International Business Notes Final

8/7/2019 International Business Notes Final

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International Monetary Fund

International Monetary Fund (IMF) is an organization of 185 countries that observes

global financial system by monitoring exchange rates and BOPs. It also offers financial

and technical assistance to the member countries. Its head quarters are located in

Washington. IMF was established to promote International monetary cooperation,

Exchange stability, orderly exchange agreements to foster economic growth and high

level of employment and to provide financial assistance to companies to meet with the

balance of payment requirements.

IMF came into life on Dec. 27, 1945 when the first 29 countries signed its article of agreement. The statutory purposes of IMF today are the same as they were formulated in

1944.

Fast Facts on the IMF

Membership : 186 countries Headquarters : Washington, DC

Executive Board : 24 Directors representing countries or groups of countries Staff : approximately 2,478 from 143 countries Total quotas : $325 billion (as of 3/31/09) Additional pledged or committed resources : $500 billion Loans committed (as of 9/1/09) : $175.5 billion, of which $124.5 billion have not

been drawn Biggest borrowers : Hungary, Mexico, Ukraine Technical assistance : Field delivery in FY2009173 person years during

FY2009 Surveillance consultations : Concluded in 2008177 countries in 2008, of which

155 voluntarily published information on their consultation (as of 03/31/09) Original aims : Article I of the Articles of Agreement sets out the IMFs main

goals:o promoting international monetary cooperation;o facilitating the expansion and balanced growth of international trade;o promoting exchange stability;o assisting in the establishment of a multilateral system of payments; ando making resources available (with adequate safeguards) to members

experiencing balance of payments difficulties.

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IMF Members qualifications:

Any country many apply for the membership of IMF. The application is first considered

by IMF/s executive board. After its consideration the executive board will submit a report

to the Board of Governance (BoG) of the IMF with recommendations in the form of a

membership resolution. These recommendations cover the amount of quota in the IMF

and the form of payment of subscription as well as terms and conditions of the

membership. After the BoG has adopted the membership resolution, the applicants state

the needs to take the legal steps required to fulfill the obligations of membership. A

members quota in IMF determine the amount of its subscription its voting weight, its

approach to IMF financing and its allocation of special drawing rights.

A member cannot increase unilaterally its quota. Increases must be approved by the

executive board e.g. in 2001, China was prevented from increasing its quota as high as it

was proposed by china. Its contribution was allowed to be increased slightly further.

Data of SDR and Contribution:

Assistance provided by IMF for global development:

1. Monitoring national, global and regional and economic and financial

developments and advising member countries on their economic policies.

2. Lending hard currencies to member countries to support policy programmes

designed to correct balance of payment problems.

3. Offering technical assistance as well as training for government and central bank

officials.

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Efforts in assistance for financial global development:

1. Exchange Rate Stability: Countries which join IMF agree to adjust their

currency rates only with agreement with IMF. IMF has continued to develop new

initiatives and policies to help member countries to meet new challenges of cross

border financial flows.

2. Advise on policies and global oversight: When a country forms IMF, it agrees to

subject or modify to economic and financial policies incorporation of the

international community and the nation makes a commitment to pursue policies

for orderly economic growth and seasonable price stability to avoid manipulating

exchange ratios for unfair competitive advantage Nations also provide data and

information about its economy.3. Crisis Preventions and resolution: IMF played a major role in Mexican Crises

of 1994-1995 and the Asian crisis of 1997-1998. IMF has emphasized the

importance of countries shock absorbers into their policies e.g. adequate foreign

exchange reserves efficient and diversified financial system, social safety and a

fiscal policy that allows the government to run higher deficits during difficult

times, IMF has introduced several initiatives designed to make countries

competent in crisis.

4. Macro economic and financial sector policies : IMF focuses on governments

budget, the management of money and credit, exchange rate policies of the

country. It also monitors macro economic performance like government and

consumer spending, business investment, exports and imports, GDP employment

and inflation. It also sees the BOP i.e. the balance of countrys transaction with

the rest of the world. It also covers labor markets, energy sector and trade.

5. Loan terminology as assistance: Technically countries do not receive loans from

the IMF, they purchase foreign Exchange from the IMFs reserve paying in their

own currency. Loan is considered repaid when the borrower repurchases its

currency from the IMF in exchange for reserve assets with IMF (quotas from

different countries)

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6. Lending to countries in difficulties: Any member country rich or poor can thurn

to IMF for financing if it has a BoP need i.e. if it cannot find sufficient financing

on affordable terms in the capital market to make its initial payment and maintain

appropriate level of resources. Loans given by IMF are intended to help its

member countries in BoP problems stabilizing their economies and for stable

economic growth.

7. IMF Lending Facilities: Stand by agreements:

a. Short term monetary requirements of the country

i. In 1997, IMF introduced supplementary reserve facilities.

ii. Large loans for short term are quickly provided

b. Extended Fund facility

i. For Long term monetary requirementsc. Facility for Poverty reduction and Growth: The IMF provides confessional

loans with an annual interest rate of 0.5% and maturity of 10 years to its

poorest member country.

8. Technical assistance and training: IMF shares its expertise with member

countries by providing technical assistance and training in a wide range of areas

such as central banking text policy and administration, monetary and exchange

rate policy and official statistics. The objective is to have the design and

implementation of members economic policy by strengthening skills in the above

mentioned areas.

9. Collaborating with other institutions: The IMF collaborates with world bank

Regional Development Banks, WTO, UNs agencies and other international

bodies. Areas in IMF and World Bank collaborate include social policies,

assessment of member countries financial position, development of standards and

codes and improvement of quality, availability and coverage of data on external

debts. IMF is also a member of financial stability forum which brings together

government officials responsible for financial stability in the major international

centers.

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10. Assistance in UN Millennium Development Goals: In 2000, the international

community agreed on a set of development targets known as UN Millennium

Goals upto 2050. IMF offers to its poorest members to help them in achieving

these goals. The goals are related to poverty and hunger, primary education,

gender equality and women empowerment, HIV AIDS and, other diseases,

environmental protection and global partnership for development

SDR: SPECIAL DRAWING RIGHT

THE ROLE OF THE SDR

SDRs are used as a unit of account by the IMF and several other internationalorganizations. A few countries peg their currencies against SDRs, and it is also used todenominate some private international financial instruments. For example, the Warsawconvention, which regulates liability for international carriage of persons, luggage or goods by air, uses SDRs to value the maximum liability of the carrier.

The SDR was created by the IMF in 1969 to support the Bretton Woods fixedexchange rate system. A country participating in this system needed official reserves government or central bank holdings of gold and widely accepted foreign currencies that could be used to purchase the domestic currency in foreign exchange markets, asrequired to maintain its exchange rate. But the international supply of two key reserveassetsgold and the U.S. dollarproved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the internationalcommunity decided to create a new international reserve asset under the auspices of theIMF.

However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime . In addition, the growth ininternational capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claimon the freely usable currencies of IMF members. Holders of SDRs can obtain thesecurrencies in exchange for their SDRs in two ways:

first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchaseSDRs from members with weak external positions.

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In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations.

Basket of currencies determines the value of the SDR The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold

which, at the time, was also equivalent to one U.S. dollar . After the collapse of theBretton Woods system in 1973, however, the SDR was redefined as a basket of currencies , today consisting of the euro, Japanese yen, pound sterling, and U.S.dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website. It iscalculated as the sum of specific amounts of the four currencies valued in U.S. dollars, onthe basis of exchange rates quoted at noon each day in the London market.

The basket composition is reviewed every five years by the Executive Board to ensurethat it reflects the relative importance of currencies in the world's trading and financialsystems. In the most recent review (in November 2005), the weights of the currencies inthe SDR basket were revised based on the value of the exports of goods and services and

the amount of reserves denominated in the respective currencies which were held byother members of the IMF. These changes became effective on January 1, 2006 . Thenext review will take place in late 2010.

The SDR interest rate

The SDR interest rate provides the basis for calculating the interest charged to memberson regular (non-concessional) IMF loans, the interest paid and charged to members ontheir SDR holdings, and the interest paid to members on a portion of their quotasubscriptions. The SDR interest rate is determined weekly and is based on a weightedaverage of representative interest rates on short-term debt in the money markets of the SDR basket currencies.

SDR allocations to IMF members

Under its Articles of Agreement, the IMF may allocate SDRs to members in proportionto their IMF quotas. Such an allocation provides each member with a costless asset.However, if a member's SDR holdings rise above its allocation, it earns interest on theexcess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall.

There are two kinds of allocations:

General allocations of SDRs. General allocations have to be based on a long-term globalneed to supplement existing reserve assets. Decisions to allocate SDRs have been madethree times. The first allocation was for a total amount of SDR 9.3 billion , distributed in1970-72 in yearly installments. The second allocation, for SDR 12.1 billion , wasdistributed in 197981 in yearly installments.

The third general allocation was approved on August 7, 2009 for an amount of SDR 161.2 billion and will take place on August 28, 2009 . The allocation would mean a

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simultaneous increase in eligible members' SDR holdings and in their cumulative SDR allocation by about 74.13 percent of their quota.

Special allocations of SDRs. A proposal for a special one-time allocation of SDRs wasapproved by the IMF's Board of Governors in September 1997 through the proposed

Fourth Amendment of the Articles of Agreement. Its intent is to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the factthat countries that joined the Fund after 1981more than one-fifth of the current IMFmembershiphave never received an SDR allocation. This allocation would increasemembers' cumulative SDR allocations by SDR 21.5 billion using a common benchmark ratio as described in the amendment.

The Fourth Amendment became effective for all members on August 10, 2009 when theFund certified that at least three-fifths of the IMF membership (112 members) with 85

percent of the total voting power accepted it. On August 5, 2009, the United States joined133 other members in supporting the Amendment. The special allocation will be

implemented on September 9, 2009.

SDR Valuation

The currency value of the SDR is determined by summing the values in U.S.dollars, based on market exchange rates, of a basket of major currencies (theU.S. dollar, Euro, Japanese yen, and pound sterling). The SDR currency valueis calculated daily and the valuation basket is reviewed and adjusted everyfive years.

Thursday, October 22, 2009

CurrencyCurrency

amount under Rule O-1

Exchangerate 1

U.S. dollar equivalent

Percent change inexchange rate

against U.S. dollar from previous

calculation

Euro 0.4100 1.49720 0.613852 0.234Japanese yen 18.4000 91.31000 0.201511 -0.515Pound sterling 0.0903 1.65380 0.149338 -0.193U.S. dollar 0.6320 1.00000 0.632000

1.596701U.S.$1.00 = SDR 0.626291 2 -0.007 3

SDR1 = US$ 1.59670 4

Notes:

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World Bank

During the Second World War, in the year 1944, a conference was held at Bretton Woods

(USA). It was attended by the representatives of 44 countries. India also participated in

this conference. It was decided in that conference that 2 institutions to be set up for

economic development of all countries. These institutions were IMF and International

Bank for reconstruction & Development (IBRD). The objective of IMF was to stabilize

exchange rates by removing temporary balance of payments deficit. On the other hand

the objective of IBRD was reconstruction of economies and provision for necessary funds

for the economic development of all developed and underdeveloped countries. The bank started its function in 1945.

Objectives of World Bank:

1. Reconstruction and development

2. Encouragement to capital investment

3. Encouragement to international trade

4. Establishment peace time economy

5. Environmental protection

6. Infrastructural development

7. Loan for meeting deficit in BoPs

Membership of World Bank:

1. Any country that is a member of IMF will automatically become a member of

World Bank

2. Those countries, who accepted the membership of the Fund in 1945, were also

treated as the founder members of the World Bank.

3. In the year 2004-2005 184 countries were the members of World Bank.

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4. A member can withdraw its membership at any time by giving a written notice.

5. If a country fails to observe the rules of the World Bank, its membership can be

terminated.

Management of WB

1. Board of Governors

2. Board of Executive Directors

3. Advisory council

4. Loan Committees

1. Board of Governance: It represents the general council of the bank. Every

member country appoints one governor, one alternative governor for 5 years. No

alternative governors can vote except when the governor is absent. The Board of governors has following rights:

a) Admissions of new members

b) Termination of membership

c) change in the capital

d) Distribution of the income of the bank

e) Agreement with international institutions

f) Liquidation (Dissolving of Banks) of the banks.

2. Board of Executive Directors: It consists of 21 members out of these 5 members

are those which have the largest subscription. These members are America,

Britain, France, Germany and Japan. The remaining members are elected from

among the other members of the Bank 2 years.

3. Advisory Council: It consists of minimum 7 members. Their appointment is

made by board of executive directors. Members of this council are experts on

different subjects like banking, foreign trade, industry, labour and agriculture.

4. Loan Committees: It is appointed to sanction loans to member countries and

private enterprises. The applications for loan are referred to this committee by

Board of Directors.

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Capital of the World Bank:

At the time of establishment, the World Banks authorized capital was $ 1,000 crores

divided into 1 Lakh shares of $ 1,00,000 each. Every member country had to pay 20% of

its quote at the time of membership. Out of this 2% was to be paid in gold and remaining

18% in its own currency.

The balance 80% of the capital subscription can be called by the Bank as an when

required.

Functions of World bank:

1. To advance loans

Between 1945-2000 WB, sanctioned loan amount was $ 33853

a. Direct Loans

b. Guarantee Loans

c. Joint Loans in collaboration with other banks.

2. Technical Assistance

3. Training: In 1956, the World Bank established economic development Institute

for imparting training.

4. Coordination and assistance in development

5. Settlement of international disputes

6. Financial assistance to world welfare institutions

7. Conducts economic research

8. Establishing subsidiary institutions.

a. International Development Association

b. International Finance Corporation

c. Multinational Investment Guarantee Agency

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Importance of World Bank:

1. Giving Loans by enlarging capital : World Bank has increased its share capital

by about 19 times to increase his powers of giving loans for the development of

member countries.

2. Attention to developed and underdeveloped countries: Out of total loans and

advances by World Bank, about 70% loans have gone to the countries of Asia,

Africa and other underdeveloped countries for their economic development.

However, the Bank has also given large amount of loans to the developed

countries.

3. Loans for productive purpose: bank gives loans particularly for development of electricity, power generation and transport the reason being that for the economic

development of the countries these facilities are a must.

4. Technical Assistance: World Bank provided technical assistance to all

underdeveloped countries of the world. Officials of many countries have received

advice from the World Bank experts.

5. Third Window Scheme: Loans given by World Bank and IDA (International

Development Association) were inadequate in order to make up this deficiency

both institutions jointly founded in 1975, a third window. The window has made

available loans to many countries like India, Pakistan, Sri Lanka etc.

6. Coordination of lending activities of the lender countries and other institutions

7. Settlement of disputes among nations: World Bank has set up an international

center for settlement of investment disputes.

8. Training: Bank arranges training for officials of members countries in the area of

economic planning, development policy, agriculture research, Healthcare, Power

Management, water management, railways etc.

9. Research: World bank has two publications

a. Finance and development report

b. World development report

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The information provided by these publications helps in economic planning and

research projects of member countries.

10. Financial Assistance to Welfare Institutions

11. Establishment of Subsidiary institutions like:

a. IFC-International Finance Corporation

b. IDA-International Development Association

c. MIGA-Multinational Investment Guarantee Agency

Limitations of World Bank:

1. Inadequate Financial Help

2. Discriminating Behaviour

3. High rate of interest on commercial credit.4. Defective Loan Policy

5. Loan for limited objectives

6. Interference in domestic affairs

World Trade Organization

GATT Rounds:

1st Round:

Held in 1947, 23 countries participated and agreed to cut tariffs on 45,000 products worth

$ 10 billion per annum.

2nd Round:Held in 1949, 10 more countries had joined GATT, Customs and tariffs on 5000

additional items of international trade were reduced.

3 rd Round:

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Agreement on Dairy Products

Agreement on meat Products

Agreement on Trade in civil aircraft

99 participants agreed to cut customs duties by 20-50% on goods valued over $ 300

billion of the world trade.

8 th Round

This round started in 1986 and the final act was signed that was Dunkel Draft

Text.

Text was signed by 125 countries by April 18, 1994.

As a result of this, WTO was established

The final text was over 400 pages document. Like a legal document, it was very

complex.

It was very complex

It was the result of a negotiation of 2631 days

117 countries participated in the negotiations

1000s of issues and debates were included related to the world trade.

GATT Vs WTO

Sr. No. GATT WTO1 No legal status Legal status2 No binding for agreements Binding for agreements3 Only goods Services and Goods4 No obligation in disputes and decisions Obligation5 Small structure Large Structure6 No proper time structure of Meeting rounds Proper time structure

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EXPORT HOUSE AND STATUS HOLDERS

Press ReleasesBack

STATUS HOLDER SCHEME REVAMPED

Date : 19 Apr 2007Location : New Delhi

Responding to the demand of the status holders, Shri Kamal Nath, Minister of Commerce & Industry, has re-christened them as Export House (earlier known asOne Star Export House), Star Export House (earlier known as Two Star ExportHouse), Trading House (earlier known as Three Star Export House), Star TradingHouse (earlier known as Four Star Export House), and Premier Trading House(earlier known as Five Star Export House). They will be granted such status onachieving aggregate exports of Rs.20 crore, Rs.100 crore, Rs.500 crore, Rs.2500 croreand Rs.10000 crore respectively over a period of four years.

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 HardwareTechnology Parks (EHTP), Software Technology Parks (STPs), and Bio TechnologyParks (BTPs), are eligible for applying for status as Star Export Houses. Under thisscheme, the applicants are granted the status depending on the total FOB / FOR exportperformance during the current plus previous three years as follows:

Old category Earlier performancecriteria (Rs. Crore)

New category New performancecriteria (Rs. Crore)

One Star Export House

15 Export House 20

Two Star Export House

100 Star ExportHouse

100

Three Star Export House

500 Trading House 500

Four Star Export House

1500 Star TradingHouse

2500

Five Star Export House

5000 Premier Trading House

10000

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Major Exports of India 2007-08 (Share and Growth Rate Commodity Wise)

Sr. No. Commodity 2007-2008 %Share %Growth

1 MINERAL FUELS, MINERAL OILSAND PRODUCTS OF THEIRDISTILLATION; BITUMINOUSSUBSTANCES; MINERAL WAXES.

29,044.50 17.8205 53.76

2 NATURAL OR CULTURED PEARLS,PRECIOUS OR SEMIPRECIOUSSTONES,PRE.METALS,CLAD WITHPRE.METAL AND ARTCLSTHEREOF;IMIT.JEWLRY;COIN.

19,821.35 12.1615 23.32

3 ORGANIC CHEMICALS 7,174.22 4.4018 25.24 ORES, SLAG AND ASH. 6,980.31 4.2828 43.35 NUCLEAR REACTORS, BOILERS,

MACHINERY AND MECHANICALAPPLIANCES; PARTS THEREOF.

6,797.52 4.1707 33.61

6 IRON AND STEEL 6,559.94 4.0249 17.257 ARTICLES OF APPAREL AND

CLOTHING ACCESSORIES, NOTKNITTED OR CROCHETED.

5,422.64 3.3271 2.71

8 ELECTRICAL MACHINERY ANDEQUIPMENT AND PARTSTHEREOF; SOUND RECORDERSAND REPRODUCERS, TELEVISIONIMAGE AND SOUND RECORDERSAND REPRODUCERS,AND PARTS.

5,347.58 3.281 30.26

9 ARTICLES OF IRON OR STEEL 5,210.59 3.197 53.3810 COTTON. 5,147.56 3.1583 31.2911 VEHICLES OTHER THAN RAILWAY

OR TRAMWAY ROLLING STOCK,AND PARTS AND ACCESSORIESTHEREOF.

4,481.90 2.7499 19.11

12 ARTICLES OF APPAREL ANDCLOTHING ACCESSORIES,KNITTED OR CORCHETED.

4,275.85 2.6235 18.27

13 PHARMACEUTICAL PRODUCTS 4,152.89 2.548 30.7814 CEREALS. 3,667.14 2.25 116.515 COPPER AND ARTICLES

THEREOF.2,917.98 1.7903 -3.98

16 PLASTIC AND ARTICLES THEREOF. 2,787.91 1.7105 1.7717 OTHER MADE UP TEXTILE

ARTICLES; SETS; WORNCLOTHING AND WORN TEXTILEARTICLES; RAGS

2,379.27 1.4598 3.46

18 RESIDUES AND WASTE FROM THEFOOD INDUSTRIES; PREPAREDANIMAL FODER.

2,065.88 1.2675 66.44

19 SHIPS, BOATS AND FLOATINGSTRUCTURES.

1,761.03 1.0805 71.12

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Total 98 Commodity Categories (Selected more than 1% in Share)% age increase in Exports 29.08 per cent

Major Imports of India 2007-08 (Share and Growth Rate Commodity Wise)

Sr. No. Commodity 2007-2008 %Share %Growth1 MINERAL FUELS, MINERAL OILS AND

PRODUCTS OF THEIR DISTILLATION;BITUMINOUS SUBSTANCES; MINERALWAXES.

86,281.52 34.2983 39.59

2 NATURAL OR CULTUREDPEARLS,PRECIOUS OR SEMIPRECIOUSSTONES,PRE.METALS,CLAD WITHPRE.METAL AND ARTCLSTHEREOF;IMIT.JEWLRY;COIN.

26,453.61 10.5157 17.16

3 NUCLEAR REACTORS, BOILERS,MACHINERY AND MECHANICALAPPLIANCES; PARTS THEREOF.

25,299.56 10.057 36.02

4 ELECTRICAL MACHINERY AND EQUIPMENTAND PARTS THEREOF; SOUNDRECORDERS AND REPRODUCERS,TELEVISION IMAGE AND SOUNDRECORDERS AND REPRODUCERS,ANDPARTS.

20,078.26 7.9814 37.92

5 AIRCRAFT, SPACECRAFT, AND PARTSTHEREOF.

13,312.29 5.2918 153.09

6 IRON AND STEEL 9,093.25 3.6147 48.447 ORGANIC CHEMICALS 8,111.61 3.2245 34.418 ORES, SLAG AND ASH. 4,648.45 1.8478 -18.969 FERTILISERS. 4,585.90 1.823 71.37

10 SHIPS, BOATS AND FLOATINGSTRUCTURES.

4,321.29 1.7178 60.73

11 OPTICAL, PHOTOGRAPHICCINEMATOGRAPHIC MEASURING,CHECKING PRECISION, MEDICAL ORSURGICAL INST. AND APPARATUS PARTSAND ACCESSORIES THEREOF;

4,227.62 1.6805 35.94

12 PLASTIC AND ARTICLES THEREOF. 4,114.65 1.6356 39.1913 ARTICLES OF IRON OR STEEL 3,296.52 1.3104 30.414 INORGANIC CHEMICALS; ORGANIC OR

INORGANIC COMPOUNDS OF PRECIOUSMETALS, OF RARE-EARTH METALS, ORRADI. ELEM. OR OF ISOTOPES.

2,831.14 1.1254 11.74

15 ANIMAL OR VEGETABLE FATS AND OILSAND THEIR CLEAVAGE PRODUCTS; PRE.EDIBLE FATS; ANIMAL OR VEGETABLEWAXEX.

2,765.75 1.0994 22.06

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Total 98 Commodity Categories (Selected more than 1% in Share)% age increase in Exports 35.54 per cent

ORGANISATIONAL SET UP AND FUNCTIONS

The mandate of the Department of Commerce is regulation, development and promotionof Indias international trade and commerce through formulation of appropriateinternational trade & commercial policy and implementation of the various provisionsthereof. The basic role of the Department is to facilitate the creation of an enablingenvironment and infrastructure for accelerated growth of international trade. TheDepartment formulates, implements and monitors the Foreign Trade Policy which

provides the basic framework of policy and strategy to be followed for promoting exportsand trade. The Trade Policy is periodically reviewed to incorporate changes necessary to

take care of emerging economic scenarios both in the domestic and internationaleconomy. Besides, the Department is also entrusted with responsibilities relating tomultilateral and bilateral commercial relations, Special Economic Zones, state trading,export promotion & trade facilitation, and development and regulation of certain exportoriented industries and commodities.

The Department is headed by a Secretary who is assisted by four Additional Secretaries,including an Additional Secretary & Financial Adviser, eleven Joint Secretaries and JointSecretary level officers and a number of other senior officers. The Department isfunctionally organized into the following eight Divisions:

1. Administration and General Division2. Finance Division3. Economic Division4. Trade Policy Division5. Foreign Trade Territorial Division6. State Trading & Infrastructure Division7. Supply Division8. Plantation Division.

The various offices/ organizations under the administrative control of the Department are:(A) two Attached Offices, (B) eleven Subordinate Offices, (C) ten Autonomous

Bodies, (D) five Public Sector Undertakings, (E) Advisory Bodies, (F) fourteenExport Promotion Councils (EPCs) and (G) other Organizations. A complete list of these offices/ organizations along with the postal addresses is given in Annexure-II.The broad organizational set up and major role and functions of these bodies arediscussed below:

Authorisation, Duty Free Import Authorisation (DFIA), Duty Entitlement Passbook (DEPB), Deemed Export Duty Drawback and Terminal Excise Duty (TED) refund,

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Export Promotion Capital Goods (EPCG) and incentive schemes like Focus Market,Focus Product, Vishesh Krishi & Gram Udyog Yojana and Served From India.

(A) Attached Offices

(i) Directorate General of Foreign Trade (DGFT)

DGFT through its various offices provides facilitation to exporters in regard todevelopments in the area of international trade, i.e. WTO agreements, Rules of Originand SPS requirements, Anti-Dumping issues, among others, to help the exporters tostrategize their import and export decisions in an internationally dynamic environment.DGFT also issues authorisations to exporters/ importers and monitors their correspondingobligations through a network of 34 Regional Offices. These Regional Offices are locatedat the following places:-

1. Ahmedabad 2. Amritsar 3. Bangalore 4. Baroda (Vadodara)5. Bhopal 6. Chandigarh7. Chennai 8. Cochin (Ernakulam)9. Coimbatore 10. Cuttack 11. Dehradun 12. Guwahati13. Hyderabad 14. Jaipur 15. Kanpur 16. Kolkata17. Ludhiana 18. Madurai19. Moradabad 20. Mumbai21. New Delhi 22. Panaji (Goa)

23. Panipat 24. Patna25. Pondicherry 26. Pune27. Raipur 28. Rajkot29. Shillong 30. Srinagar (functioning at Jammu)31. Surat 32. Thiruvananthapuram33. Varanasi 34. Vishakhapatnam

ii) Directorate General of Supplies and Disposal (DGS&D)

The DGS&D, with headquarters at New Delhi, is headed by the Director General. Itfunctions as the executive arm of the Supply Division of the Department of Commercefor conclusion of Rate Contracts for common user items, procurement of stores,inspection of stores, shipment and clearance of imported stores/ cargo. It has threeRegional Offices located at Chennai, Mumbai and Kolkata. The functions of DGS&D are

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carried out through its functional wings and supporting service wings. The functionalwings are the Supply Wing and the Quality Assurance Wing. The supporting servicewings include Administration, Vigilance, Complaints and Public Relations, Co-ordination, Internal Work Study, Management Information Services, Litigation, etc.

The Supply Wing has commodity-wise Purchase Directorates such as InformationTechnology, Electrical Stores, Mechanical Engineering, Automobiles, Steel & Cement,Structural Engineering, Hardware, Workshop & Machine Tools, Wool & Leather, Paper & Paper Products, Oil & Chemicals. The handling of commodity-wise work facilitatesmaintenance of data bank on prices, vendors, specifications, market trends, etc. TheQuality Assurance Wing has 27 offices / sub-centres spread all over the country.

((B) Subordinate Offices

(i) Directorate General of Commercial Intelligence and Statistics (DGCI&S)

This Directorate, with its office located at Kolkata, is headed by the Director General. Itis entrusted with the work of collecting, compiling andpublishing/disseminating tradestatistics and various types of commercial information required by the policy makers,researchers, importers, exporters, traders as well as overseas buyers. The Directorate

brings out a number of publications mainly on inland and coastal trade statistics, revenuestatistics, shipping & air cargo statistics, among others, which are utilised by theGovernment Departments as well as by trading communities and researchers. The foreigntrade data generated by the Directorate are disseminated through (i) Monthly PressRelease, (ii) Foreign Trade Statistics of India by Principal Commodities & Countries, (iii)Monthly Statistics of Foreign Trade of India, and (iv) Statistics of Foreign Trade of India

by Countries. The DGCI&S also maintains a commercial library for the use of traders,manufacturers, businessmen, industrialists, technologists, government officials, students,teachers and researchers from India and abroad.

(ii) Office of Development Commissioner of Special Economic Zones (SEZs)

The main objective of SEZ s is to provide certain common facilities, a hassle free tradingenvironment and a duty free environment for exporters. All laws of India are applicablein SEZs unless specifically exempted as per the SEZ Act/ Rules. Each Zone is headed bya Development Commissioner and is administered as per the SEZ Act, 2005 and SEZRules, 2006. There are currently eight Development Commissioners of SEZs.

Units may be set up in the SEZ for manufacturing, trading or for service activity. Theunits in the SEZ have to be net foreign exchange earners but they are not subjected to any

predetermined value addition or minimum export performance requirements. Sales in theDomestic Tariff Area from the SEZ units are treated as if the goods are being importedand are subject to payment of applicable customs duties.

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(iii) Pay and Accounts Office (Supply)

The payment and accounting functions of Supply Division, including those of DGS&D,are performed by the Chief Controller of Accounts (CCA) under the DepartmentalizedAccounting System. Payment to suppliers across the country is made through this

organization.

(iv) Pay and Accounts Office (Commerce & Textiles)

The Pay and Accounts Office, common to both the Department of Commerce and theMinistry of Textiles, is responsible for the payment of claims, accounting of transactionsand other related matters through the four Departmental Pay & Accounts Offices inDelhi, two in Mumbai, two in Kolkata and two in Chennai. These Departmental Pay andAccounts Offices are controlled by the Principal Accounts Office at Delhi with the Chief Controller of Accounts (CCA) as the Head of the Department of the Accounts Wing.

C) Autonomous Bodies

(i) Coffee Board

The Coffee Board was set up under Section (4) of the Coffee Act, 1942. The Board isheaded by a Chairman and functions from Bangalore. The Board administers four Regional Coffee Research Stations, a Coffee Research Institute, a number of RegionalField Stations and Coffee Demonstrations Farms. The primary functions of the Boardinclude formulating and implementing programmes and projects for growth anddevelopment of the coffee industry; promoting coffee consumption in India and exportsin the international market; supporting research; extension and developmental activitiesfor raising productivity; evolving pest and disease resistant varieties; and prescribing andenforcing quality standards at all stages.

(ii) Rubber Board

The Rubber Board was set up under Section (4) of the Rubber Act, 1947. The Board isheaded by a Chairman with head quarters at Kottayam. It has four Zonal Offices, fortyRegional Offices, a number of Field Stations, Rubber Development Centers and Regional

Nurseries. The Board is responsible for the development of the rubber industry by way of assisting and encouraging scientific, technical and economic research; supplyingtechnical advice to rubber growers; training growers in improved methods of planting,cultivation and manuring and collecting statistics from the owners of estates, dealers,manufacturers.

(iii) Tea Board

The Tea Board was constituted as a Statutory Body on 1st April, 1954 under Section (4)of the Tea Act, 1953. The Board is headed by a Chairman with head office at Kolkata. Asan apex body for the tea industry in India, the Board has fifteen Regional and Sub-

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Regional Offices spread over different parts of India and three foreign offices in London,Moscow and Dubai. The primary functions of the Board include rendering financial andtechnical assistance for cultivation, manufacture, marketing of tea; promoting tea exports;aiding research and developmental activities for augmentation of tea production andimprovement of tea quality; encouraging and assisting the unorganized small growers

sector financially and technically and collecting & maintaining statistical data and its publication for the benefit of growers, processors and exporters.

(iv) Tobacco Board

The Tobacco Board was constituted as a Statutory Body on 1st January, 1976 under Section (4) of the Tobacco Act, 1975. The Board is headed by a Chairman, withheadquarters at Guntur, Andhra Pradesh, and is responsible for the development of thetobacco industry. The Board also has a Directorate of Auctions at Bangalore. The

primary functions of the Board include regulating the production and curing of VirginiaTobacco; keeping a constant watch on the Virginia Tobacco market in India and abroad;

ensuring fair and remunerative prices to growers; maintaining and improving existingmarkets and developing new markets abroad by devising appropriate marketingstrategies. The Board is entrusted with the task of recommending to the CentralGovernment the minimum prices that may be fixed; regulating tobacco marketing inIndia with due regard to the interest of growers, manufacturers and dealers; propagatinginformation useful to growers, traders and manufacturers and purchasing VirginiaTobacco from the growers when the same is considered necessary for protecting theinterests of growers.

(v) Spices Board

The Spices Board was constituted as a Statutory Body on 26th February, 1987 under Section (3) of the Spices Board Act, 1986. The Board is headed by a Chairman with itshead office at Kochi and is responsible for the development of cardamom industry and

promoting the export of all the 52 Spices listed in the Spices Board Act, 1986. The primary functions of the Board include increasing the production and productivity of small and large cardamom; development, promotion and regulation of export of spices;assisting and encouraging studies and research for improvement of processing, gradingand packaging of spices; striving towards stabilization of prices of spices for export andupgrading quality for export. In regard to cardamom, the Board also provides financialand other assistance for cultivation and processing of cardamom; monitoring prices;increasing domestic consumption; improving marketing; undertaking, assisting or

encouraging scientific, technological and economic research and improving quality. TheBoard also implements programmes for development of exotic and high value spices likevanilla, herbal spices and organic spices. It also supports programmes aimed at better

post harvest practices.

(vi) Export Inspection Council (EIC)

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The Export Inspection Council was set up as a Statutory Body on 1st January, 1964 under Section 3 of the Export (Quality Control and Inspection) Act, 1963 to ensure sounddevelopment of export trade of India through Quality Control and Inspection and for matters connected therewith. The Council is an advisory body to the Central Government,with its office located at New Delhi and is headed by a Chairman. The Executive Head of

the EIC is the Director of Inspection & Quality Control who is responsible for theenforcement of quality control and compulsory pre-shipment inspection of variouscommodities meant for export and notified by the Government under the Export (QualityControl and Inspection) Act, 1963. The Council is assisted in its functions by the ExportInspection Agencies (EIAs), which are field organizations located at Chennai, Delhi,Kochi, Kolkata and Mumbai and have state-of-art laboratories for quality certificationactivities.

These Agencies have a network of thirty eight sub-offices and laboratories located atdifferent ports or major industrial centres to back up the pre-shipment inspection andcertification activities.

(vii) Indian Institute of Foreign Trade (IIFT)

The Indian Institute of Foreign Trade was registered in May, 1963 under the SocietiesRegistration Act, 1860. The Institute, with its head office at New Delhi and one regional

branch at Kolkata, is headed by a Director. The Institute has been conferred DeemedUniversity status and is engaged in the following activities:-

Running academic courses leading to issue of degrees in International Business &Export Management;

Training of personnel in international trade;

Organising research on issues in foreign trade, marketing research, area surveys,commodity surveys, market surveys; and Dissemination of information arising from its activities relating to research and

market studies.

(viii) Indian Institute of Packaging (IIP)

The Indian Institute of Packaging was registered in May, 1966 under the SocietiesRegistration Act, 1860. The Institute, with its office located at Mumbai and branchoffices at Delhi, Chennai, Kolkata and Hyderabad, is headed by a Director. The mainfunction of the Institute is to undertake research on raw materials for the packaging

industry, organise training programmes on packaging technology and stimulateconsciousness of the need for good packaging.

(ix) The Marine Products Export Development Authority (MPEDA)

The Marine Products Export Development Authority was set up as a Statutory Body in1972 under an Act of Parliament (No.13 of 1972). The Authority, with its headquarters at

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Kochi and field offices in all the Maritime States of India, is headed by a Chairman. TheAuthority is responsible for development of the marine industry with special focus onmarine exports. Besides, it has Trade Promotion Offices at Tokyo (Japan) and New York (USA).

(x) Agricultural and Processed Food Products Export Development Authority(APEDA)

The Agricultural and Processed Food Products Export Development Authority was set upin 1986 as a Statutory Body under an Act of Parliament of 1986. The Authority, with itsheadquarters at New Delhi, is headed by a Chairman. The Authority has five RegionalOffices at Guwahati, Hyderabad, Kolkata, Bangalore & Mumbai and is entrusted with thetask of promoting agricultural exports, including the export of processed foods in valueadded form. APEDA has also been entrusted with monitoring of export of non-scheduled

products such as Basmati Rice, Wheat and Coarse Grains. Import of sugar is alsomonitored by APEDA.

The concept of Agri Export Zones (AEZs) was introduced in 2001 and APEDA wasnominated the nodal agency to coordinate the efforts on the part of Central Government.The AEZs are developed by a coordinated effort of the Central Government, APEDA andthe concerned State Government. It takes a comprehensive vision about a particular

produce/ product integrating all the activities involved right from production to themarket. It involves developing and sourcing the raw materials, their processing/

packaging and other activities till the final exports.

(D) Public Sector Undertakings (PSUs)(i) State Trading Corporation of India Limited (STC)

STC was set up on 18th May, 1956, primarily with a view to undertake trade with EastEuropean Countries and to supplement the efforts of private trade and industry indeveloping exports from the country. The Corporation is registered as an autonomouscompany under the Companies Act, 1956. By virtue of infrastructure and experience

possessed by the Corporation, it plays an important role in arranging import of essentialitems into India and developing exports of a large number of items from India.

(ii) MMTC Limited

The MMTC Limited, formerly known as the Minerals and Metals Trading Corporationwas created in 1963 as an individual entity on separation from State Trading Corporationof India Ltd. primarily to deal in exports of minerals and ores and imports of non-ferrousmetals. In 1970, MMTC took over imports of fertilizer raw materials and finishedfertilizers. Over the years import and exports of various other items like steel, diamonds,

bullion, etc. were progressively added to the portfolio of the company. Keeping pace with

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the national economic development, MMTC over the years has grown to become thelargest trading Organisation in India.

(iii) PEC Limited

The PEC Ltd., formerly known as the Project and Equipment Corporation of India, wascarved out of the STC in 1971-72 to take over the canalized business of STCs railwayequipment division, to diversify into turn-key projects specially outside India and to aid& assist in promotion of exports of Indian engineering equipment. With effect from23.05.1990, PEC became a subsidiary of the then newly formed Holding Company,Bharat Business International Ltd. Thereafter, w.e.f. 27.03.1991, PEC became anindependent company directly owned by Government of India.

(iv) Export Credit Guarantee Corporation of India Ltd. (ECGC)

The Corporation was established in 1957 as the Export Risk Insurance Corporation of

India Ltd. Keeping in view the wider role played by the Corporation, the name waschanged to Export Credit Guarantee Corporation of India Ltd. (ECGC). The ECGC is the premier organization in the country, which offers credit risk insurance cover to exporters, banks, etc. The primary objective of the Corporation is to promote the countrys exports by covering the risk of export on credit. It provides (a) a range of insurance covers toIndian exporters against the risk of non-realisation of export proceeds due to commercialor political causes and (b) different types of guarantees to banks and other financialinstitutions to enable them to extend credit facilities to exporters on liberal basis.

(v) India Trade Promotion Organization (ITPO)

India Trade Promotion Organisation has been formed by merging erstwhile TradeDevelopment Authority (TDA) with Trade Fair Authority of India (TFAI) with effectfrom 1st January 1992. India Trade Promotion Organisation is the premier trade

promotion agency of India and provides a broad spectrum of services to trade andindustry so as to promote Indias exports. These services include organization of tradefairs and exhibitions in India and abroad, Buyer-Seller Meets, Contact PromotionProgrammes apart from information dissemination on products and markets .

(E) Export Promotion Councils (EPCs)

Presently, there are fourteen Export Promotion Councils under the administrative control

of the Department of Commerce. Names of these Councils are given in Appendix II.These Councils are registered as non-profit organizations under the Companies Act/Societies Registration Act. The Councils perform both advisory and executive functions.The role and functions of these Councils are guided by the Foreign Trade Policy, 2004-09. These Councils are also the registering authorities for exporters under the ForeignTrade Policy 2004-09.

(F) Advisory Bodies

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international trade in the States with a view to boost Indias exports. The Council isrepresented by Chief Ministers of the States or State Cabinet Ministers nominated byChief Ministers, Lt. Governors or Administrators of the Union Territories or their nominees, Secretaries of the Departments of Commerce, Revenue, Industrial Policy &Promotion, Agriculture & Cooperation, Shipping, Road Transport & Highways,

Ministries of External Affairs and Power and Chairman, Railway Board. It also co-optsthe Chairman-cum-Managing Director of Export Credit Guarantee Corporation,Managing Director of EXIM Bank, Deputy Governor of Reserve Bank of India,Chairman of Agricultural and Processed Food Products Export Development Authority,Chairman of Marine Products Export Development Authority and Presidents of CII,FICCI, FIEO, ASSOCHAM and Export Promotion Council for EOUs/SEZs.

(G) Other Organizations

(i) Federation of Indian Export Organizations (FIEO)

The Federation of Indian Export Organizations is an apex body of various export promotion organizations and institutions with its major regional offices at Delhi,Mumbai, Chennai and Kolkata. It provides the content, direction and thrust to Indiasglobal export effort. It also functions as a primary servicing agency to provide integratedassistance to its members comprising professional exporting firms holding recognitionstatus granted by the Government, consultancy firms and service providers. TheFederation organizes seminars and arranges participation in various exhibitions in Indiaand abroad. It also brings out FIEO News, for creating awareness amongst its member exporters and importers.

(ii) Indian Council of Arbitration (ICA)

The Indian Council of Arbitration was set up under the Societies Registration Act, 1860.The Council, with its office located at New Delhi, promotes arbitration as a means of settling commercial disputes and popularizes the concepts of arbitration among thetraders, particularly those engaged in international trade. The Council, a non-profitservice organization, is a grantee institution of the Department of Commerce and iseligible for assistance under the Marketing Development Assistance (MDA) Scheme of the Department. The main objectives of the Council are to promote the knowledge anduse of arbitration and provide arbitration facilities for amicable and quick settlement of commercial disputes with a view to maintaining the smooth flow of trade, particularly,export trade on a sustained and enduring basis.

(iii) Indian Diamond Institute (IDI)

With the objective of enhancing the quality, design and global competitiveness of theIndian Jewellery, the Indian Diamond Institute was established as a Society in 1978 withits office located at Surat. The Institute is sponsored by the Department of Commerce and

patronized by the Gems and Jewellery Export Promotion Council. The Instituteconducted various diploma and other courses related to diamond trade and industry. The

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Institute also has certification services for diamonds, coloured stones and gold jewellery.IDI has a Gem Testing Lab (GTL), which is recognised by Government of India as anapproved Diamond Grading / Certification Institution for cut and polished diamonds upto weight of 0.25 carat. It also has an Assayizng and Hallmarking Centre (AHMC) whichis approved by Bureau of Indian Standards (BIS), Government of India. The Institute also

has Sardar Vallabhbhai Patel Centre of Jewellery Design and Manufacture (SVJDM)which offers advanced courses in Jewellery Design and Manufacture.

(iv) Footwear Design & Development Institute (FDDI)

Footwear Design and Development Institute was set up in 1986 as a Society registered under theSocieties Act, 1860 for Infrastructure Development for the footwear industry and HumanResource Development. The Institute conducts wide range of long term and short termprogrammes in the area of Retail Management, Fashion, Footwear Design, Technology,Management, Fashion Merchandising, Marketing, Creative Designing & CAD/CAM, Leather Goods & Accessories Design etc. The long-term programmes are of two to three years durationwhile short-term programmes are of one-year duration. All programmes offered by the Institutemeet the international standards.

Directorate General of Anti-Dumping & Allied Duties (DGAD)

The Directorate General of Anti-Dumping & Allied Duties was constituted in April, 1998and is headed by the Designated Authority of the level of Additional Secretary to theGovernment of India who is assisted by a Joint Secretary, Adviser (Cost) and AdditionalEconomic Adviser. Besides, there are twelve Investigating and Costing Officers toconduct investigations. The Directorate is responsible for carrying out investigations andto recommend, where required, under Customs Tariff Act, the amount of anti-dumpingduty/ countervailing duty on the identified articles which would be adequate to remove

injury to the domestic industry.

International Business Notes Final

Documents

Transcript of International Business Notes Final