Foreign Trade Policy
1. FOREIGN TRADE POLICY - 2015-2020
With an aim to make India a significant partner in global trade by 2020, the Foreign Trade Policy 2015-20 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country. The focus of the Government is to support both the manufacturing and services sectors, with a special emphasis on improving the ’ease of doing business’.
The Mid Term Review of the Foreign Trade Policy was announced on 5th of December, 2017. The basic focus of the policy was adoption of twin strategy of prompting traditional and sunrise sectors of exports including services. The policy has also ushered in an era of trust. The Mid Term Review has aimed at facilitating Ease of Doing Business through simplification of procedure and decentralization of decision making. Some of the important highlights of the policy are as follows: -
- 2% increase in the MEIS rates for labour intensive sectors such as leather, carpets, hand tools, marine, medical & scientific products and Services such as accountancy, architecture, legal, education, hotel and restaurant.
- The trust based system for the grant of Advance Authorization for no norms cases for exporters registered as Authorised Economic Operators(AEO) marks a new beginning of reliance on trade and will encourage exporters to apply for AEO Scheme which facilitate customs clearance both in India as well as abroad.
- Creation of new Logistics Division in the Department of Commerce and decision to develop National Logistics Information Portal for online logistics market player which will go a long way to reduce the logistics cost in India which will also be supplemented by the initiative on Trade Facilitation Agreement and e-Way Bill introduction under GST.
- The new Agricultural Export Policy to be released to provide stable and open exports for long term with a view to double the income of farmers.
- Procedural simplifications such as
Ø To replace IEC by PAN;
Ø Increase in the validity of the scrips from 18 months to 24 months;
Ø Reintroduction of ARO facility for supply against Advance Authorization/EPCG/EOU;
Ø Clubbing of EPCG Authorization including where export obligation period has expired;
Ø Extension in export obligation including block –wise export by the Regional Authority of DGFT;
Ø Removal of restriction on DTA sale on applicable import duty.
2. SALIENT FEATURES OF THE POLICY ARE:
Trade facilitation and ease of doing business
Trade facilitation is a priority of the Government for cutting down the transaction cost and time, thereby rendering Indian exports more competitive. Some of the new measures spelt out in the Foreign Trade Policy in the direction of trade facilitation are given below:
An online procedure to upload digitally signed documents by Chartered Accountant/Company Secretary/Cost Accountant has now been decided to develop. To start with, applications underMEIS/ SEIS and Advance Authorization and DFIA are covered.
Facility has been created to upload documents like IEC, Manufacturing license, RCMC, PAN etc in Exporter/Importer Profile.
An Online Complaint registration and monitoring system allows users to register complaint and receive status/reply online, details of which are available on the DGFT website.
Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import Authorisations, Export Authorisation, will start in a phased manner, with the objective to reduce time for approval.
24X7 Customs Clearance
The facility of 24x7 Customs clearance for specified imports has been made available at 18 sea ports across the country besides certain Airports.
Movement of Consignments
Consignments of items meant for exports shall not be withheld/ delayed for any reason by any State/Central Government.
Submission of a Certificate from an independent Chartered Engineer confirming the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorization has been dispensed with.
Maintenance of records by EPCG Authorisation holders has been reduced to 2 years from 3 years.
A new service by DGFT for complaint resolution of exporters & importers, as well as a single window contact through Contact@DGFT has been operationalized on the DGFT site (www.dgft.gov.in)
3. GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS
Some of the new provisions governing import and export of goods and services are as under:
Electronic form for e-IEC has now been operationalized.
With the implementation of GST, PAN of an entity will be used for the purpose of IEC, i.e., IEC will be issued by DGFT with the difference that it will be alpha numeric and will be same as PAN of an entity. Application for IEC will be made to DGFT and applicant’s PAN will be authorized as IEC.
The limited list of three mandatory documents for import / export would now be required. Only three documents for exports viz. Invoice cum Packing List, Shipping Bill and Bill of Lading/Airway Bill will be mandatory. Similarly, for Imports, Invoice cum Packing List, Bill of Entry and Bill of Lading/ Airway Bill will be required.
Self Certification of COO
Approved Exporter Scheme has been introduced for Self Certification of Certificate of Origin in respect of manufactured goods originating from India with a view to qualify for preferential treatment under PTA, FTAs, CECA and CEPA. Manufacturer Status Holders are eligible for Approved Exporter Scheme.
The definition of an Actual User (both Industrial and Non-Industrial) has been amended to include a condition that the premises at which the goods are used by the person (natural or legal) must have a definitive postal address.
Import of Samples
a)No Authorisation shall be required for Import of bonafide technical and trade samples of items restricted in ITC (HS) except vegetable seeds, bees and new drugs. Samples of tea not exceeding Rs.2000 (CIF) in one consignment shall be allowed without an Authorisation by any person connected with Tea industry.
b)Duty free import of samples upto Rs.3,00,000 for all exporters shall be allowed as per terms and conditions of Customs Notification.
Export of Samples
a)Exports of bonafide trade and technical samples of freely exportable item shall be allowed without any limit.
b)An application for export of samples/exhibits, which are restricted for export, may be made to DGFT as per ANF-2Q.
4. PROMOTIONAL SCHEMES
In the Foreign Trade Policy 2015-20, under Export from India Schemes, there are two Schemes for exports of merchandise and services viz.:
(i) Merchandise Exports from India Scheme (MEIS); and
(ii) Service Exports from India Scheme (SEIS)
The objective of MEIS is to offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/ manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India’s export competitiveness. Similarly, the objective of SEIS is to encourage export of notified Services from India.
Some of the main features of these Schemes are as under:
The MEIS Entitlement would be 2% / 3% / 5% / 7% of FOB value of notified goods exported to notified markets [based on three distinct categories framed and covered in Appendix 3B] in free foreign exchange or FOB value of exports as given in the Shipping Bills in free foreign exchange, whichever is less.
Country Groups - Category A: Traditional Markets (30) - European Union (28), USA, Canada. Category B - Emerging & Focus Markets (139), Africa (55), Latin America and Mexico (45), CIS countries (12),Turkey and West Asian countries (13), ASEAN countries (10), Japan, South Korea, China, Taiwan and Category C: Other Markets (70).
Units located in SEZs have also been made eligible for MEIS & SEISbenefit.
Export of goods through Courier or Foreign Post Offices using e-Commerce (as notified in Appendix-3C) of FOB value only uptoRs. 25,000/- per consignment are entitled for rewards under MEIS.
Under SEIS, Service providers of notified services (under Appendix 3D) will be eligible for rewards in the form of duty credit scrips @ 5% and 7% on the net foreign exchange earned from notified services (w.e.f. 05.12.2017).
Only services provided in the manner/mode specified at Para 9.51 (i) & (ii) are eligible, i.e. Supply of a ’service’ from India to any other country (Mode 1-Cross border trade) and Supply of a ’service’ from India to service consumers of any other country (Mode 2- Consumption abroad).
Minimum net free foreign exchange earnings of USD 15,000 in the preceding year is the eligibility criteria. For Individual Service Providers and Sole Proprietorship minimum USD 10,000/-.
Duty Credit Scrip
Basic Custom duty paid in cash or through debit under Duty Credit scrip shall be adjusted for Duty Drawback benefits.
As per Trade Notice No. 11 dated 30/06/2017, under the GST regime, the Duty Credit Scrips cannot be used for payment of IGST, GST and Compensation cess in inputs and CGST/SGST/IGST, GST and Compensation cess for domestic procurement
Duty Credit Scrip issued on or after 01.01.2016 under Chapter 3 shall be valid for a period of 24 months from the date of issue and must be valid on the date on which actual debit of duty is made.
Market Access Initiatives (MAI) Scheme to act as a catalyst to promote exports on a focus product- focus country approach, so as to evolve specific markets and products through market studies/surveys.
5. STATUS HOLDER
Status Holder Scheme is for business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade.
An applicant shall be categorized as status holder on achieving export performance during the current and previous three financial years (for Gems & Jewellery Sector the performance during the current and previous two financial years shall be considered for recognition as status holder) as under:
Status recognition depends upon export performance. The export performance is counted on the basis of FOB value of export earnings in free foreign exchange.
For deemed export, for value of exports in Indian Rupees is required to be converted in US$ at the exchange rate notified by CBEC, as applicable on 1st April of each Financial Year.
Export Performance FOB/FOR
(as converted) Value
(in US $ million)
One Star Export House
Two Star Export House
Three Star Export House
Four Star Export House
Five Star Export House
5.1 Privileges of Status Holders
A Status Holder shall be eligible for privileges as under:
Provision for self-declaration
Authorisation and Customs Clearances for both imports and exports may be granted on self-declaration basis;
Input-Output norms may be fixed on priority within 60 days by the Norms Committee
Banking related provisions
Exemption from furnishing of Bank Guarantee for schemes under FTP, unless specified otherwise anywhere in FTP or HBP
Exemption from compulsory negotiation of documents through banks. Remittance / receipts, however, would be received through banking channels
Two star and above
Two star and above Export houses shall be permitted to establish Export Warehouses as per Department of Revenue guidelines.
Three star and above
Three Star and above Export House shall be entitled to get benefit of Accredited Clients Programme (ACP) as per the guidelines of CBEC (website:http://cbec.gov.in).
Preferential treatment in handling of consignments
The status holders would be entitled preferential treatment and priority in handling of their consignments by the concerned agencies.
Provision for self certification of manufactured goods
Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled to self-certify their manufactured goods (as per their IEM/IL/LOI) as originating from India with a view to qualify for preferential treatment under different preferential Trading agreements(PTA), Free Trade Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECA) and Comprehensive Economic Partnership Agreements (CEPA). Subsequently, the scheme may be extended to remaining Status Holders.
Manufacturer exporters who are also Status Holders shall be eligible to self-certify their goods as originating from India as per para 2.108 (d) of Hand Book of Procedures.
Freely exportable items
Status holders shall be entitled to export freely exportable items (excluding Gems and Jewellery, Articles of Gold and precious metals) on free of cost basis for export promotion subject to an annual limit of Rupees One Crore or 2% of average annual export realization during preceding three licensing years, whichever is lower.
Export of Pharma Products
For export of pharma products by pharmaceutical companies, the annual limit would be 2% of the average annual export realization during preceding three licensing years.
In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health programmes of international agencies such as UN, WHO-PAHO and Government health programmes. The annual limit shall be upto 8% of the average annual export realisation during preceding three licensing years. Such free of cost supplies shall not be entitled to Duty Drawback or any other export incentive under any export promotion scheme.
6. DUTY EXEMPTION/REMISSION SCHEME
This Scheme enables exporters’ duty free import of inputs for export production, including replenishment of input or duty remission.
The Duty Exemption Scheme consists of the following:
Advance Authorisation (AA) (including Advance Authorisation for Annual Requirement)
Allow duty free import of input, physically incorporated in export product, on the basis of Standard Input Output Norms (SION) or Self Declaration. Minimum 15% value addition is required to be achieved. Period for fulfillment of export obligation is 18 months from the date of issue of Authorization.
Duty Free Import Authorisation (DFIA)
Issued to allow duty free import of inputs and is exempted only from payment of Basic Customs Duty. Additional Customs Duty/Excise Duty paid may be adjusted as CENVAT credit. Value addition required 20%.
7. MAIN CHANGES IN FTP 2015-20 ARE AS UNDER
As per Trade Notice No. 11 dated 30.06.2017 under GST Regime, no exemption from payment of IGST and Compensation Cess would be available for imports under Advance Authorisation. However, as per Notification No. 33 dated 13.10.2017, imports under Advance Authorisation have been exempted from IGST and Compensation Cess till 31.03.2018, subject to pre-import condition.
Special Advance Authorization Scheme for export of Articles of Apparel & Clothing Accessories has been introduced for duty free import of fabric, subject to the specified conditions.
Under Self Ratification Scheme, eligible exporter, on self declaration and self ratification basis, can apply for an Advance Authorisation where there is no SION/valid Adhoc Norms for an export product and where SION has been notified but exporter intends to use additional inputs in the manufacturing process.
Imports under Advance Authorization would now also be exempted from Transition Product Specific Safeguard Duty and Countervailing Duty.
Advance Authorization for annual requirements would only be issued for items notified in SION and it shall not be available in cases of adhoc norms.
Calicut Airport, Kerala &Arakonam ICDs (Tamil Nadu) are notified as additional Ports allowed for export and import.
DFIA will be exempted only from payment of Basic Customs Duty and minimum value addition of 20% will be required to be achieved.
Duty Free Import Authorization (DFIA) will be issued only on post export basis separately for each SION and each Port and it will not be issued for an export product where SION prescribes ’Actual User’ condition for any input.
Exports under DFIA shall be made from a single Port and Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of issue. No further revalidation shall be granted by Regional Authority.
Duty Remission is Duty Drawback Scheme administered by Department of Revenue.
EPCG Scheme allows import of capital goods for pre-production, production and post-production at Zero customs duty. As per Trade Notice No. 11 dated 30.06.2017 under GST Regime, no exemption from payment of IGST and Compensation Cess would be available for imports under EPCG. However, as per Notification No. 33 dated 13.10.2017, Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable thereon upto 31st March, 2018.
Some changes made in the new Policy are:
Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorisation.
In case of capital goods are procured from indigenous manufacturers the specific Export Obligation has been reduced by 25% of the stipulated export obligation of the duty saved on such goods.
The services to be notified under Appendix 5D (which provides for list of services where payment has been received in Indian rupees which can be treated as receipt in Foreign Exchange as per guidelines of RBI) would now be considered towards the discharge of EO.
Time period for seeking extension of EO period increased from 30 days to 75 days from the expiry of original EO period. In case where the time period is not specifically mentioned in the BIFR order for units registered with BIFR/ Rehabilitation Department of State Government, extension of EO reduced to 3 years from 9.
The procedure for export obligation (EO) period wise extension under EPCG Scheme has been simplified and delegated to regional offices.
Clubbing of EPCG authorizations has been allowed in respect of those authorizations also where EO period has expired.
In case countervailing duty (CVD) is paid in cash on imports under EPCG, incidence of CVD would not be taken for computation of net duty saved, provided CENVAT is not availed has been omitted.
uRestricted for Export
If the goods proposed to be exported under EPCG authorisation are restricted for export, the EPCG authorisation shall be issued only after approval for issuance of export authorisation from Exim Facilitation Committee at DGFT Headquarters
Second hand capital goods shall not be permitted to be imported under EPCG Scheme.
Shifting of capital goods allowed from one unit of the IEC holder to the other.
For clarity, a negative list of capital goods which are not permitted under EPCG scheme has been notified.
Under the Scheme, as per Trade Notice 11 dated 30.06.2017, under the GST regime, the units are allowed to import or procure locally, without payment of Basic Custom duty but by payment of IGST, all types of goods including capital goods, raw materials, components, packing materials, consumables, spares and various other specified categories of equipments including material handling equipments, required for export production or in connection therewith. An EOU can be set up by any entrepreneur for manufacturing of goods and also for rendering services.
However, as per Notification No. 33 IGST is exempted till 31.03.2018. An EOU can be set up for repair, reconditioning, re-making and re-engineering also. Existing DTA Unit may also convert into an EOU/EHTP/STP/BTP. Positive net foreign exchange earnings are necessary.
EOU / EHTP / STP / BTP units may import without payment of customs duty as provided under First Schedule to the Customs Tariff Act, 1975 and additional duty of Customs leviable under Section 3(1), 3(3) and 3(5) and without payment of Integrated Tax and GST Compensation Cess leviable under section 3(7) and 3(9) of the Customs Tariff Act, 1975 as per notification issued by the Department of Revenue and / or procure from DTA, with payment of applicable taxes under GST and/ or CENVAT, as the case may be, certain specified goods for creating a central facility. Software EOU / DTA units may use such facility for export of software.
Following are the new initiatives for EOUs, EHTPs. & STPs
EOUs, etc. have been allowed to share infrastructural facilities among themselves
An EOU / EHTP / STP / BTP unit may export all kinds of goods and services except items that are prohibited in ITC (HS). However, export of gold jewellery, including partly processed jewellery, whether plain or studded, and articles, containing gold of 8 carats and above up to a maximum limit of 22 carats only shall be permitted.
Second hand capital goods
Second hand capital goods, without any age limit, may also be imported without payment of duty/taxes as provided under First Schedule to the Customs Tariff Act, 1975 and additional duty of Customs leviable under Section 3(1), 3(3) and 3(5) and without payment of Integrated Tax and GST Compensation Cess leviable under section 3(7) and 3(9) of the Customs Tariff Act, upto 31.03.2018 only
Inter unit transfer of goods and services
Inter unit transfer of goods and services have been allowed among EOUs on payment of applicable GST & Compensation Cess with prior intimation to concerned Development Commissioners of the transferor and transferee units as well as concerned Customs authorities, as per specified procedure for movement of goods.
Existing EHTP/STP units may also apply for conversion /merger to EOU unit and vice-versa. In such cases, units will avail exemptions in duties and taxes as applicable.
Supply of spares/ components
100%EOUs have been allowed facility of supply of spares/ components upto 2% of the value of the manufactured articles to a buyer in domestic market for the purpose of after sale services.
Now in the case of adverse market condition or any ground of genuine hardship, 5 years period for NFE completion can be extended by one year.
Letter of Permission
Now Letter of Permission (LOP) will have an initial validity of 2 years. Further extension can be granted by the DC upto one year. Extension beyond 3 years of the validity of LOPO can be granted in case unit has completed 2/3rd of activities, including the construction activities.
Fast track procedures
EOUs having physical export turnover of Rs. 10 crore and above, have been allowed the facility of fast track clearances of export, import and domestic procurement.
A simplified procedure may be provided to fast track the de-bonding/exit of the STP/ EHTP units which has not availed any duty benefit on procurement of raw material, capital goods etc..
Deemed Exports refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian Rupees or in Free Foreign Exchange. As per Trade Notice 11 dated 30.06.2017, the drawback as provided under Chapter 7 would be limited to the refund of basic custom duty only. In respect of eligible items covered under Schedule 4 of Central Excise Act, 1944 refund would also be covered under the drawback provided the item is eligible for such supply.
11. QUALITY COMPLAINTS AND TRADE DISPUTES
In an endeavour to resolve quality complaints and trade disputes between exporters and importers, a new chapter on ’Quality Complaints and Trade Disputes’ has been incorporated in the FTP. For resolving such disputes at a faster pace, a Committee on Quality Complaints and Trade Disputes (’CQCTD’) is constituted in 22 offices having members from Export Promotion Council/FIEO/APEDA/EICs/RBI etc. The CQCTD will be responsible for enquiring and investigating into all quality related complaints and other trade related complaints falling under the jurisdiction of the respective RAs. It will take prompt and effective steps to redress and resolve the grievances of the importers/exporters/overseas buyers, preferably within three months of receipt of the complaint. CQCTD proceedings are only reconciliatory in nature and the aggrieved party is free to pursue any legal recourse.
- Importers / Exporters are required to comply with the provisions of Rule 11 of the FTR Rules in terms of which every importer/exporter is required to submit complete details of the goods in question to the best of his knowledge and belief.
- Exporters of specified commodities are required to conform to the prescribed standards on quality control and pre-shipment inspection.