Foreign Trade Policy

NATIONAL
FOREIGN TRADE
POLICY

WHY EXPORTS?
NATIONAL LEVEL
Develope foreign Exchange reserves & Improve
balance of Payment.
Better use of National/Natural Resources.
Technological Development.
Globalisation.
Reduction of Unemployment.

WHY EXPORTS?
COMPANY LEVEL
Use of Surplus Capacity.
Slack season Capacity Utilisation.
Economies of Scale-World is our Market
Globalisation.
Benifities.(Export Incentives).
International Exposure.

EXPORTS ( $ billion)
2009-2010- 182.
2010-2011- 250
2011-2012- 303
2012-2013- 300.60 (360).
2013-2014-325 (Revised from $500).
AGENCIES INVOLVED IN
EXPORT SHIPMENTS.
CUSTOMS. (MINISTRY OF FINANCE)
DGFT (MINISTRY OF COMMERCE).
PORTS. (MINISTRY OF SURFACE TRANSPORT).
CENTRAL EXCISE (MINISTRY OF FINANCE).
RESERVE BANK OF INDIA.
AUTHORISED DEALERS.
COMMERCIAL BANKS.

EXPORT SHIPMENTS.
EXPORT PROMOTION COUNCIL.
CHAMBERS OF COMMERCE.
SALES TAX DEPARTMENT.
INCOME TAX DEPARTMENT
LOCAL AUTHORITIES (OCTROI/ TOT).
CUSTOM HOUSE AGENTS.
SHIPPING COS/AIRWAYS/ROAD TRANSPORT
FREIGHT FORWARDERS.
NVOCCS
EXPORT INSPECTION AGENCY.

EXPORT SHIPMENTS.
PRIVATE INSPECTION AGENCIES.
TRANSPORTERS.
LOGISTICS CO.
ECGC.

MODUS OPERANDI OF SHIPMENTS.

PRESHIPMENT STAGE.

SHIPMENT STAGE.
POSTSHIPMENT STAGE.
PRESHIPMENT STAGE.
RECEIPT OF AN ENQUIRY.
QUOTATION TO CUSTOMER.
RECEIPT OF PURCHASE ORDER.
PROFORMA INVOICE TO CUSTOMER.
RECEIPT OF L/C.
ARRANGEMENT OF PRESHIPMENT
FINANCE.
DESPATCH FROM PLANT.

SHIPMENT STAGE.
PHYSICAL MOVEMNENT OF GOODS.
Dock Stuffing.
Factory Stuffing.
ICD- Dock Stuffing/Factory Stuffing.
PERMISSION FROM CUSTOMS.
PHYSICAL EXAMINATION.
OUT OF CHARGE.
LOADING OF CARGO ON VESSEL.
ADVANTAGES OF DOCK
STUFFING.

CHOICE OF SHIIPING CO.
IMMEDIATE DESPATCH OF
CONSIGNMENT ON TRUCKS/TRAILERS.
DETENTION OF CONT. AVOIDED.
SHORT SHIPMENT POSSIBLE.
SUITABLE FOR LCL CARGO.
DISADVANTAGES OF DOCK
STUFFING.
TIME CONSUMIG-.
MISHANDLING OF CONSIGNMENT.
IMPROPER STUFFING.
DEPENDENT ON CFS.
NON SUITABILITY FOR FRAGILLE
CARGO.
INCREASE IN LOGISTICS COST.

ADVANTAGES OF FACTORY
STUFFING.
TIME SAVING.
PROPER INHOUSE STUFFING AS PER
CUSTOMERS REQUIREMENT.
COST ADVANTAGE.
MINIMUM FORMALITIES AT GATEWAY
PORT.
UNLOADING OF CONT. WITHOUT
PASSING OF DOCUMENTS.
DISADVANTAGES OF FACTORY
STUFFING.
DETENTION OF CONT.IF
CONSIGNMENT DELAYED AT PLANT.
SHORT SHIPMENT NOT POSSIBLE.
DELAY IN DESPATCH DUE TO NON
ARRIVAL OF CONT. AT FACTORY.
WAITING PERIOD AT PORT IN CASE OF
MISSING OF VESSEL.

ADVANTAGES OF ICD.
QUICK PASSING OF DOCS.
MINIMUM FORMALITIES AT GATEWAY PORT.
BACKLOADING AT FACTORY POSSIBLE.
ARRIVAL OF CONT. AT BECK-N-CALL.
RAIL TRANSPORTATION IS CHEAPER THAN ROAD
TRANSPORTATION.
CARRYING CAPACITY IS MORE IN RAIL
TRANSPORTATION COMPARED TO ROAD
TRANSPORTATION.
CONGESTION AT PORT AVOIDED LEADING TO
SAVING IN LOGISTICS COST.

DISADVANTAGES OF ICD.
LIMITED CHOICE OF SHIPPING COS.
DELAY DUE TO TRANSPORT (RAIL/ROAD)
PROBLEM.
FULL CONTAINER LOAD TRAIN.
TRACKING OF CONT. DIFFICULT.
HOLDING OF CONTAINER DIFFICULT.

POSTSHIPMENT STAGE.

INFORM CUSTOMER SHIPMENT DETAILS.

ARRANGE FOR NEGOTIATION OF
DOCUMENTS.

COMPLETE PROOF OF EXPORT ACTIVITY.

CLAIM INCENTIVES FROM GOVT.

INCOTERMS
The Inco terms rules or International Commercial
Terms are a series of pre-defined commercial terms
published by the International Chamber of Commerce
(ICC) that are widely used in International commercial
transactions or procurement processes. A series of
three-letter trade terms related to common contractual
sales practices, the Inco terms rules are intended
primarily to clearly communicate the tasks, costs, and
risks associated with the transportation and delivery of
goods.

18
INCOTERMS
The Inco terms rules are accepted by
governments, legal authorities, and practitioners
worldwide for the interpretation of most
commonly used terms in international trade.
They are intended to reduce or remove
altogether uncertainties arising from different
interpretation of the rules in different countries.
As such they are regularly incorporated into
sales contracts worldwide.

19
INCOTERMS
First published in 1936, the Inco terms rules
have been periodically updated, with the eighth
versionInco terms 2010having been
published on January 1, 2011. "Inco terms" is a
registered trademark of the ICC.

20
INCOTERMS2000
Group E: EXW Ex works (. Named Place of Seller).

Group F: FCA Free Carrier (Named Place).
FAS Free alongside ship ( Named port of Shipment).
FOB Free on Board (. Named port of Shipment.).

Group C: CFR Cost & freight (. Named port of Destination).
CIF Cost, insurance & freight (. Named port of
Destination).
CPT Carriage paid to (. Named place of Destination).
CIP Carriage & Insurance Paid to (. Named place of
Destination).

Group D DAF Delivered at Frontier ( named place of Buyer)
DES Delivered EX Ship (. Named port of Destination)
DEQ Delivered Ex Quay (Duty paid) (. Named port of
Destination)
DDU Delivered Duty Unpaid (. Named place of Destination)
DDP Delivered Duty paid (. Named place of Destination)
INCOTERMS2010
Group E: EXW Ex works (. Named Place of Seller).

Group F: FCA Free Carrier (Named Place).
FAS Free alongside ship ( Named port of Shipment).
FOB Free on Board (. Named port of Shipment).

Group C: CFR Cost & freight (. Named port of Destination).
CIF Cost, insurance & freight (. Named port of
Destination).
CPT Carriage paid to (. Named place of Destination).
CIP Carriage & Insurance Paid to (. Named place of
Destination).
Group D DAT Delivered at Terminal (named terminal at port or
place of Destination)
DAP Delivered at Place (. Named place of Destination)
DDP Delivered Duty paid (. Named place ).
CHOOSING AN APPROPRATE
INCOTERMS.
SMALL EXPORTER EXPORTING TO BIG
CUSTOMER SHOULD OPT FOR EXW.
BIG EXPORTER EXPORTING TO SMALL
CUSTOMER SHOULD OPT FOR DDP.
EXPORTER HAVING GLOBAL TIE UP WITH
SHIPPING CO SHOULD OPT FOR FOB.
SPLIT THE TERMS IN CASE OF DDU & DDP
SHIPMENT.
COMPARE LOGISTICS COST WITH 3 PL &
SELECT AN INCOTERM.
FOREIGN TRADE POLICY
Exim Policy or Foreign Trade Policy is a set of
guidelines & instructions established by the DGFT in
matters related to Imports & Exports of goods in India.
The Foreign Trade policy is guided by the Foreign
Trade Development & Regulation Act , 1992.
In order to liberalize Imports & boost Exports the
Government of India has for the first time introduced
the Indian Exim Policy on April 1, 1992.

FOREIGN TRADE POLICY
1992-1997.
1997-2002.
2002-2004.
2004-2009
2009-2014
FOREIGN TRADE POLICY-2009-14
(KEY OBJECTIVES)
TO ARREST THE DECLINING EXPORT & REVERSE
TREND.
TO PROVIDE ADDITIONAL SUPPORT TO
EMLOYMENT INTENSIVE SECTORS.
TO REACH OUT TO NON TRADITIONAL
DESTINATIONS IN AFRICA, LATIN AMERICA & ASIA.
TO ENCOURAGE TECHNOLOGICAL UPGRADATION
OF EXPORT.
TO SIMPLIFY PROCEDURE FOR REDUCING
TRANSACTION COST.
Promotional Measures in
Department of Commerce. (CH-3)
ASSISTANCE TO STATE FOR INFRASRUCTURE
DEVELOPMENT OF EXPORT. (ASIDE).

MARKET ACCESS INITIATIVE. (MAI).

MARKETING DEVELOMENT ASSISTANCE (MDA).

MEETING EXPENSES FOR STATUTORY COMPLIANCES IN
BUYER COUNTRY FOR TRADE RELATED MATTER.

TOWNS OF EXPORT EXCELLANCE. (TFE).

BRAND PROMOTION & QUALITY.

TEST HOUSES.

EXPORT & TRADING HOUSE.
ELIGIBILITY

MERCHANT AS WELL AS MANUFACTURE EXPORTERS,

SERVICE EXPORTERS,SERVICE PROVIDERS, EOU& UNIT

LOCATED IN SPECIAL ECONOMIC ZONE (SEZ), AGRI

EXPORT ZONE, ELECTRONIC HARDWARE TECHNOLOGY PARK

(EHTPS),SOFTWARE TECHNOLOGY PARK (STPS), AND BIO

TECHNOLOGY PARKKS (BTPS), SHALL BE ELIGIBLE FOR

STATUS.

STATUS CATEGORY
APPLICANT SHALL BE
CATEGORISED DEPENDING ON
HIS TOTAL (FOB), (FOR),(DEEMED
EXPORTS) PERFORMANCE DURING
CURRENT PLUS PREVIOUS THREE
YEARS (TAKEN TOGETGER)
UPON EXCEEDING LIMIT BELOW.
FOR (EH) EXPORT PERFORMNCCE
IS NECESSARY IN AT LEAST TWO
OF FOUR YEARS (I.E CURRENT
YEAR PLUS PREVIOUS YEAR).

STATUS
CATEGORY
EXPORT
PERFORMANCE
FOB/FOR VALUE
(RS. IN CRORES )
EXPORT HOUSE
(EH)
20
STAR EXORT
HOUSE (SEH )
100

TRADING
HOUSE (TH)
500
STAR TRADING
HOUSE ( STH)
2500
PREMIER
TRADING
HOUSE (PTH).
7500
PREVILAGES OF EXPORT & TRADING HOUSE
HOLDERS.
AUTHORISATION OF CUSTOM CLEARANCE FOR BOTH IMPORT &
EXPORTS ON SELF DECLARATIN BASIS.
FIXATION OF INPUT OUT NORMS ON PRIORITY BASIS WITHIN 60 DAYS.
EXEMPTION FROM COMPULSORY NEGOTIATION OF DOCUMENTS.
100 % RETENTION OF FOREIGN EXCHANGE IF EEFC ACCOUNT.
EXEMPTION FROM FURNISHING OF BG IN SCHEMES UNDER FTP.
SEHS & ABOVE SHALL BE PERMITTED TO ESTABLISH WAREHOUSE.
STATUS HOLDERS OF SPECIFIC SECTORS SALL BE ELIGIBLE FOR
STATUS HOLDER INCENTIVE SCRIP.
STATUS HOLDERS OF AGRI SECTOR SHALL BE ELIGIBLE FOR AGRI
INFRASTRUCTURE INCENTIVE SCRIP. UNDER VKGUY.
SERVICE EXPORT.
SERVICES INCLUSE ALL 116 TRADABLE SERVICES COVERED
UNDER GENERALAGREEMENT ON TRADE IN SERVICES
(GATS) WHERE PAYMENT OF SUCH SERVICES IS RECEIVED IN
FREE FOREIGN EXCHANGE.
REGISTRATION CUM MEMBERSHIP CERTIFICATE (RCMC):
SOFTWARE EXPORTERS SHALL REGISTER THEMSELVES WITH
ELECTRONICS & SOFTWARE EPC. EXPORTERS OF 15 SPECIFIC
SERVICES REGISTER WITH SERVICES EPC. PTHER SERVICES
SHALL REGISTER WITH FIEO.
COMMON FACILITY CENTRES:
GOVERNMET SHALL PROMOTE ESTABLISHMENT OF CFC FOR USE
BY HOME-BASED SERVICE PROVIDERS IN DISTRICT LEVEL
TOWNS.

REWARDS/INCENTIVES SHEMES IN DGFT.
SERVED FROM INDIA SCHEME.(SFIS)-10 %.
VISHESH KRISHI GRAM UDYOG YOJANA
(VKGUY)- 5%.
AGRI INFRASTRUCTIRE INCENTIVE SCRIPS-
10%.
FOCUS MARKET SCHEME- 3%.
FOCUS PRODUCT SCHEME- 2%.
MARKET LINKED FOCUS PRODUCT SCRIPS.-
2%
STATUS HOLDERS INCENTIVE SCRIPS- 1%.

SERVED FROM INDIA
SCHEME.(SFIS).
Objective- To accelerate Growth in Export of
Services.
Eligibility.
Entitlement.- 10 %
Imports Allowed.
Non Transferability.
Procurement from Domestic Sources.
VISHESH KRISHI GRAM UDYOG
YOJANA (VKGUY).
Objective: Duty Credit Scrip benefits are
granted with an Aim to Compensate high
transport Costs, and to offset other
Disadvantages.
Entitlement- 5%. of FOB Value of Exports.
Agri Infrastructure Incentive Scrip- 10%. On
FOB .
Actual User Condition.

AGRI INFRASTRUCTIRE
INCENTIVE SCRIPS-

Status Holders ( having Status recognition for
the current year ) shall be granted Duty Credit
Scrip of 10 % of FOB value of Agricultural
Exports ( including VKGUY) subject to total
benifite does not exceed Rs. 100 Crores.
The following Capital Goods/Equipments
permitted to import.
Cold Storage units, Pack houses , reefer
Van/Containers subject to Actual User
Condition.
FOCUS MARKET SCHEME.
Objective is to offset high cost & other
externalities to select international markets with
a view to enhance Indias Export
competitiveness in these countries.
Entitlement- 3%. of FOB Value of Exports

FOCUS PRODUCT SCHEME.
Objective is to incentivise export of such
products which have high export intensity
/employment potential, so as to offset
infrastructure inefficiencies & other associated
costs involved in marketing of these products.
Entitlement- 2%. of FOB Value of Exports

STATUS HOLDERS INCENTIVE
SCRIPS.

Objective is to promote investment in up
gradation of technology of some specified
sectors.
Entitlement- 1%. of FOB Value of Exports.
Actual User Condition.
Sectors-Leather, Textiles. Handicrafts, Engg.
Sectors-Plastics, Basic Chemicals.

STATUS HOLDERS INCENTIVE
SCRIPS.

Counting of Commision-3% on FOB.
Free Transferability.

DUTY EXEMPTION SCHEME.-CH-4
DUTY EXEMPTION SCHEMES ENABLE DUTY
FREE IMPORT OF INPUTS REQUIRED FOR
EXPORT PRODUCTION.

DUTY EXEMPTION SCHEME CONSIST OF :

ADVANCE AUTHORISATION SCHEME.(AA).

DUTY FREE IMPORT AUTHORISATION.(DFIA).

DUTY REMISSION SCHEME.-CH-4
DUTY REMISSION SCHEME ENABLES POST EXPORT
REPLENISHMENT/REMISSION OF DUTY ON INPUTS
USED IN EXPORT PRODUCT.

DUTY REMISSION SCHEME CONSIST OF :

DUTY ENTITLEMENT PASSBOOK SCHEME(DEPB).
(Discontinued from 30.09.12).

DUTY DRAWBACK.

ADVANCE AUTHORISATION
SCHEME.(AAI)

An Advance Authorization is issued to allow duty free import of
inputs, which are physically incorporated in export product .
Duty free import of mandatory spares up to 10% of CIF value of
Authorization which are required to be exported/supplied with
resultant product.
Advance Authorization can be issued to either Manufacturer
Exporter or Merchant Exporter tied to Supporting
Manufacturers.
Advance Authorization are exempted from payment of basic
Customs duty, additional Customs duty, education cess,
antidumping duty & safeguard duty.

SCHEME.(AAI).

Actual user Condition.
AAI issued for Physical Export, Intermediate Supplies.
Minimum value addition of 15 %.
In case of Authorization for Import of Tea minimum
Value Addition shall be 50%.
Free of Cost Supply by Foreign Buyer.
Export Obligation to be completed within 18 months.
Extension of EO up to 6 months.
Provision for BIFR Units.- EOP- 5 Years.

SCHEME.(AAI).

Advance Authorization for Annual requirement-
up to 300% of the FOB value of Physical
Export and/or FOR value of Deemed Export in
preceding licensing year or Rs. 1 Crore,
whichever is higher.
Advance Release Order & Invalidation letter.
Authorization holder shall submit requisite
evidence of EO within Two months from the
date of Expiry.

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SCHEME.(AAI).
No export or Import of an item shall be allowed under
AAI/DFIA if the items is prohibited for Exports or
Imports.
Items reserved for import by STEs can not be
imported against AAI/DFIA however those items can
be procured from STEs against ARO or invalidation
letter.
Items reserved for Export by STEs can be Exported
under AAI/DFIA only after obtaining NOC from the
concerned STEs.

45
DUTY FREE IMPORT
AUTHORISATION SCHEME.(DFIA).

DFIA is issued to allow duty free import of inputs, fuel ,oil
,energy sources which are required for production of export
product .
DFIA shall be issued only for products for which SION have
been notified.
Minimum Value addition of 20%.
Pre-Export Authorization shall be issued with Actual user
condition & shall be exempted from payment of basic Customs
duty/excise duty, additional Customs duty, education cess,
antidumping duty & safeguard duty.
In case of post-Export DFIA, a merchant exporter shall be
required to mention only names & addresses of manufacturers of
the Export product.

DUTY FREE IMPORT
AUTHORISATION SCHEME.(DFIA).

Minimum value addition of 20 %.
Export Obligation to be completed within 18
months.
Re-export of goods imported under DFIA
scheme.`
Transferability of the DFIA.

DUTY ENTITLEMENT PASS
BOOK SCHEME.
Objective of DEPB is to neutralize incidence of
customs duty on import content of export
product. Duty credit under the scheme shall be
calculated by taking in to account deemed
import content of said export product as per
SION. Value addition achieved by export of
such product shall also be taken in to account
while determining the rate of duty credit under
the scheme.
BOOK SCHEME.
Fixation of DEPB rate.
Provisional DEPB rate.
Port of Registration.
Credit under DEPB & Present Market Value.
Application of DEPB.
Monitoring of Realisation.
Time period.``
BOOK SCHEME.
Frequency of Application.
Verification by customs.
Issuence of DEPB & other duty credit
certificates against lost EP copy of the Shipping
Bill.
DUTY DRAWBACK
The Duty Drawback seeks to rebate duty or tax
chargeable on any imported/excisable materials &
input services used in the manufacture of export
goods. The Duties & tax neutralized under the
Scheme are :-
Customs & Union Excise Duties in respect of
inputs.
Service Tax in respect of inputs.

51
DUTY DRAWBACK
DUTY DRAWBACK SCHEME COVERS ABOUT4000
ITEMS.
ALL INDUSTRY RATE.
DBK AMOUNT OR RATE SHOULD NOT EXCEED 1/3 rd
OF THE MARKET PRICE OF PRODUCT.
BRAND RATE WHICH IS VALID FOR ONE YEAR.
NO DRAWBACK IS ADMISSIBLE IF MARKET PRICE OF
THE GOODS IS LESS THAN THE AMOUNT OF
DRAWBACK.
AIR SHIPMENTS DBK SANCTIONED WITHOUT
DEDUCTING FREIGHT. FROM FOB CONTRACTED
FOB VALUE.
DUTY DRAWBACK
DBK AMOUNT DUE IS CREDITED IN OT EXPORTERS ACCOUNT
IN ANY BANK/BRANCH AFTER LEO & EGM FILED BY CARRIER.
DBK AMOUNT IS RECOVERABLE IF SALES PROCEEDS NOT
REALISED WITHIN THE TIME PERMITED BY RBI.
DOCUMENTS REQUIRED ALONGWITH DRAWBACK COPY OF
SHIPPING BILL.
(a) Copy of export contract or L/C.
(b) Copy of Packing List.
ARE-1/2
(d) Insurance Certificate wherever necessary.
(e) Copy of Brand Rate Sanction.

EXPORT PROMOTION CAPITAL GOODS
SCHEME[EPCG] [ 0 % ].-CH-5
ZERO DUTY EPCG SCHEME ALLOWS IMPORT OF CAPITAL GOODS

FOR PEEPRODUCTION, PRODUCTION & POST PRODUCTION

(INCLUDING CKD/SKD THEREOF AS WELL AS COMPUTER

SOFTWARE SYSTEM) AT 0% CUSTOMS DUTY SUBJECT TO

AN EXPORT OBLIGATION EQUIVALENT TO 6 TIMES OF DUTY

SAVED ON CAPITAL GOODS IMPORTED UNDER EPCG SCHEME ,
TO

BE COMPLETED IN 6 YEARS. THE ZERO DUTY EPCG SCHEME

SHALL BE IN OPERATION TILL 31.03.13.

SCHEME[EPCG] [ 3 % ].
EPCG SCHEME ALLOWS IMPORT OF CAPITAL GOODS

FOR PEEPRODUCTION, PRODUCTION & POST PRODUCTION

(INCLUDING CKD/SKD THEREOF AS WELL AS COMPUTER

SOFTWARE SYSTEM) AT 3 % CUSTOMS DUTY SUBJECT TO

AN EXPORT OBLIGATION EQUIVALENT TO 8 TIMES OF DUTY

SAVED ON CAPITAL GOODS IMPORTED UNDER EPCG SCHEME ,
TO

BE COMPLETED IN 8 YEARS.

SCHEME[EPCG].

AGRO UNITS, AND UNITS IN COTTAGE & TINY
SECTOR. (6 times duty saved & Eop is 12 years).

SSI UNITS CIF VALUE SHOULD NOT EXCEED Rs.50lakhs
& TOTAL INVESTMENT IN PLANT & MACHINERY
AFTER SUCH IMPORT SHOULD NOT EXCEED SSI
LIMITS. (6 times duty saved & Eop is 8 years).

IN CASE DUTY SAVED AMOUNT OF RS. 100 CRORES
OR MORE , (Eop is 12 years).

SECOND HAND CAPITAL GOODS, WITHOUT ANY
RESTRICTION CAN BE IMPORTED UNDER EPCG.

SCHEME[EPCG].
IMPORT OF MOTOR CARS,SUV/ALL PURPOSE
VEHICLES SHALL ONLY BE ALLOWED TO HOTELS,
TRAVEL AGENTS, TOUR OPERATOR OR TOUR
TRANSPORT OPERATORS & COMPANIES OWNING/
OPERATING GOLF RESORTS..
EPCG FOR PROJECTS.
EPCG FOR RETAIL SECTOR. ( Minimum Area of 1000 sq
meters) ( EO 8 TIMES IN 8 YEARS).
EPCG FOR ANNUAL REQUIREMENT.
ELIGIBILITY. ( Common Service Providers).
ACTUAL USER CONDITION.
SCHEME[EPCG].
EXPORT OBLIGATION.

PROVISION FOR BIFR UNITS.( EOP up to 12 Years).

EPCG FOR AGRO UNITS.

INDEGINOUS SOURCING OF CAPITAL GOODS &
BENIFITES TO DOMESTIC SUPPLIER.

TECHNOLOGICAL UPGRATION OF EXISTING EPCG
MACHINERY. ( Minimum period 5 ysars & minimum Export
made must be 40%).).

INCENTIVE FOR FAST TRACK COMPANIES
SCHEME[EPCG].
FOR UNITS LOCATED IN ARUNACHAL
PRADESH, ASSAM, MANIPUR,
MEGHALAYA,MIZORAM, NAGALAND ,
SIKKIM & TRIPURA, SPECIFIC EO SHALL
BE 25 % OF THE EO, AS STIPULATED
HOWEVER THERE SHALL BE NO
CHANGE IN AVERAGE EO AS
STIPULATED.
EPCG DUTY CALCULATION
EPCG DUTY SAVE & PAID
a ASS. VAL. 100000
b BASIC 10% 10 10000
a+b 110000
c CVD 12% 12 13200
d E. CESS 0% 0 0
e H.E.CESS 0% 0 0
b+c 23200
f = (b+c+d+e X2 %) E. CESS 2% 2 464
g = {b+c+d+e X1 %) H.E.CESS 1% 1 232
h = (a+b+c+d+e+f+g X 4 %) SAD 4% 4 4955.84
I = (b+c+d+e+f+g+h) TOTAL DUTY % 28851.84
j = (a X 3.09 %) EPCG DUTY PAID 3.09% 3.09 3090
k = (i-j) DUTY SAVE 25761.84
EPCG BOND AMOUNT
BOND
JNP , MUMBAI &
AIR
Duty save amt *18% *10 year + Duty save amt= Bond Amt
DUTY SAVE 25761.84
X 18 % 4637.13
X 10 YEARS 46371.31
BOND AMT 72133.15 (Pl take Round up Amt i.e. Rs.72140
EOU, EHTPS, STPS & BTPS-
CH-6
UNITS UNDRTAKING TO EXPORT THEIR ENTIRE
PRODUCTION OF GOODS & SERVICES (EXCEPT
PERMISSIBLE SALES IN DTA), MAY BE SET UP UNDER
THE EOU SCHEME, EHTP SCHEME, STP SCHEME OR BTP
SCHEME FOR MANUFACTURE OF GOODS, INCLUDING
REPAIR, REMAKING, RECONDITIONING, RE-
ENGINEERING & RENDERING OF SERVICES.
TRADING UNITS ARE NOT COVERED UNDER THESE
SCHEMES.

EOU, EHTPS, STPS & BTPS
EXPORT & IMPORT OF GOODS.
Export all kinds of goods & services except items that
are prohibited.
Export of Special chemicals, organisms, materials,
Equipment & Technologies (SCOMET) shall be
subject to fulfillment of the Conditions.
Import &/or procure, from DTA or bonded
warehouses in DTA without payment of Duty, all
types of goods, including Capital goods with Actual
user Condition.

SECOND HAND CAPITAL GOODS.
Second hand Capital goods, without any age
limit , may also be imported duty free.
LEASING OF CAPITAL GOODS.
Source capital goods from a domestic / foreign
leasing company without payment customs /
excise duty.
Sell capital goods & lease back the same from a
NBFC.

64
NET FOREIGN EXCHANGE EARNINGS.
Unit shall be a net foreign exchange earner
except for sector specific provision.
NFE earnings shall be calculated cumulatively in
blocks of 5 years, starting from commencement
of production.
BoA may also consider extension of block
period on case to case basis.

65
LETTER OF PERMISSION/LOI & LEGAL
UUNDERTAKINGS.
LOP/LOI shall be issued by DC/designated
officer shall have initial validity of 3 years by
which time unit should have commenced
production.
Its validity may be further extended by 3 years
by competent authority however extension
beyond six year on exceptional circumstances.
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67
NET FOREIGN EXCHANGE EARNINGS.
Unit shall be a net foreign exchange earner except for sector
specific provision.
NFE earnings shall be calculated cumulatively in blocks of 5
years, starting from commencement of production.
BoA may also consider extension of block period on case to case
basis.
LOP/LOI valid for 5 years may be further extended by DC for 5
years at a time.
Unit shall execute an LUT with DC concerned.

INVESTMENT CRITERIA
Only projects having a minimum investment of
Rs. 1 Cr. in plant & machinery shall be
considered for establishment as EOUs.
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APPLICATION & APPROVALS.
Shall be approved or rejected by the units
Approvals Committee within 15 days as per
criteria.

DTA SALE OF FINISHED
PRODUCTS/REJECTS/WASTE/SCRAP/RE
MNANTS & BY-PRODUCTS.
Units, other than gems & jewellery units, may
sell goods up to 50% of FOB value of export,
subject to fulfillment of positive NFE.
Gems & jewellery units may sell up to 10% of
FOB value of exports of the preceding year in
DTA.
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Unless specifically prohibited in LOP, rejects
within an overall limit of 50% may be sold in
DTA on payment of duties as applicable. Sale of
rejects up to 5% of FOB value of exports shall
not be subject to achievement of NFE.
In case of new EOUs , advance DTA sale will
be allowed not exceeding 50% of its exports for
first year, except pharmaceutical units where this
will be based on estimated exports for two years.
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OTHER SUPPLIES .
Supplies effected in DTA to holders of Advance
Authorization/Advance Authorization for
annual requirement / DFIA under duty
exemption/remission scheme/ EPCG scheme.
Supplies effected in DTA against foreign
exchange remittances received from overseas.
Supplies to other EOUs.

72
ENTITLEMENTS FOR SUPPLIES FROM
DTA.
Supplies from DTA to EOU/EHTP/STP/BTO
units will be regarded as Deemed Exports.
Reimbursement of Central Sales Tax (CST) on
goods manufactured in India.
Exemption from payment of Central Excise
Duty on goods procured from DTA on goods
manufactured in India.

73
OTHER ENTITLEMENTS.
Exemption from Income Tax as per Section
10A & 10B of Income Tax Act.
Exemption for industrial licensing for
manufacture of items reserved for SSI sector.
Export proceeds will be realized within 12
months.
Units allowed to retain 100% of its export
earning in EEFC account.
74
INTER UNIT TRANSFER.
Transfer of manufactured goods from one EOU
unit to another EOU unit is allowed with prior
intimation to concerned DC.
Capital goods may be transferred or given on
loan to other unit with prior intimation to
concerned DC.

75
SUB-CONTRACTING.
Sub contract production processes to DTA
through job work which may also involve
change of form or nature of goods, thru job
work by units in DTA.
EOU with annual permission from customs,
undertake job work for Export, on behalf of
DTA exporter provided goods are directly
exported from EOU.

76
SALE OF UN UNTILSED MATERIAL.
Transfer to another EOU/EHTP/STP/BTP.
Disposed off in DTA with Approval.
Exported .Such Transfer from
EOU/EHTP/STP/BTP unit to another such
unit would be treated as import for receiving
unit.
RECONDITIONING/REPAIR & RE-
ENGINEERING.
REPLACEMENT/REPAIR OF
IMPORTED/INDIGENOUS GOODS.
EXIT FROM EOU SCHEME.
Unit proposing to exit out of EOU scheme
shall intimate DC & Central Excise authorities
in writing.

EXIT FROM EOU SCHEME.
With approval of DC, an EOU may opt out of Scheme subject
to payment of Excise & Customs duties & industrial policy in
force.
If unit has not achieved obligations, it shall also be liable to
penalty at the time of exit.
CONVERSION.
Existing DTA units may also apply for Conversion in to an
EOU/EHTP/STP/BTP unit.
Existing EHTP/STP units may also apply for
conversion/merger to EOU unit vice versa.

MONITORING OF NFE.
Performance of units shall be monitored by
Units Approval Committee.
EXPORT THROUGH
EXHIBITIONS/EXPORT PROMOTION
TOURS/SHOWROOMS ABROAD/DUTY
FREE SHOPS.
PERSONAL CARRIAGE OF
IMPORT/EXPORT PARCELS INCLUDING
THRU FOREIGN BOUND PASSENGERS.

APPROVAL OF EHTP/STP.
In case of EHTP/STP schemes , necessary
approvals /permission shall be granted by
officer designated by Ministry of
Communication & Information technology,
instead of DC
APPROVAL OF BTP.
Approval by designated officer of department of
Biotechnology.

DEEMED EXPORT
DEEMED EXPORT REFER TO THOSE
TRANSACTIONS IN WHICH GOODS
SUPPLIED DO NOT LEAVE COUNTRY
AND PAYMENT FOR SUCH SUPPLIES IS
RECEIVED IN INDIAN RUPEES OR IN
FREE FOREIGN
DEEMED EXPORT.-CH-8
CATEGORIES OF SUPPLY.
BENIFITE TO DEEMED EXPORTS.
BENIFITE TO THE SUPPLIERS.
ELIGIBILITY FOR REFUND OF
TERMINAL EXCISE/ DUTY DRAWBACK.
SUPPLIES TO BE MADE BY THE
MAIN/SUB CONTRACTOR.
SPECIAL ECONOMIC ZONE
ASIAS FIRST EPZ WAS SET UP IN KANDLA IN
1965.
SEZ POLICY WAS AMENDED IN APRIL2000.
SEZS IN INDIA FUNCTIONED FROM 01.11.2000
TO 09.02.2006 UNDER THE PROVISION OF
FOREIGN TRADE PLOICY.
SEZ ACT 2005 SUPPORTED BY SEZ RULES
CAME IN TO EFFECT FROM 10.02.2006
PROVIDING FOR DRASTIC SIMPLIFICATION
OF PROCEDURES & FOR SINGLE WINDOW
CLEARANCE.
The main objectives of the SEZ Act are:
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and
foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities;
The SEZ Rules provide for:
Simplified procedures for development, operation, and
maintenance of the Special Economic Zones and for
setting up units and conducting business in SEZs;
Single window clearance for setting up of an SEZ;
Single window clearance for setting up a unit in a
Special Economic Zone;
Single Window clearance on matters relating to Central
as well as State Governments;
Simplified compliance procedures and documentation
with an emphasis on self certification
THE MAJOR INCENTIVES & FACILITIES.
Exemption from customs/excise duties for development of
SEZs for authorized operations approved by the BOA.
Income Tax exemption on income derived from the business of
development of the SEZ in a block of 10 years in 15 years under
Section 80-IAB of the Income Tax Act.
Exemption from minimum alternate tax under Section 115 JB of
the Income Tax Act.
Exemption from dividend distribution tax under Section 115O
of the Income Tax Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7, 26 and Second Schedule
of the SEZ Act).
OTHER BENIFITES
Exemption from Central Sales Tax / VAT (For input material used for
manufacturing for export purposes)
100% FDI through automatic route
Domestic Sales on payment of applicable duties by the buyer
External commercial borrowings by units up to $ 500 million a year allowed
without any maturity restrictions
No requirement for Import License
Freedom to bring in export proceeds without any time limit
Flexibility to keep 100% of export proceeds in EEFC account
Offshore banking unit
On-site custom house
Self-certification
Warehouses/ICD

(EXPORT PERFORMANCE)
Year Value (Rs. Crore) G.R ( over p.year )
2003-2004 13,854 39%
2004-2005 18,314 32%
2005-2006 22 840 25%
2006-2007 34,615 52%
2007-2008 66,638 93%
2008-2009 99,689 50%
2009-2010 2,20,711.39 121.40%
2011-2012 3,64,477.73 65 %
2012-2013 4,76,159.00 31 %

(HOW TO APPLY)
Any individual, co-operative society, company or partnership
firm can file an application for setting up of Special Economic
Zone. The application is to be made in Form-A to the concerned
State Government and the Board of Approval (BOA) in the
Department of Commerce, Government of India. However the
application would be considered by the BOA only when the
State Government recommendation is received.


MINIMUM AREA REQUIREMENT FOR SETTING
UP A SEZ ARE AS FOLLOWS:
MULTI SECTOR SEZ : 1000 HECTARES.
SPECIFIC SECTOR SEZ: 100 HECTARES.
FTWZ : 40 HECTARES.
IT/ITES/HANDICRAFTS 10 HECTARES.
HANDICRAFTS 10 HECTARES.
BIOTECHNOLOGY. 10 HECTARES.
GEMS & JEWELARY 10 HECTARES.
NON CONVENTIONAL ENERGY

10 HECTARES.
SEZ/EOU
EOU is a scheme with an applicable sunset clause whereas
SEZ is an Act. The SEZ scheme has many advantages over
the EOU scheme.
Net Foreign Exchange earnings as a percentage is not
applicable. Only units have to be NFE (net foreign exchange)
positive cumulatively at the end of 5 years.
Predetermined value addition is not compulsory.
No maturity restriction on external commercial borrowings
Duty free material could be utilized in five years time instead
of one year.
Self certification is applicable for imports and exports.
Mandatory period of 180 days for receipt of export proceeds
has been extended to 360 days.
As per Sunset Clause, STPI or EOU's may not be eligible for
any Income tax benefit u/s 10B, for exports affected after
31/03/11.

SEZ/EOU
Trading activity with Zero Value addition is allowed in SEZ.
Customs examination is to the minimum. SEZ units function on
self certification basis. The meaning of Hassle Free Zone clearly
originates from this concept. No Tax, No Duties, No Hurdles.
DTA exports are faster than EOU.
NFE is calculated on a simple formulae i.e. Exports (FOB value
of all exports) Imports (CIF value of all imports) > 0. In
simple words, if a unit is bringing in X amount foreign
exchange i.e. exports and is buying Y amount of foreign
exchange from the Government and if X is > Y even by 1$, it
has achieved a positive NFE.
Registration formalities for
Exports
Obtaining Permanent Account Number (PAN)
Opening bank Account
Registration for Organisation
Obtaining Importer-Exporter Code Number
(IEC No.)
Registration with VAT and Sales Tax Authority
Registration with Export Promotion Council

Registration formalities for Exports
Registration with Export Credit and Guarantee
Corporation of India (ECGC)
Registration with other Authorities
Federation of Indian Export Organisation
(FIEO)
Indian Trade Promotion Organisation (ITPO)
Chambers Of Commerce (COC)
Productivity Councils, etc.

IMPORTANCE OF EXPORT
DOCUMENTS .

NO. OF DOCUMENTS (HEAVY DOCUMENTATION).
INVOLVEMENT OF DIFF. GOVT.
AGENCIES/INSTITUTIONS.
COMPLEX FORMALITIES.
FOREIGN EXCHANGE INVOLVEMENT.
PAYMENT RISK.
RULES & REGULATIONS OF IMPORTING COUNTRY.
MULTIMODAL TRANSPORT.
DELIVERY COMMITMENT.
EXPORT INCENTIVE.
MULTIPLE TRANSFER OF TITLE.
TRANSACTION COST.

ELECTRONIC DATA INTERCHANGE
(EDI)

EDI IS THE COMPUTER TO COMPUTER EXCHANGE OF
BUSINESS DATA IN A PUBLICLY PUBLISHED &
GLOBALLY STANDARDISED FORMAT.

EDI IS THE TRANSFER OF STRUCTURED BUSINESS
DATA, BY AGREED MESSAGE STANDARDS, FROM
ONE COMPUTER APPLICATION TO ANOTHER BY
ELECTRONIC MEANS AND WITH A MINIMUM OF
HUMAN INTERVENTION.
1. PREVENTING CLERICAL ERROR.

2. TIME SAVING

3. REDUCTION IN TRANSACTION COST.

4. QUICK ACCESS TO INFORMATION BY USERS.

5. STRATEGIC INTEGRATION OF DATA.

6. MINIMISATION OF PAPER USE.
ADVANTAGES OF (EDI)
EXPORT DOCUMENTS
COMMERCIAL DOCUMENTS REGULATORY DOCUMENTS
1. Enquiry 1. Invoice (pre-shipment)
2. Purchase Order 2. Packing List (pre-shipment)
3. Proforma Invoice 3. Excise Challan
4. Commercial Invoice 4. ARE 1
5. Packing List 5. Annexure A or B
6. Shipping Instructions 6. Annexure C
7. Intimation for inspection 7. Declaration D
8. Certificate of inspection / Quality
Control.
8. Shipping Bill
9. Insurance Declaration 9. G.R./Statutory Declaration Form.
10. Certificate of Insurance 10. Freight Payment Certificate
11. Shipping Order
12. Mate Receipt
EXPORT DOCUMENTS
COMMERCIAL DOCUMENTS REGULATORY DOCUMENTS
13. Bill of Lading / Combined Transport
Documents.
14. Application for Certificate of Origin.
15. Certificate of Origin / GSP
16. Bill of Exchange / Sight Draft
17. Shipment Advice
18. Letter of Bank for collection /
negotiation of documents.
POST SHIPMENT DOCUMENTS REQUIRED
FOR NEGOTIATION
a) Covering letter to Bank.
b) Original L/C or Purchase Order
c) Bills of Exchange
d) Invoice
e) Consular Invoice
f) Packing List
g) Certificate of Origin or G.S.P.
h) B/L. (3) Originals.
i) Weighment Certificate
j) Test Certificate
k) Ins. Certificate in case of CIF.
l) Fumigation Certificate in case of Australia & USA.
m) Intermodal Certificate.
n) Packing declaration in case of Australia
o) Advance Cargo Declaration (CRF)
p) Third party inspection certificate (CRF)
q) Shipment Advice.
r) SDF Form (Duplicate copy)
s) Any other document as per requirement of L/C.

POST SHIPMENT DOCUMENTS REQUIRED
FOR NEGOTIATION
Certificate from Shipper reg. Sending of N/N documents.

Certificate from Shipper reg. Partial Qty as per P/I is of the same lot.

Certificate from Shipper that the goods are strictly as per Proforma
Invoice and are of Indian origin.

NVOCC B/L not acceptable.

Age certificate from shipping co.

Certificate from shipping co. reg. Non calling at Israeli port

Freight certificate as per requirement of L/C.

To check the quantity of Invoice with ARE-1 and Packing List.

To check whether the P.O. & / or L/C no. is correctly mentioned on
Preshipment documents. If the same are not available with us to send
message to HO/PLANT.

To check the Rate / Size / Value and description as per P.O. / L/C with the
Preshipment Invoice.

To mention commission as per Commission List. & also endorsement for
Incentive Scheme & EPCG Scheme.

To make Pre-shipment Invoice without mentioning commission, GR
Waived in case of FREE Sample Consignment.

To check the quantity as per the Packing List (Net weight / Gross Weight).
CHECK LIST
(FOR PRE-SHIPMENT DOCUMENTS)

To prepare the documents with clear copy of Purchase Order & / or L/C.
To check the Quantity / Rate / Value & Description as per the Pre-shipment central
excise attested Invoice.
To check No. of cases, Gross Weight / Nett Weights as per the Packing List.
B/L is prepared, as per L/C & or P.O. Description of Goods should be strictly as per
L/C & / or P.O. check last Date of Shipment and Expiry date as per the L/C
accordingly B/L date is to be taken. Claused B/L is to be avoided.
To check Shipper, Consignee, Notify party, Second Notify Party, Port of Destination
(via) final destination, Shipping Agents Name and Address and SHIPPED ON
BOARD stamp with date stamp.
CHECK LIST
(FOR POST-SHIPMENT DOCUMENTS)
CHECK LIST
(FOR POST-SHIPMENT DOCUMENTS)

To check the GR form (duplicate) thoroughly since GR cannot be
amended.

Original set of documents to be prepared strictly as per the L/C & /
or P.O.

Freight Certificate is to be attached together with the Original set of
documents.

Commission is not to be mentioned on any of the documents as in
some Countries like IRAN the Commission Payment is totally
banned.

All Certificates and documents are attached strictly as per the Terms
and Conditions of the L/C.

a)Clubbing of documents for big Order although dispatched in different lots.
b)To understand the psychology of people of Importing Country.
c)In case of USA, Intermodal Certificate is must. Due to Wt. Restriction in country.
d)In case of Australia Fumigation Certificate and Packing Declaration is must.
e)Inspection Certificate from Outside Agencies like S.G.S, OMIC & INTEPTECK.
f)Gulf documents to be prepared carefully as they are very strict.
g)Country requirement of inspection by S.G.S. or any other Agency.
h)Legislation.
Points to be noted while preparing
Final Post Shipment documents
107

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NATIONAL

MULTI SECTOR SEZ : 1000 HECTARES.

SPECIFIC SECTOR SEZ: 100 HECTARES.

GEMS & JEWELARY 10 HECTARES.

NON CONVENTIONAL ENERGY

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