Foreign Trade Policy (FTP) (2009-2014)

INTRODUCTION
FTP is administrated by the DGFT under the Foreign Trade (Development & Regulation) Act,1992. It came into force with effect from 27th August, 2009 & shall remain in force upto 31st March, 2014 unless otherwise specified. All exports & imports upto 26th August, 2009 are governed by the FTP 2004-2009.

Export-Import Data

(as on August,2011)

Exports during July 2013, were valued at US $ 25834.46 million. Indian exports maintained their momentum registering a 20.9% growth last year. Imports during July 2013 were valued at US $ 38102.56 million The trade deficit for April-July, 2013-14 was estimated at 62448.16 million US dollars which was higher than the deficit of 59695.75 million US dollars during April-July, 2012-13.

OBJECTIVES
Short Term Objectives To arrest & reverse the declining trend of exports. To provide additional support to those sectors which have been hit badly by recession in the Developed World.

Medium Term Policy Objectives To achieve an Annual Export growth of 15% with an Annual Export Target of US $ 200 billion by March 2011. To achieve an Annual Export growth of around 25% by 2014.

Contd.

 To be able to achieve the target of US$ 500 billion exports by 2013-14. To double Indias exports of goods and services by 2014.
Long Term Objective To double Indias share in Global Trade by 2020.

STRATEGIES
Stable Policy environment. Simplifying procedures & bringing down transaction costs. Facilitation development of India as a global hub for manufacturing, trading and services. Faciliting technology and infrastructure upgradation. Fiscal incentives. Diversification of export markets & products. Procedural rationalization. Institutional changes.

STRATEGIES
Ministry of Commerce unveiled an Action Plan in May 2011 for doubling Indias merchandise exports to US$ 500 billion which was based on following strategy : Developing products with a considerable growth potential Market diversification strategy Nurturing high technology exports Build a Brand India

STRATEGIES
In the last 3 years, the scope and coverage of the Focus Market Scheme has expanded which now covers 112 markets across the world. Indias exports to Asia, Africa and Latin America put together totaled US$188 billion which constitutes 62% of Indias total export basket which is a significant development. Another redeeming feature of export performance last year was substantial increase in value added exports, engineering exports touched US$ 60 billion. Gems and jewellery crossed US$ 46 billion, and textiles exports crossed US$ 14 billion and pharmaceutical exports stood at US$ 13 billion.

Components & Schemes

Import / Exports controls Schemes for Duty Exemption/Remission Promotional Measures/ Incentive Schemes Technological Upgradation Deemed Exports Export Oriented Units (EOUS), Electronics Hardware Technology Parks (EHTPS), Software Technology Parks (STPS) & Bio-Technology Parks (BTPS)

Various Agreements
Free Trade Agreements (FTAs) are an important element of Indias trade strategy. Through FTAs, India has enhanced its presence in new and emerging markets to increase market share. Through FTA its ensured that raw material and intermediate products for our domestic industry at competitive prices. In the last 3 years, we have signed various agreements :
Trade in Goods Agreement with ASEAN, Comprehensive Economic Partnership Agreements with Republic of Korea, Japan, and Malaysia . At present negotiating similar Agreements with New Zealand, Australia, Canada. Almost at concluding stage of an ambitious Broad based Trade and Investment agreement with EU..

Various Measures to boost exports.

a) Give a focused thrust to employment intensive Industry for generating gainful employment.

b) Encourage domestic manufacturing for inputs to export industry and reduce the dependence on Imports. c) Promote technological up gradation of exports to retain a competitive edge in global markets.
d) Persist with a strong market diversification strategy to hedge the risks against global uncertainty. e)

Various Measures to boost exports.

e) Encourage exports from the North Eastern Region. f) Provide incentives for manufacturing of green goods recognizing the imperative of building capacities for environmental sustainability.

Import / Export Controls

Imports Around 5% Tariff Lines are under Import Controls. 11600 Tariff Lines are free for import. Almost total control on imports in 1991. Restrictions removed over the next 10 years, removing almost all the Quantitative Restrictions. Presently: Prohibited items - 53 Lines Restricted items - 485 Lines State Trading Items - 33 Lines.
Contd.

 Exports Controls primarily on account of security, public health, public morals, exhaustible resources and environment grounds. Prohibited items - 59 Restricted items - 155 State Trading Items - 12
Restrictions fall under two Categories Dual Use Items (SCOMET items) Special provision for these items under Weapons of Mass Destruction Act, 2005. General Trading Items - Export Facilitation Committee looks into applications for license for these items.

Schemes For Duty Exemption/Remission

Principle -

Goods and Services are to be exported & not the Taxes and Levies.

Purpose -

Procure inputs and capital goods without the component of Central Indirect Taxes & Levies.
Contd.

Pre Export Schemes :

1) For Inputs:- Advance Authorisation Scheme

Duty Free Import Authorisation (DFIA) Scheme Schemes for Gems & Jewellery Sector Scheme

2) For Capital Goods:- Export Promotion Capital Goods (EPCG)

Post Export Schemes : Duty Entitlement Pass Book (DEPB)

Scheme Duty Drawback Scheme Terminal Excise Duty (TED) Refund

Advance Authorization Scheme

For making available duty free inputs required to manufacture the export product. Inputs allowed as per SION and with Actual User condition. Facility available for Physical exports (including supplies to SEZ units & SEZ Developers) Deemed exports Intermediate supplies
Contd.

 Minimum 15% VA (value addition). Duty free import of mandatory spares up to 10% of CIF value of Authorization which are required to be exported / supplied with resultant product are allowed under Advance Authorization.

Duty Free Import Authorisation (DFIA)

This scheme is in force from 1st May, 2006. It is issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required for production of export product. It was introduced to facilitate transfer of the authorisation or the inputs imported, once export is completed. Based on SION A minimum 20% value addition shall be required for issuance of such authorisation, except for items in gems & jewellery sector.

Duty Entitlement Passbook Scheme (DEPB)

Most popular scheme.

The objective is to neutralise the incidence of basic & special

customs duty on import content of export product.

Post export freely transferable Duty Credit Scrips issued at notified percentage of FOB value of Exports. Duty Credit Scrips used for payment of customs duty on imports.
Contd.

 DEPB rates notified for 2137 items.

The DEPB shall be valid for a period of 24 months from the date of its issuance. DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in SION.

Gems & Jewellery Scheme

Duty Free Procurement of precious metal (Gold / Silver / Platinum) from the nominated agencies either in advance or as replenishment. Duty Drawback scheme notified.

Duty Free Import of Consumables for export production up to a specified percentage of FOB value of previous years export.

Promotional Measures/ Incentive Schemes

Vishesh Krishi and Gram Udyog Yojana (VKGUY) Focus Market Scheme (FMS) Focus Product Scheme (FPS) Market Linked Focus Product Scheme (MLFPS) Served From India Scheme (SFIS)

Vishesh Krishi & Gram Udyog Yojana (VKGUY)

To promote exports of Agricultural Produce & their value added products Minor Forest Produce & their value added variants Gram Udyog Products Forest Based Products Other Products, as notified from time to time.
VKGUY benefits are granted with an aim to compensate high

transport costs.

Contd.

 Duty Credit Scrip equivalent to 5 % of FOB value of exports. 6 New products (Castor Oil Meal Defatted Variety and Instant Coffee) incentivised under VKGUY eligible for benefits @ 5% of FOB value of exports to all market. However, some flowers, fruits, vegetables & other products, shall be entitled to an additional duty credit scrip equivalent to 2 % of FOB value of exports.

Contd.

 The following capital goods/equipments shall be permitted for import: Cold storage units, Precooling Units and Mother Storage Units for Onions, etc. Pack Houses (including facilities for handling, grading, sorting and packaging etc.). Reefer Van / Containers.

Contd.

 It shall be granted at a reduced rate of 3 % of FOB value of exports in such cases where exporter has also availed benefits of: Drawback at rates higher than 1% Specific DEPB rate Advance Authorization or Duty Free Import Authorization Import of inputs for the exported product for which Duty Credit Scrip under VKGUY is being claimed.

Focus Market Scheme (FMS)

ObjectiveOffset high freight cost and other externalities to select international markets with a view to diversify the markets and to enhance Indias export competitiveness in these countries 26 new markets added including 16 new markets in Latin America and 10 in Asia-Oceania. Currently 109 markets have been notified. FMS has been raised from 2.5% to 3% of FOB value of exports for each licensing year.
Contd.

 The following categories of export products / sectors shall be Supplies made to SEZ units Service & Deemed Exports Diamonds and other precious, semi precious stones Gold, silver, platinum and other precious metals in any form Ores and Concentrates, of all types and in all forms Cereals and sugar, of all types Crude / Petroleum Oil & Crude / Petroleum based Products covered under ITC HS codes 2 709 to 2 715, of all types and in all forms Export of Milk and Milk Products covered under ITC HS Codes 0401 to 0406, 1 9011 001, 1 9011 010, 2105 & 3501.

ineligible FMS scheme:

Focus Product Scheme (FPS)

Objective: Focus Product Scheme is to incentivise export of such products which have high employment intensity in rural & semi urban are so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products FPS has been raised from 1.25% to 2% of FOB value of exports.
Contd.

 Currently over 1000 Products covered under FPS.

New products added to FPS: Engineering products (machines, musical instruments, clocks & watches, railway locomotives etc.) Plastic Jute & Sisal products Technical Textiles Green Technology products (wind mills, wind turbines, electric operated vehicles etc.) Project goods vegetable & Electronic items

Market Linked Focus Product Scheme (MLFPS)

To promote exports of products of high export intensity but which have a low penetration in countries. Export of Products/Sectors of high export intensity / employment potential (which are not covered under present FPS List) would be incentivized at 2 % of FOB value of exports. 1837 new products added which are exported to specified markets under MLFPS.

Contd.

Major sectors include: Machine Tools, Earth moving equipments Transmission towers, Electrical & Power Equipments Steel Tubes, pipes and galvanized sheets, Compressors, Iron & Steel Structures, Auto components Three wheelers and cotton woven fabrics. Two new major markets, Japan and China added in addition to the existing 13 markets, viz., Algeria, Egypt, Kenya, Nigeria, South Africa, Australia, Brazil, Mexico, Tanzania, Ukraine, New Zealand, Cambodia and Vietnam.

Served From India Scheme (SFIS)

Objective: Accelerate growth in export of services so as to create a powerful and unique Served From India brand, instantly recognized & respected world over. All Service Providers shall be entitled to Duty Credit Scrip equivalent to 10% of free foreign exchange earned during current financial year.

Contd.

 Duty Credit scrip may be used for import of any capital goods including spares, office & professional equipment, office furniture & consumables; that are otherwise freely importable or restricted under ITC (HS). Imports shall relate to any service sector business of applicant. In case of hotels, clubs having residential facility of minimum 30 rooms, golf resorts & stand-alone restaurants having catering facilities, Duty Credit scrip may also be used for import of consumables including food items & alcoholic beverages.

Schemes For Technological Upgradation

Export Promotion Capital goods Scheme (EPCG) Status Holders Incentive Scrip (SHIS)

Export Promotion Capital Goods (EPCG) Scheme

It permits import of capital goods for pre production, production and post production at 5% customs duty. It came into force in 1999. EPCG Scheme at Zero Duty has been introduced for engineering & electronic products basic chemicals & pharmaceuticals apparels & textiles, plastics, handicrafts chemicals & allied products leather & agricultural products

Contd.

 Export obligation: Subject to export obligation of 8 times duty saved over 8 years (5% duty scheme) and 6 times duty saved over 6 years (zero duty scheme) reckoned from Authorization issue date; Exceptions for Small scale, tiny industries, agriculture sector. The zero duty EPCG scheme will be in operation till 31.3.2011 . Second hand capital goods, without any restriction on age, may also be imported under EPCG scheme.
Contd.

 Import of motor cars, sports utility or all purpose vehicles shall be allowed only to hotels, travel agents, tour operators & companies owning/operating golf resorts, subject to the condition that: Total foreign exchange earning from hotel, travel & tourism & golf tourism sectors in current and preceding 3 licensing years is Rs. 1.5 crores or more. Duty Saved amount on all EPCG Authorizations issued in a licensing shall not exceed 50% of average foreign exchange earnings. Vehicles imported shall be so registered that the vehicle is used for tourist purpose only. However, parts of motor cars, sports utility or all purpose vehicles cannot be imported under the EPCG Scheme.

Status Holders Incentive Scrip

Objective: To promote investment for upgradation of technology of specified sectors, Status Holders shall be entitled to incentive scrip @1% of FOB value of exports. This duty credit scrip can be used for import of capital goods by these status holders. Status Holders availing Technology Upgradation Fund Scheme (TUFS) benefits (under Ministry of Textiles) during a particular year shall not be eligible for Status Holders Incentive Scrip for exports of that year.
Contd.

 The Status Holders of the following sectors shall be eligible for this scheme: Leather Sector (excluding finished leather) Textiles & Jute Sector Handicrafts Engineering Sector (excluding Iron & Steel, Nonferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships, Boats and Floating Structures) Plastics Basic Chemicals (excluding Pharma Products)

Contd.

Criteria For Recognition Of Status

Status Category
Export House (EH) Start Export House (SEH) Trading House (TH)

Export Performance FOB/FOR value (Rs in crore)

20 100 500

Star Trading House (STH)

Premier Trading House (PTH)

2500
7500

Special Focus Initiative

These initiatives are started with view to doubling percentage share of global trade within 5 years & expanding employment opportunities, especially in semi-urban & rural areas. Sectores included under this are: Agriculture Handlooms Handicraft Gems and jewellery Leather Marine

Agriculture & Village Industry

Vishesh Krishi and Gram Udyog Yojana

Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ. Import of restricted items, such as panels, are allowed under various export promotion schemes.

Contd.

 Import of inputs such as pesticides are permitted under Advance Authorisation for agro exports. New towns of export excellence with a threshold limit of Rs 150 crore shall be notified. To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

Handlooms
To simplify claims under FPS, requirement of Handloom Mark for availing benefits under FPS has been removed. New towns of export excellence with a threshold limit of Rs 250 crores shall be notified. Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair shall be permitted. Duty free import entitlement of specified trimmings & embellishments shall be 5% of FOB value of exports during the previous year.

Handicrafts
New handicraft SEZs shall be established that would procure products from the cottage sector & do the finishing for exports. The HEPC shall be authorized to import trimmings, embellishments & consumables on behalf of those exporters for whom directly importing may not be viable. New towns of export excellence with a reduced threshold limit of RS 250 crores shall be notified. CVD is exempted on duty free import of trimmings, embellishments & consumables.

Gems & Jewellery

To neutralize duty incidence on gold jewellery exports, Duty Drawback to be allowed. It is planned to establish Diamond Bourse (s) to make India a diamond international trading hub. Duty free re-import for rejected jewellery shall be 2% of the FOB value of export.

Contd.

 The value limits of personal carriage have been increased from US $ 2 million to US $ 5 million in case of participation in overseas exhibitions. A new facility for import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced [Branch of Gemological Institute of America (GIA) at Mumbai has been notified for the purpose].

Leather & Footwear

Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty.
Enhancement of FPS rate to 2%, would also significantly benefit the leather sector. Machinery & equipment for Effluent Treatment Plants shall be exempt from basic customs duty.

Marine Sector
Fisheries have been included in the sectors which are exempted from maintenance of average EO under EPCG Scheme, subject to the condition that fishing trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision.

Marine products are considered for VKGUY scheme.

Contd.

 Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for status holders has been given to Marine sector. Duty free import of specified specialised inputs /chemicals & flavouring oils is allowed to the extent of 1% of FOB value of preceding financial years export.

Pharmaceutical Sector
Pharma sector extensively covered under MLFPS for countries in Africa and Latin America; some countries in Oceania and Far East. Export Obligation Period for advance authorizations issued with 6-APA as input increased from the existing 6 months to 36 months.

Tea
Minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%. DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%. Export of tea has been covered under VKGUY Scheme benefits.

Toys & Sports Goods

Additional 2% bonus benefits over & above the existing benefits under FPS will significantly benefit the toys and sports goods sector. Benefits under Zero duty EPCG and SHIS schemes will significantly promote technological upgradation of toys and sports goods sectors.

Support For Green Products & Products From North East

Focus Product Scheme benefit extended for export of green products and for exports of some products originating from the North East.

Thrust To Value Added Manufacturing

To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme has now been prescribed. Coverage of project exports & a large number of manufactured goods under FPS and MLFPS.

Export Oriented Units(EOUS)

EOUs are permitted for manufacture of goods including repair, remaking, reconditioning & re-engineering. Trading activity is not permitted. EOUs have been allowed to sell products manufactured by them in DTA (Domestic Tariff Area ) upto a limit of 90% instead of existing 75%. EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

Contd.

 To provide clarity to the customs field formations, DOR shall issue a clarification to enable procurement of spares beyond 5% by granite sector EOUs. EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale. During the period of downturn, Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs.

EOUS, EHTPS, STPS, BTPS

An EOU / EHTP / STP / BTP unit may export all kinds of goods and services except items that are prohibited in ITC (HS). In addition, EOU / EHTP / STP / BTP units shall be entitled to following: Reimbursement of Central Sales Tax on goods manufactured in India. Simple interest @ 6% per annum will be payable on delay in refund of CST, if the case is not settled within 30 days of receipt of complete application.
Contd.

 Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India.

Exemption from Income Tax as per Section 1 0A and 10B of Income Tax Act. Exemption from industrial licensing for manufacture of items reserved for SSI sector.
Units will be allowed to retain 100% of its export earning in the EEFC account. Set up showrooms / retail outlets at International Airports.

Deemed Exports
Deemed exports shall be eligible for any / all of following benefits: Advance Authorisation / Advance Authorisation for annual requirement / DFIA. Deemed Export Drawback. Exemption from terminal excise duty where supplies are made against ICB. In other cases, refund of terminal excise duty will be given.

Flexibility Provided To Exporters

Payment of customs duty for EO shortfall allowed through debit of Duty Credit scrips. Earlier the payment was allowed in cash only. Import of restricted items, as replenishment, shall now be allowed against transferred DFIAs.

Time limit of 60 days for re-import of exported gems & jewellery items, for participation in exhibitions extended to 90 days in case of USA.
Transit loss claims received from private approved insurance companies in India allowed for the purpose of EO fulfillment, as against only public sector general insurance companies earlier.

Directorate Of Trade Remedy Measures

To enable support to Indian industry and exporters, in availing their rights through trade remedy instruments, a Directorate of Trade Remedy Measures shall be set up.

Waiver Of Incentives Recovery, On RBI Specific Write off

RBI specifically writes off the export proceeds realization, the incentives under the FTP shall now not be recovered from the exporters subject to certification by the Indian missions abroad and the RBI.

Simplification Of Procedures
To facilitate duty free import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. To allow exemption for up to two stages from payment of excise duty in lieu of refund. Customs shall permit the conversion of Shipping Bills from one Export Promotion scheme to other scheme within 3 months, instead of the present limited period of only 1 month. To reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorization scheme for deemed supplies.

Contd.

 Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty, even before fulfillment of export obligation under Advance Authorization and EPCG Scheme. Regional Authorities have now been authorized to issue licenses for import of sports weapons by renowned shooters, on the basis of NOC from the Ministry of Sports & Youth Affairs. The procedure for issue of Free Sale Certificate has been simplified & the validity of the Certificate has been increased from 1 year to 2 years. Automobile industry, having their own R&D establishment, would be allowed free import of reference fuels (petrol and diesel), upto a maximum of 5 KL per annum

Reduction Of Transaction Costs

For all other Authorizations/ license applications, maximum applicable fee is being reduced to Rs. 100,000 from the existing Rs. 1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs. 75,000 (for EDI applications).

To further EDI initiatives, Export Promotion Councils/ Commodity Boards have been advised to issue RCMC through a web based online system.

Contd.

 An Inter Ministerial Committee will be formed to redress/ resolve problems/issues of exporters. For EDI ports, with effect from December 09, double verification of shipping bills by customs for any of the DGFT schemes shall be dispensed with. An updated compilation of Standard Input Output Norms (SION) and ITC (HS) Classification of Export and Import Items has been published.

Electronic Data Interchange (EDI) Initiatives

One of the first Government Departments to enable online processing of applications. DGFT website updated on daily basis. All DGFT Offices are computerised and networked to the DGFT NIC Server. Applications for Export / Import are made online with digital signature and Electronic Fund Transfer Facility.

CERTIFICATES/AUTHORISATIONS ISSUED BY REGIONAL OFFICES OF DGFT IEC Number Authorisations under Duty Neutralization Schemes & Export Promotion Schemes (Incentive Schemes) Import licences for Restricted Items Export Licences including SCOMET licences Status Certificates Preferential (GSP) & Non-preferential certificates of origin Tariff rate quota allocation Authorisations for Imports at concessional duty for R& D purpose for Pharmaceuticals and Bio-technology Sectors Authorisation for Duty Free import of consumables by Gems & Jewellery Sector Terminal Excise Duty (TED) refund and Duty Drawback on deemed exports

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