FAQs ON FOREIGN TRADE POLICY
Ques 1: What is IEC? Who requires an IEC?
Ans 1: IEC Stands for IMPORTER EXPORTER CODE. Any bonafide Person/ Company looking to enter Import – Export business require IEC.
Ques 2: Who issues an IEC?
Ans 2: IEC is issued by Regional Offices of Directorate General of Foreign Trade established all over India.
Ques 3: What is the RCMC and who issue it for which purpose?
Ans 3: RCMC is Registration cum Membership Certificate. It is issued by the specific Export Promotion Council against an application from exporter in the prescribed format. With this the exporter avails promotional services from the EPC and also avail benefit prescribed in Foreign Trade Policy.
Ques 4: What is e-BRC
Ans 4: Electronic-Bank Realization Certificate (e-BRC) is issued by Banks based on realization of payment against export by an Exporter.
Ques 5: What is procedure for Import of samples?
Ans 5: No Authorization shall be required for Import of bona fide 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 Authorization by any person connected with Tea industry (value limits).
Duty free import of samples upto Rs. 3,00,000 for all exporters shall be allowed subject to laid down conditions by the Customs.
Ques 6: What are export procedures for samples?
Ans 6: Exports of bonafide trade and technical samples of free exportable item shall be allowed without any limit.
Ques 7: What are ITC (HS) Codes?
Ans 7: ITC (HS) Code or better known as Indian Trade Classification (Harmonized System) Code was adopted in India for import – export operations. Indian Customs uses an Eight Digit ITC (HS) Codes to suit the national trade requirement.
Ques 8: How do I find HS Code for my product?
Ans 8: If you want to know the HS Code, Click on ‘ITC HS Based Policy’ on the website of DGFT. A new window will open as ITC (HS) Query Form. Insert the name of the product in the description option to know the HS Code of your product. Similarly, if you want to know the product and are already aware of the HS Code, enter the ITC (HS) Code (e.g. 0324) option to know the product.
Ques 9: What is a ‘Restricted Item?
Ans 9: All goods, import of which is permitted only with an Authorization / Permission / License or in accordance with the procedure prescribed in a notification / public notice are ‘Restricted’ goods.
Ques 10: Where are the ‘Restricted’ item listed?
Ans 10: The list of ‘Restricted’ items is available in the ITC(HS) Classification of Export and Import items and the same can be viewed under the Download section in DGFT website at http://dgft.gov.in.
Ques 11: What is MEIS and how does this works?
Ans 11: Under Merchandise Exports from India Scheme (MEIS) Duty Credit Scrip is granted as rewards.
On an application of exports of notified goods/products to notified markets Duty Credit Scrip is issued at a specified rate on realized FOB value of exports in free foreign exchange. This scrip can be used for payment of Customs Duties for import of inputs/goods/capital goods. It can also be used for payment of excise duty and service tax.
Ques 12: Is e-Commerce exports is eligible for any benefit?
Ans 12: Exports of certain specified goods through Courier or Foreign P.O. using e-commerce, of FOB value upto Rs. 25,000/- per consignment are entitled for rewards under MEIS.
Ques 13: Whether Service Exports are entitled for any benefit?
Ans 13: Service providers of notified Services located in India are rewarded at specified rates under Service Exports from India Scheme (SEIS) on earning of Net free foreign exchange in preceding financial year for rendering such services.
Ques 14: Is there any assistance available to fruits and vegetables exporters for transportation of produce to an overseas market?
Ans 14: Export of identified floriculture, fresh fruits and vegetables, fresh medicinal plants and culinary herbs, dairy, meat and poultry products and processed food products are eligible for grant of transport assistance scheme operated by APEDA.
Ques 15: Is there any facility of on line filing of application?
Ans 15: Yes, all applications under FTP may be filed ‘on line’. Presently, the facility is available for:
i) IEC Code
ii) MEIS & SEIS
iii) Advance Authorisation/DFIA
v) Registration Certificate for Cotton/Yarn
vi) SCOMET items Licenses (restricted)
Ques 16:What is digital signature?
Ans 16: A digital signature is the electronic equivalent of a physical signature and can be used to electronically sign any document or transaction. One needs to have a valid digital certificate to create a digital signature.
Ques 17: What is Advance Authorization Scheme? How does Advance Authorization Scheme work?
Ans 17: Under Advance authorization Scheme, exporter can import raw-materials and related inputs 100% duty free for export production. The importer has to approach the Regional Authorities of DGFT for issue of the Authorization. Minimum value addition @ 15% is fixed as per the standard input-output norms. Advance Authorisation is issued on Actual User basis and goods imported under it cannot be sold. However, once the export obligation is fulfilled and the Authorization is redeemed, the manufactured products may be sold in domestic market.
Ques 18: Can a Merchant Exporter is eligible for Advance Authorisation ?
Ans 18: Yes, Advance Authorization can be issued to a Merchant Exporter tied to supporting manufacturer.
Ques 19: Is any value addition is required to be achieved ?.
Ans 19: Yes, minimum 15% value addition is required to be achieved under Advance Authorisation.
Ques 20: What is the time period for fulfillment of export obligation under Advance Authorization?
Ans 20: It is 18 months from the date of issues of Authorisation.
Ques 21: Can an exporter procure inputs from indigenous supplier against an Advance Authorisation?
Ans 21: Holder of an AA/DFIA can procure inputs from indigenous supplier/STE in lieu of direct import. Such procurement can be against ARO, Invalidation letter or Back-to-Back Inland Letter of Credit.
Ques 22: What is difference between Advance Release Order (ARO) and Invalidation Letter?
Ans 22: ARO is issued if the domestic supplier intends to seek refund of duty through Deemed Export mechanism, whereas Invalidation Letter is issued when domestic supplier intends to obtain duty free material for inputs through Advance Authorization for supplying resultant product to another Advance Authorization holder.
Ques 23: What is DFIA and how it works?
Ans 23: Duty Free Import Authorisation (DFIA) is allowed to allow duty free import of inputs. Goods imported under it are exempted only from payment of basic Customs Duty. It is issued on Post export basis for products for which SION have been fixed. Minimum value addition of 20% is required to be achieved.
Ques 24: What is the procedure to obtain DFIA?
Ans 24: Before starting export, online application should be made to the RLA. Exports are to be completed within 12 months and all export documents should bear the file number. After completion of exports & realization of the proceeds, request for issuance of the transferable DFIA should be made to concerned RLA within a period of 12 months from the date of exports or six months from the date of realization. RLA shall issue DFIA with a validity of 12 months.
Ques 25: What is the minimum value addition required under DFIA?
Ans 25: Minimum value addition of 20% shall be required to be achieved.
Ques 26: Whether exporters of gem & jewellery can import/procure duty free input?
Ans 26: Yes, such exporters can import/procure duty free input for manufacture of export product under the following Schemes:
i) Advance Procurement/Replenishment of precious metals from Nominated Agencies
ii) Replenishment Authorisation for Gem
iii) Replenishment Authorisation for Consumables
iv) Advance Authorisation for precious metal
Ques 27: Can import of gem & jewellery samples be made duty free?
Ans 27: Duty free import of gem & jewellery samples upto Rs. 3 lakh or 0.25% of the average of last three years export turnover of gem & jewellery items, whichever is lower, is allowed.
Ques 28: What is EPCG Scheme?
Ans 28: Export Promotion Capital Goods (EPCG) Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty.
Ques 29: Whether any export obligation is required to be fulfilled?
Ans 29: Yes, import under the scheme shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods to be fulfilled in 6 years from date of issue of Authorization. In addition, the holder of the Authorization is also required to fulfill the average level of exports achieved by it during the preceding three licensing year for the same & similar products.
Ques 30: Can Capital Goods imported under EPCG Scheme be transferred to another Unit?
Ans 30: On the permission of DGFT such transfer may take place provided that both the addresses of the Units are endorsed in IEC & RCMC.
Ques 31: Whether exports of alternate products can be counted for fulfillment of export obligation under EPCG?
Ans 31: There was a provision to fulfill export obligation upto the extent of 50% by alternate product or services during the period 01.04.2008 to 17.04.2013. Therefore, inclusion of alternate products (for export) would be allowed for fulfillment of EO subject to the condition that first 50% of EO should be fulfilled only by original export product and average EO will be re-fixed in respect of alternate products as well.
Ques 32: Whether the Capital Goods can be sourced indigenously?
Ans 32: A person holding an EPCG Authorization may source capital goods from a domestic manufacturer.
Ques 33: Is any benefit is available to domestic supplier?
Ans 33: Domestic manufacturer is eligible for deemed export benefit like Advance Authorisation/DFIA; Deemed Export Drawback and Refund of excise duty, if exemption is not available.
Ques 34: What are the criteria for calculation of EO in the case of domestic sourcing of the capital goods?
Ans 34: EO is reckoned with reference to notional Customs Duties saved on FOR value.
Ques 35: What is Post Export EPCG REDIT Scrip?
Ans 35: It is available to exporters who intend to import capital goods on full payment of applicable duties in cash and choose to opt for this Scheme. BCD paid on capital goods is remitted in the form of freely transferable duty credit scrip similar to those issued under Chapter 3 of FTP.
Ques 36: Whether there is any provision for extension in EO period?
Ans 36: Only one extension of upto 2 years in export obligation period may be considered by RA concerned on payment of composition fee equal to 2% of proportionate duty saved amount on unfulfilled EO for each year of extension.
Ques 37: What is the procedure for regularization of bonafide default?
Ans 37: In case the prescribed EO is not completed, then Customs Duty with interest is payable.
Ques 38: What is EOU/EHTPS/STP Scheme?
Ans 38: Under the Export Oriented Scheme/Electronics Hardware Technology Park/Software Technology Parksmes, exporting units are allowed to set up with the objective of mainly exporting entire production except as provided under the Foreign Trade Policy.
Ques 39: What are the incentives/facilities available to such Units?
Ans 39: Duty free imports/procurement from DTA, Reimbursement of CST, DTA sale upto 50% of FOB value of exports on payment of concessional rate of Central Excise duty, etc.
Ques 40: How such Units operate?
Ans 40: The Units have to operate under Customs/Central Excise Bond as per the conditions under FTP/ Customs/Central Excise Notifications.
Ques 41: In case an EOU is procuring raw material from the indigenous market and then selling the product in the DTA then what is the amount of duty they are required to pay?
Ans 41: In case an EOU making a product by procuring 100% raw material indigenously, then such product can be sold in the domestic market on payment of excise duty.
Ques 42: What is the meaning of Deemed Exports?
Ans 42:‘Deemed Exports’ as defined in the PTP means those transactions in which the goods supplied do not leave the country and the supplier in India receives the payment for the goods. It means the goods supplied need not go out of India to treat them as ‘Deemed Export’.
Ques 43: What are the different categories of supplies regarded as ‘DEEMED EXPORTS’
Ans 43: Supply of goods against AA/DFIA, to EOUs etc., against EPCG Authorization, to Projects financed by Multilateral or Bilateral Agencies; etc. as per FTP 2015-20
Ans 44: Advance Authorization/DFIA, Deemed Export Drawback, Refund of TED.
Ques 45: What is DP term of payment? How does DP term of payment work?
Ans 45: D.A.P or D/P terms of payment means, Documents against Payment. Once cargo is shipped exporter is issued Bill of Lading (under sea shipment) or Airway Bill (under air shipment) by Carrier or his agent. Exporter submits all required documents along with Bill of Lading /Airway bill, invoice, packing list, bill of exchange with the bank to send to buyer through buyer’s bank. After receipt of such shipping documents by buyer’s bank notifies buyer on receipt of documents and advise to ‘accept’ the documents by effecting payment of export proceeds. Under a DP terms of payment (DAP terms of payment), the buyer collects original shipping documents from his bank after making necessary payment against sale of goods.48.
Ques 46: What the normal procedures for receipt of paymentsainst exports:
Ans 46: The amount representing the full export value of the goods exported should be received through an AD Bank in the manner specified in the Foreign Exchange Management Act.
Ques 47: What is time period for Realization and Repatriation of proceeds of export of goods?
Ans 47: The period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in SEZs, Status Holder Exporters, EOUs, Units in EHTPs, STPs & BTPs.
Ques 48: Can the export documents be dispatched directly to the buyer?
Ans 48: The export documents should be routed through the Authorized Dealer. Only Status Holder exporters are allowed to dispatch the documents directly subject to realization of payments through the AD Bank.
Ques 49: What is Merchanting Trade?
Ans 49: For a trade to be classified as Merchanting Trade following conditions should be satisfied:
i) Goods acquired should not enter the Domestic Tariff Area
ii) The state of the goods should not undergo any transformation.
Ques 50: What are the rules governing consignment exports from India?
Ans 50: When goods have been exported on consignment basis, the bank, while forwarding shipping documents to his overseas branch/correspondent, should instruct the latter to deliver them only against trust receipt/undertaking to deliver sale proceeds by a specified date within the period prescribed for realization of proceeds of the export.
Ques 51: What is an EEFC Account and what are its benefits?
Ans 51: Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Category - I bank i.e. a bank authorized to deal 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.
Ques 52: Who can open an EEFC account?
Ans 52: All categories of foreign exchange earners, such as individuals, companies, etc., who are resident in India, may open EEFC accounts.
Ques 53: Who can open an EEFC account? Can interest be paid on these accounts?
Ans 53: All categories of foreign exchange earners, such as individuals, companies, etc., who are resident in India, may open EEFC accounts. No interest is payable on EEFC accounts.
Ques 54: How much of foreign exchange earnings can be credited into an EEFC account?
Ans 54: 100% foreign exchange earnings can be credited to the EEFC account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
Ques 55: Whether Export Credit is under priority sector?
Ans 55: Yes, Export Credit is included under Priority Categories.
Ques 56: Whether EEFC Account can be opened by Special Economic Zone (SEZ) Units?
Ans 56: A unit located in a Special Economic Zone can open a Foreign Currency Account with an Authorised Dealer in India subject to conditions stipulated in Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016.
Ques 57: What is the definition of MSME?
Ans 57: The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:
Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and
(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore
Ques 58: What is the Credit Guarantee Fund Trust Scheme for MSEs?
Ans 58: The Ministry of MSME, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals/ third party guarantees. The main objective of the scheme is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of a MSE unit, which availed collateral- free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 per cent of the outstanding amount in default.
Ques 59: Whether Agency Commission on Exports is allowed ?
Ans 59: Yes, payment of Agency Commission is allowed subject to fulfillment of the specified conditions.
Ques 60: What are the documents required to be filed with the Customs while effecting exports?
Ans 60: In the EDI System, CHA/Exporter has to submit the following documents at the Service Centre:
· A declaration in the prescribed format
· Copy of Export Invoice
· Packing List
· Drawback/DEEC /AR, etc. as applicable
Ques 61: How the export documents are processed?
Ans 61: The Shipping Bill is processed by the system on the basis of declaration made by the exporter.
Ques 62: What are examination norms for the export goods?
Ans 62: Generally 5% to 10% of the goods are subject to examination.
Ques 63: What is LEO?
Ans 63: Being satisfied on examination, the Customs Officer gives “Let Export Order” and once the LEO is given the Shipping Bill is printed and the goods are loaded in the container.
Ques 64: What is Duty Drawback Scheme?
Ans 64: Under the Scheme, exporters are reimbursed the Customs, Central Excise s & Service Tax paid on inputs used in export production.
Ques 65: How the exporter can claim Drawback?
Ans 65: Filing of separate claim is not required. After actual export of the goods, the Drawback claim is processed through EDI System and the Drawback amount is automatically credited into the Bank account of exporter.
Ques 66: What is EGM?
Ans 66: Export General Manifest (EGM) is the document which is to be filed by Airlines/Shipping Lines declaring the consignments alongwith the relevant particulars like S/Bill No., AWB/BL No. and number of packages which have been loaded in the aircraft/ship for taking these out from India.
Ques 67: What are the formalities for procuring excisable goods from a factory without payment of duty by a Merchant Exporter?
Ans 67: The Merchant Exporter has to execute General Security Bond. Excizse Authority will issue CT 1 Certificate in the name of the manufacturer from whom the Merchant Exporter desires to procure duty free goods for export. The proof of exports in such case to be produced before the Bond accepting authority.
Ques 68: What is the procedure for obtaining rebate of duty on goods exported?
Ans 68: If the excisable goods are exported directly from the factory of manufacturer, the rebate of excise duty paid on such goods can be claimed either from the jurisdictional AC/DC or from the Maritime Commissioner.
Ques 69: Whether rebate of duty can be claimed on goods purchased from open market and exported?
Ans 69: The rebate of excise duty paid on excisable goods exported from a place other that the factory of manufacture can also be claimed it is possible to correlate the goods and their duty paid character.
Ques 70: Can material be procured without payment of duty for manufacturing or processing goods for exports?
Ans 70: Exporter who manufacturers or processes export goods can procure excisable goods without payment of duty by registering with the Jurisdictional C.Ex. Office. Notification No. 43/2001-CE (NT) may be referred.
Ques 71: What the procedure regarding purchase of raw materials by EOU?
Ans 71: EOU can purchase excisable goods without payment of excise duty by furnishing CT 3 Certificate issued by Jurisdictional CEX. Authorities.