pre&

post production 2. Facilitate up gradation of plant

&machinery, inputs of spares upto 100% of value of exports

3. Promote high value in exports, export obligation of 50% is removed

FPS, FMS, MLFPS

• FPS (Focus product scheme): Provides license for export product which have high employment potential in rural & urban areas with a view of infrastructural facility.

• FMS (Focus Market Scheme): Offsetting high freight cost & distribution faced in assessing foreign markets

• MLFPS (market Linked Focus Product Scheme): Expanding products in identified markets.

• Vishesh Krishi & Gram Udyog Yojna: To boost Agriculture & rural exports re-credit is given at 2% special additional duty.

Incase of payment of duty by incentive scheme scrips such as Vishesh Krishi and Gram Udyog Yojana, FPS & FMS would not be available.


Announcements

for FPS, FMS, MLFPS

1. 26 new markets added in this scheme.

2. Incentives under FMS raised from 2.5 % to 3 %

3. Incentive available under Focus Product Scheme (FPS) raised from 1.25% to 2%.

4. products included in the scope of benefits under FPS


5. Market Linked Focus Product Scheme (MLFPS) expanded by inclusion of products like pharmaceuticals, textile fabrics, rubber products, glass products, auto components, motor cars, bicycle and its parts.etc. (However , benefits to these products will be provided, if exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand).

6. Focus Product Scheme benefit extended for export of ‘green products 'and some products from the North East.

7. A common simplified application form has been introduced to apply for the benefits under FPS, FMS, MLFPS and VKGUY.

Market Development Assess (MDA)

• Financial Assistance provided for a range of export promotional activities implemented by EPC, & Trade Promotion organization. This is administered by DOC (Dept of Commerce).

– 1. Trade faires, & Buyer seller meet abroad & India

– 2. Export Promotion Services

– 3. Financial Assistance with travel agent is available to export . Travelling area of focus: Latin America, Africa, ASEAN, Austraia & Newzeland.

Market Assess Initiatives (MAI)

• Financial Assistance provided by export promotional activities on focus country & focus product basis. Financial Assistance are available for Export Promotion Council (EPC), Industry & trade Associates (ITA), Agencies of state govts, Indian Commercial Mission (ICM)

1. Market study & survey

2. Setting up showcases

3. Participation in trade faires

4. Displays in international Dept. Stores

5. Publicity & Campaigns

6. Brand Promotion

7. Tests charges of soft eng. Prods.


• Announcements for MDA & MAI

Higher allocation for Market Development Assistance (MDA) and Market Access

Initiative (MAI) has been announced.

• Towns of Export Excellence (TEE)

The following cities have been recognized as towns of export excellence (TEE)

Handicrafts : Jaipur, Srinagar and Anantnag

Leather Products : Kanpur, Dewas and Ambur

Horticultural Products: Malihabad


• Scheme for Status Holders (Status Holders means star status holders) Share eligible for privilege under:

1. Authorization of customs clearance for both exp & imp on self declaration basis.

2. Fixation of input & output norms on priority with in 60 days.

3. Exemption from compulsory negotiation for documents (Remittance / Receipts )

4. 100% retention (withholding) of exchange in EEFC (Exchange Earners’ Foreign Currency) account.

5. Status of agricultural sector eligible for Agricultural Infrastructure Incentive Scrips.

• EEFC is an account maintained in foreign currency with an Authorised Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs


1. Additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports accelerate exports and encourage technological up gradation.

2. This facility shall be available for sectors of leather (excluding finished leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and ships, boats and floating structures), plastics and basic chemicals (excluding pharma products).

3. This facility was available up to 31 March, 2011.

4. Transferability for the Duty Credit scrips being issued to status holders under VKGUY Scheme permitted only for the procurement of cold chain equipments.


• Extension of Income Tax Exemption to EOU (Export oriented unit) and STPI (software Technology park unit) :

• Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of

• Income Tax Act, has been already extended for the financial year 2010-11 in the Budget 2009-10.

Extension of ECGC (Export Credit Guarantee Corporation of India) :

• Export Credit Guarantee Corporation of India Limited, was

established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit.

• Provides a range of credit risk insurance covers to exporters against loss in export of goods and services

• Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them

• The adjustment assistance scheme initiated in December, 2008 to provide enhanced

• ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010.


Announcements

For Marine sector

• Fisheries exempted from maintenance of average EO under EPCG Scheme (along with 7 sectors) however Fishing Trawlers, boats, ships and other similar items shall not be allowed for this exemption.

• Additional flexibility under Target Plus Scheme (TPS) (The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports) / Duty Free Certificate of Entitlement (DFCE for status holders) Scheme for the marine sector.

Backgrounder on Status Holders / Star Export Houses Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in SEZs, Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTP), Software Technology Parks (STPs), and Bio Technology Parks (BTPs), are eligible for applying for status as Star Export Houses. Under this scheme, the applicants are granted the status depending on the total FOB / FOR export performance during the current plus previous three years as follows:


Announcements

for Gems & Jewellery

• Duty Drawback (Drawback is the refund of duties, taxes, and fees imposed on imported merchandise which is subsequently exported.) is allowed on Gold Jewellery exports to neutralize duty incidence.

• Plan to establish "Diamond Bourse (A wholesale polished diamond exchange where trade merchants meet to transact business) with an aim to make India and International Trading Hub announced.

• Introduction of a new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification.


Announcements

for Agro Exports

• Introduction of a single window system (Models include paperless

Customs, Port Community Systems) to facilitate export of perishable agricultural produce with an aim to reduce transaction and handling cost.

• This system will involve creation of multi-functional nodal agencies. These agencies will be accredited by APEDA (Agricultural and Processed Food Products Export Development Authority).


Announcements

for Leather Exports

• On the payment of 50 % applicable export duty, Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses.

Re-exportation can be used to avoid sanctions by other nations. For example, the United Arab Emirates may have engaged in re-exportation of goods to Iran as a way for Iran to avoid U.S. trade sanctions against it


Announcements

for Tea Exports

• The existing Minimum value addition under Advance Authorization Scheme(duty free on imports of inputs) for export of tea is 100 %. It has been reduced from the existing 100% to 50%.

• DTA (Domestic Tarriff Area is an area within India that is outside the Special Economic Zones and EOU/EHTP (Electronic Hardware Technology Parks )/STP/ Software technology Parks ( BTP.(Bio-Technology Parks ()) sale limit of instant tea by EOU units increased from 30% to 50%.

• Export of tea has been included under VKGUY Scheme benefits.


Announcements

for Pharma Exports

• Export Obligation Period for advance authorizations issued increased from existing 6 months to 36 months.

• Pharma sector included under MLFPS for countries in Africa and Latin America & some countries in Oceania (Oceania is a region centered on the islands of the tropical Pacific Ocean) and Far East (East Asia).


Announcements

for Handloom Exports

• The claims under Focus Product Scheme, the requirement of " Handloom mark" was required earlier. This has been removed.


Scheme for Export Oriented Units:

• EOUs have been allowed to sell products manufactured by them in DTA (Domestic Tariff Area) up to a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’ within the overall entitlement of 50% for DTA sale. (This means that instead of 75% these units can sell up to 90 % of their products in the domestic markets)

• The term ‘similar goods” means “goods which is although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same unit by the same person who produced the export goods”.


• EOU allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

• Extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs kept under consideration.

• EOU allowed CENVAT Credit Facility.


• Announcements for Value Added Manufacturing (VAM)

• To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme (The Duty Exemption Scheme enables duty free import of inputs required for export production.)


• Announcements for Project Exports:

• Project Exports (overseas as construction and/or engineering projects) and a large number of manufactured goods covered under FPS and MLFPS.

• Fuel included in DEPB (Duty Entitlement Pass Book Scheme is an export incentive scheme) :

• Custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norm included in factoring.(standard norms which define the amount of inputs required to manufacture a unit of output for export purpose. Input output norms are applicable for the products such as electronics, engineering, chemical, food products including fish and marine products, handicraft, plastic and leather products etc ).


• Easy Import of samples:

• Number of sample pieces has been increased from the existing 15 to 50. This will facilitate the duty free import of samples by exporters.

• Convertibility of Shipping Bills

• Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export Promotion scheme to other scheme. Customs shall now permit this conversion within three months, instead of the present limited period of only one month.


• Reduction in Transaction Costs:

• Dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorization scheme for deemed supplies (Deemed Exports refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. For Example any supply to a factory in SEZ is deemed Import. Any sale from SEZ is Deemed Export)

• Maximum applicable fee for 18 Authorizations/ license applications has been reduced to Rs. 100,000 from the existing Rs 1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs.75,000 (for EDI applications).

• No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of FTP.


• Disposal of Manufacturing Wastes:

• Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty also before fulfillment of export obligation under Advance Authorization and EPCG Scheme. Earlier it was allowed after fulfillment of export obligation.

• Announcements for Sports Weapon:

• Licenses for the import of sports weapon will be issued now by Regional Authorities provided a NOC (No Objection Certificate) is issued by Ministry of Sports & Youth Affairs. (Earlier DGFT Headquarters had to be approached for this)


• Announcements for Medical Devices

• To solve the problem of medical device industry, the procedure for issue of Free Sale Certificate (Document required in certain countries or for certain commodities (such as pharmaceuticals), certifying that the specified imported goods are normally and freely sold in the exporting country's open markets and are approved for export.) has been simplified and the validity of the Certificate has been increased from 1 year to 2 years.

• Announcements for Automobile Industry

• Those Automobile industries which have their R&D establishment will be allowed free import of reference fuels (homologation or confirm Different geographic areas have different petrol and diesel), upto a maximum of 5 KL per annum, which are not manufactured in India. Simplification in EPCG for automobile industry.


• Announcements for EDI (Electronic Data Interchange) Initiatives

• Export Promotion Councils & Commodity Boards have been advised to issue RCMC (registration cum membership certificate) through a web based online system.

• Set up of Directorate of Trade Remedy Measures Announced

• A Directorate of Trade Remedy Measures shall be set up, which will enable support to Indian industry and exporters, especially the Micro Small & medium Enterprises MSMEs in availing their rights through trade remedy instruments

• DTRM is to enable support to Indian industry and exporters, in availing their rights through trade remedy


• Easing Duty Credit Scrips (duty credit scrip may be used for import of any capital goods, including spares, office and professional equipment, office furniture, and consumables )

Earlier the payment of customs duty for Export Obligation (EO) shortfall under Advance Authorization, DFIA (Duty Free Import Authorization )or EPCG Authorization was allowed in cash only. Now this payment can be done in the way of debit of Duty Credit scrips.


• Import of Restricted Items

Restricted Items can be imported now (as replenishment) against transferred DFIAs (Duty Free Import Authorizations) as the present DFRC (Duty Free Replenishment Card) scheme. It is Issued to a merchant-exporter or manufacturer-exporter for the Import of Inputs in the Manufacture Of Goods Without Payment of Basic Customs.

• Dollar Credits

There is a provision for state-run banks to provide dollar credits

Thank You

Foreign trade policy of india 2009 14

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