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FOREIGN TRADE

POLICY

MEANING OF EXIM POLICY/FOREIGN


TRADE POLICY:
FOREGIN TRADE POLICY (FTP)(ALSO CALLED EXIM
POLICY) means the policy relating to country’s exports
and imports. It is the policy relating to foreign
trade/international marketing. Even policies relating to
export promotion are covered within the scope of Exim
policy. In India, Exim Policy is announced by the Central
Government (Ministry of Commerce) periodically (at
present on five years basis with yearly revision). Exim
policy contains various policy and procedural decisions
taken as per the prevailing internal as well as global
marketing environment. FTP suggests the measures
adopted to achieve well-defined export objectives.
Certain concessions, incentives and facilities are also
provided to exporters through foreign trade policy.
Exporters are supposed to study the details of the Exim
Policy and adjust their export marketing activities
accordingly. They have to follow certain rules and
procedures as noted in the foreign trade policy for
securing the benefits of concessions and incentives.
OBJECTIVES OF EXIM POLICY:
Broad/overall objectives of Exim Policy/Foreign Trade
Policy are:-
(1) To strengthen the base for export production for
promoting exports.
(2) To create sound and favorable situation for export
promotion through diversification.
(3) To facilitate technological upgradation of domestic
production so as to make Indian goods globally
competitive.
(4) To reduce imports through import substitution and
encouragement to indigenous production.
(5) To simplify and streamline import-export procedures.
(6) To enable exporters to draw long term export plans
and strategies.
(7) To provide necessary institutional support to export
initiatives by exporters/export organizations.
(8) To provide liberal import facilities to promote exports.
(9) To offer different types of export incentives,
concessions and facilities so as to encourage
manufacturers and exporters to take more initiatives in
export promotion.
(10) To facilitate availability of necessary imported inputs
for sustaining industrail growth.
ROLE OF EXIM POLICY IN EXPORT
PROMOTION:
Exim policy and export promotion are closely related
concepts. In fact, the basic purpose of Exim policy is to
develop export potential, improve export performance
and to capture foreign markets to the maximum extent
possible. For achieving these objectives, various facilities,
concessions and incentives are offered under FTP
announced periodically. In the Exim policy, various
measures are also introduced in order to solve the
problems and difficulties of exporters. Here again, the
purpose is to promote exports. For example, in recent
years, steps for simplification of export procedures are
taken under Exim policy. The purpose is to give
convenience and encouragement to exporters in their
export promotion efforts.

EXIM POLICY 1985 ONWARDS


(1)EXIM POLICY-1985-88 :- Announced on 12th April,
1985 by the then Commerce Minster Mr. V. P. Singh. This
is the first policy statement announced for a period of
three years.
(2)EXIM POLICY-1988-91:- Announced on 30th March,
1988 by the then Commerce and Finance Minister Mr. N.
D. Tiwari. It was an extension of earlier EXIM policy for
1985-88.
(3)EXIM POLICY-1990-93:-The Exim policy 1988-91 was
to expire by March, 1991 but was revised one year earlier
by the National Front Government on March 30th, 1990.
(4)EXIM POLICY-1992-97:-The EXIM policy for 1992-97
was announced by the then Minister of State for
Commerce Mr. P. Chidambaram on 31st March, 1992 and
revised on yearly basis.
(5)EXIM POLICY-1997-2002:- The Exim Policy 1997-
2002 was announced on March 31, 1997. The earlier
policy for 1992-97 was replaced by this new policy. It was
suitably amended on yearly basis.
(6)EXIM POLICY-2002-2007:- The Exim Policy for 2002-
2007 was announced by the then Union Commerce and
Industry Minister Late Shri Murasoli Maran on March 31,
2002.
(7)MINI EXIM POLICY-2004:- Due to Lok Sabha
elections in April-May 2004, the Government announced
Mini Exim Policy on 28th January, 2004. It was a temporary
arrangement as the regular Exim Policy was to be
announced after the formation of new government.
(8)FOREIGN TRADE POLICY-2004-2009:- The current
Exim Policy for 2004-09 was announced on August 31st.
2004 by Commerce Minister Mr. Kamal Nath. The earlier
policy for 2002-07 was replaced by this new policy.

FOREIGN TRADE POLICY


2009-14
On 27th August, 2009 the Foreign Trade Policy for the
period 2009-14 was announced. The UPA Government
came to power at a time when the entire world was
passing through unprecedented economic slowdown.
Practically every country is affected due to economic
recession but ofcourse in varying degrees. All the major
economic indicators of industrial production, trade,
capital flows, unemployment, per capita investment and
consumption have been adversely affected. The WTO
estimates decline of global trade by 9% in volume terms
and IMF estimates a decline of over 11%. World Bank has
forecasted a painful and disturbing forecast which
suggests that 53 million more people would be placed
below poverty line and over a billion people would go
hungry. Fortunately, India has not suffered as badly as
the countries of the West. Yet our exports have declined
due to contraction in demand. Announcing Foreign Trade
Policy in this economic climate is indeed a daunting task.
HIGHLIGHTS/FEATURES OF FTP
2009-14 :
(1)Higher support for market:26 new markets have
been added under Focus Market Scheme which includes
16 new markets in Latin America and 10 in Asia-Oceania.
An incentive under Focus Market Scheme has been raised
from 1.25% to 2%.
(2)Product diversification: A large number of product
from various sectors have been included which cover
engineering products (agricultural machinery, parts of
trailers, sewing machines, hand tools, garden tools,
musical instruments, railway locomotives, clocks and
watches etc); plastic; jute products; technical textiles;
green technology products and certain electronic items.
Market Linked Focus Product Scheme (MLFPS) has been
expanded. Certain new products have been added to
meet demand in new markets which are motor car,
apparels, auto components, bicycle and its parts. Higher
allocation for Market Development Assistance (MDA) and
Market Access Initiative (MAI) scheme will be provided.
(3)Technological upgradation: In order to help
technological upgradation in the export sector EPCG
scheme at zero duty has been implemented. This scheme
will be available for engineering and electronic products,
basic chemicals and pharmaceuticals, apparels, textiles,
handicrafts, plastics, chemical and allied products,
leather and leather products. This scheme will remain
operative till 31st March 2011.
(4)EPCG Scheme relaxation: Export obligation under
EPCG scheme has been reduced to 50%in order to
increase the life of existing plant and machinery. In the
light of economic recession hitting export performance,
the facility of re-fixation of Annual Average Export
Obligation for the year in which there is decline in exports
from the country has been extended upto 31st March
2014.
(5)Gems and Jewellery Sector: It is planned to
establish “Diamond Bourse/s” to make India a diamond
international trading hub. Import on consignment basis of
cut and polished diamonds has been introduced. In case
of participation in overseas exhibitions values limits of
personal carriage of gems and jewellery has been
increased from $2 million to $5 million. Duty drawback
will be allowed on export of gold jewellery.
(6)Status holders: In order to increase exports and
encourage technological upgradation, additional Duty
Credit Scrips shall be given to status holders @1% of the
FOB value of past exports. Duty credit scrips can be used
to obtain capital goods with Actual User Condition upto
31st March 2011.
(7)Marine sector: In order to boost marine sector
import of fishing trawlers, boats, ships and other similar
items shall not be allowed. Marine sector now enjoys the
position of status holders.
(8)Agriculture sector: In order to help export of
perishable agricultural produce in single window system
has been introduced. This sector will have multi-
functional model agencies to be accredited.
(9)Leather sector: Unsold imported raw hides and skins
can be re-exported along with semi-finished leather from
bonded warehouse. The exporter will have to pay 50% of
the applicable export duty. FPS rate will be increased by
2% in this sector.
(10)Tea: Export of tea is covered under VKGUY scheme
benefits. The sale limit of instant tea by EOUs has been
enhanced from 30% to 50%. Minimum value addition
under advance authorization scheme has been reduced
from the existing 100% to 50%.
(11)Handloom sector: Handloom Mark has been
removed to get benefits under FPS.
(12)Pharmaceutical sector: Export obligation period
for advance authorization has been increased from the
existing 6 months to 36 months.
(13)EOUs: Instead of existing 75%, EOUs has been
allowed to sell products manufactured by them in DTA
upto 90%. EOUs will be allowed to procure finished goods
for consolidation along with their manufactured goods.
During the present state of recession, Broad of Approvals
(BOA) will consider giving extension of block period by
one year for calculation of Net Foreign Exchange earning
of EOUs.
(14)Duty Entitlement Passbook Scheme (DEPB):
DEPB rate shall also include factoring of custom duty
component on fuel where is allowed as a consumable in
standard input-output norms.
(15)Flexibility provided to exporters:
(a) Earlier payment of customs duty for export
obligation shortfall was allowed in cash only.
Now debit of duty credit scrips is permitted.
(b)In case of USA, time limit of 60 days for re-import
of exported gems and jewellery items for taking part
in exhibitions has been increased to 90 days.
(c) Transit loss claims from private approved
insurance companies in India will now be allowed.
This facility was restricted to public sector general
insurance companies only.

(16) Simplification of procedures:


(a)Exporters were allowed to import upto 15 pieces of
sample which has been increased to 50. The value of
quantity of samples for customs clearance will be
provided by importers.
(b)Currently exemption from payment of excise duty
is allowed only upto one stage. Under the new policy
this exemption is allowed upto two stages provided
the manufacturer supplies the products to final
exporter.
(c)Customs will allow conversion of shipping bills
from the present one month to three months.
(d)Dispatch of imported goods directly from the port
to the site is allowed for deemed supplies in order to
cut down transaction costs.
(e)Disposal of manufacturing wastes/scrap will now
be allowed after payment of applicable excise duty.
(f)With regard to import of sports material, there is
no need to approach DGFT. Regional authorities are
now authorized to issue licenses for import sports
materials after obtaining NOC from Ministry of Sports
and Youth Affairs.
(g)To help medical devices industry, the procedure
for issue of Free Sale Certificate is simplified. The
validity of the Certificate is increased from 1 to 2
years.
(h)Automobile industry maintaining R & D
department are allowed free import of petrol and
diesel upto a maximum of 5KL per annum.
(i)Redemption forms under EPCG scheme have been
simplified.

(17)Reduction of transaction costs:


(a)With effect from December 2009 double
verification of shipping bills by customs for EDI ports,
on any scheme of DGFT will be removed.
(b)Free paid already for the cancelled authorization
will be adjusted against the application fee for the
new authorization subject to payment of minimum
fee of Rs.200
(c)In order to solve problems facing the exporters an
Inter-Ministerial Committee will be formed.

(18)Directorate of Trade Remedy Measures: A


Directorate of Trade Remedy Measures shall be
established to enable exporters to exercise their rights
through trade remedy instruments.

HIGHLIGHTS OF FOREIGN
TRADE POLICY 2009-2014-AT
GLANCE:

(1)New facility to allow import of cut and polished


diamonds for grading and certification.
(2)Value limits of personal carriage increased to Rs.24.5
crore for participation in overseas exhibitions.
(3)Plan diamond bourses.
(4)Export units allowed to sell 90% of goods in domestic
market.
(5)Single-window scheme for farm exports.
(6)Export oriented instant tea companies can sell upto
50% produce in domestic market.
(7)Number of duty-free sample for exporters raised to 50
pieces.
(8)100% of growth of India’s export of goods and services
by 2014.
(9)Targeted India’s share of global trade by 2020, double
from the current 1.64%
(10)Rs.98000 crore is the export target for 2010-11
(11)26 new markets added Focus Market Scheme. Sops
hiked to 3%.
(12)Focus Product Scheme incentives raised to 2% from
1.25%. More products added.
(13)EPCG scheme at zero duty introduced.
(14)Duty Entitlement Passbook (DEPB) scheme extended
till December 31, 2010
(15)2% interest subvention on pre-shipment credit
extended till March 31, 2010.

(16)Duty drawback on gold jewellery exports allowed.


(17)Market-linked Focus Product Scheme introduced for
export of identified products to 13 identified markets.
EXPORT SOPs IN FOREIGN TRADE POLICY
2009-2014:
(1)Rs. 5,000 crore refinances facility to Exim bank for pre-
shipment and post-shipment credit.
(2)Rs.1,100 crore allocated for settling refund claims.
(3)Rs.1,400 crore for textile upgradation fund.
(4)Rs. 350 crore for handicrafts units.
(5)2% interest subvention on loans to several export
sectors.
(6)Issues related to service tax refunds to exports sorted
out.
(7)Section 10A and10 B benefits for software technology
parks and export-oriented units extended till 2010-11.
(8)Special refinance facility to banks for extending credit
to export sector.

SPECIAL FOCUS
INITIATIVES:
In the Foreign Trade Policy 2004-09, the concept of
Special Focus Initiatives was introduced sectors with
significant export prospects have been identified as
thrust sectors. FTP 2004-09 announced specific strategies
(termed as “Special Focus initiatives”) such sectors.
The sectors are: Agriculture, Handicraft, Handlooms,
Gems and Jewellery and Leather and Footwear. These
sectors have been given special facilities and incentives
for their growth during the period 2004 to 2009. Here, the
purpose was to export on a massive scale from these
sectors and also to generate employment in these
sectors.
With a view to double our percentage share of global
trade within five years and expanding employment
opportunities, within the country, the focus initiatives of
FTP 2004-09 have been given continuation in the new
Foreign Trade Policy 2009-14.
In addition, the government shall make concerted
efforts to promote exports of these sectors by specific
sectoral strategies that shall be notified from time-to-
time. In order to boost-up exports from various sectors, a
number of sector specific initiatives have been
announced.
The special focus initiatives under the FTP 2009-2014
are as noted below:

(1)Agriculture and Village Industry:


Agriculture was identified as focus sector for special
initiatives under FTP 2004-09. Sectorial initiatives for
agricultural sector are varied in character Vishesh Krishi
and Gram Udyog Yojana (VKGUY) has been launched for
promoting exports from agricultural sector and village
industry. The following initiatives have been proposed
under VKGUY:
(a) Capital goods imported under EPCG will be permitted
to be installed anywhere in Agri Export Zones (AEZs).
(b)Import of restricted items, such as panels, are allowed
under various export promotion schemes.
(c)Import of inputs such as pesticides is permitted under
Advance Authorisation for agro exports.
(d)Certain specified flowers, fruits and vegetables are
entitled to special duty credit scrip, in addition to the
normal benefit under VKGUY.

(2) Handlooms:
(a) Specific funds are earmarked under Market Access
Initiatives (MAI)/Market Development Assistance (MDA)
Scheme for promoting handloom exports.
(b) Duty free import entitlement of specified trimmings
and embellishment is 5% of FOB value of exports during
previous financial year.
(c) Duty free import entitlement of hand knotted carpets
samples is 1% of FOB value of exports during previous
financial year.
(d) Duty free import of old pieces of hand knotted carpets
on consignment basis for re-export after repair is
permitted.
(e)New towns of export excellence with a threshold limit
of Rs. 150 crore shall be notified.
(f) Machinery and equipment for effluent treatment plants
is exempt from customs duty.

(3)Handicrafts:
(a)Duty free import entitlement of tools, trimmings and
embellishments is 5% of FOB value of exports during
previous financial year.
(b)Handicraft EPC is authorized to import trimmings,
embellishments and consumables for exporters for whom
direct importing may not be viable.
(c)Specific funds are earmarked under Market Access
Initiatives (MAI)/Market Development Assistance (MDA)
Scheme for Handicrafts exports.
(d)Countervailing Duty (CVD) is exempted on duty free
import of trimmings, embellishments and consumables.
(e)New towns of export excellence with a reduced
threshold limit of Rs. 150 crore shall be notified.
(f)Machinery and equipments for effluent treatment
plants are exempt from customs duty.
(g)All handicrafts exports would be treated as special
focus products and entitled to higher incentives.

(4) Gems and Jewellery:


(a) Import of gold of 8k and above is allowed under
replacement scheme subject to import being
accompanied by an Assay Certificate specifying purity,
weight and alloy content.
(b)Duty Free Import Entitlement (based on FOB value of
preceding year’s exports) of Consumables and Tools for
jewellery made of precious Rhodium plated Silver-3% and
Cut and Polished Diamonds-1%.
(c)Duty free import entitlement of commercial samples
shall be Rs.3, 00,000.
(d) Duty free re-import entitlement for rejected jewellery
shall be 2% of FOB value of exports.
(e)Import diamonds on consignment basis for
Certification/Grading and re-export by the authorized
offices/agencies of Gemological Institute of America (GIA)
in India or other approved agencies will be permitted.
(f)Personal carriage of Gems and Jewellery products in
case of holding/participating in overseas exhibitions
increased to US $ 5 million and US $1 million in case of
export promotion to 90 days.
(g)Extension in number of days for re-import of unsold
items in case of participation in an exhibition in USA
increased to 90 days.
(h)In an endeavor to make India a diamond international
trading Hub, it is planned to establish “Diamond
Bourse(s)”.

(5)Leather and Footwear:


(a) Duty free import entitlement of specified items is 3%
of FOB value of exports of leather garments during
preceding financial year.
(b)Duty free entitlement for import of trimmings,
embellishments and footwear components for footwear,
gloves, travel bags and handbags is 3% of FOB value of
exports of previous financial year.
(c)Machinery and equipment for Effluent Treatment
Plants shall be exempt from basic customs duty.
(d)Re-export of unsuitable imported materials such as
raw hides and skins and wet blue leathers is permitted.
(e)Countervailing Duty (CVD) is exempted on lining and
inter-lining material and raw, tanned and dressed fur
skins falling under chapter 43 of ITC (HS).
(f) Re-export of unsold hides, skins and semi-finished
leather shall be allowed from Public Bonded warehouse at
50% of the applicable export duty.

NEGATIVE LIST OF
EXPORTS:
Reference is made to negative list of items in Exim
Policy. It means a list of items which cannot be
imported or exported freely or banned for imports
and exports. Negative list of exports contain items
which cannot be freely exported. Negative list
includes the following three categories of items:
(a)Prohibited items: This items which are
banned for imports and exports. Such
prohibited/banned items cannot be imported or
exported. Prohibited items include birds, animals
and plants.
(b)Restricted items: Such items can be imported
or exported with the special permission/license
from DFGT. (castles, camels, chemical fertilizers,
etc.)
(c)Canalised items: These are the items which
are to be imported/exported through canalizing
agencies like STC.(Petroleum products, etc.)

The negative list in the Exim policy has lost its


importance in recent years period as such list is
reduced considerably due to liberalization of our
imports and exports. Our exports and imports are
now liberalized under the WTO agreement. This
makes the concept of negative list rather outdated.
However, some restrictions on the imports and
exports are bound to exist.
Negative list includes negative of exports and
negative list of imports.
Negative list of exports includes those export
items which are banned (prohibited items), or
cannot be exported freely (restricted items) or
can be exported only through canalised agencies
(canalizing items).

The prohibited or banned items or exports


are:
All forms of wild animals, Exotic birds, Beef,
Human skeletons, Chemicals as notified by DGFT,
Red sanders wood in any form, Tallow, fat and/ or
oils of any animal’s origin, wood and wood
products and sandalwood items as notified by
DGFT.

The restricted items of exports are:


Total restricted items are 31. Restricted items of
exports include camel, hides and skins, fodder
including wheat and rice straw, fur of domestic
animals, deoiled groundnut cakes, fresh and frozen
silver pomfrets of weight less than 300 gms and
textile items with imprints of excerpts or verses of
the Holy Quran.
The canalizing items of exports are:
Petroleum products (through Indian Oil Corporation
Ltd.), Onions (through NAFED), Mica Waste and
Scrap (through MMTC), Niger seeds (through
NAFED), Minerals oils and concentrates (MMTC and
MOIL), Gum Karaya (through TRIFED).