INTERNATIONAL TRADE

LESSON 19: EXPOR T- IMPORT POLICY OF INDIA

Export Import Policy of India

Introduction Meaning General Objectives. Objective. Highlights. Implications.

ment (Ministry of Commerce). Indias EXIM policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favourable balance of payments position. Legal Framework for Foreign Trade of India In India, the legal framework for the regulation of foreign trade is mainly provided by the Foreign Trade (Development and Regulation) Act, 1992, Garments Export Entitle-ment Policy: 2000-2004, Export (Quality Control and Inspection) Act, 1963, Customs and Central Excise Duties Drawback Rules, 1995, Foreign Exchange Management Act, 1999 --and the Customs and Central Excise Regulations. The main objective of the Foreign Trade (Development and Regulation) Act is to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. This Act has replaced the earlier law namely, the imports and Exports (Control) Act1947. A comparison of the nomenclature of the two Acts makes it very dear that there is a shift in the focus of the law from control to development of foreign trade. This shift in the focus is the outcome of the emphasis on liberalisation and globalisation as a part of the process of economic reforms initiated in India since June 1991. The application of the provisions of the Foreign Trade (Development & Regulation) Act 1992 has been exempted for certain trade transactions vide Foreign Trade (Exemption from application of Rules in certain cases) Order 1993 General Objectives of the Exim Policy Government control import of non-essential items through an import policy. At the same time, all-out efforts are made to promote exports. Thus, there are two aspects of trade policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. The main objective of the Government policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exports of items specially needed within the country. Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. In other words, the policy Aims at (i) Promoting exports and augmenting foreign exchange earnings; and

Export-Import Policy 1997-2000

Export-Import Policy 2002-2007 Objective.

Highlights. Implications.

Introduction
Trade policy governs exports from and imports into a country. It is one of the various policy instruments used by a country to attain her goals of economic develop-ment. This policy is thus, formulated keeping in view, the national priorities for economic development and the international commitments made by the country. It is essential that the entrepreneurs and the export managers understand the trade policy as it provides the vital inputs for the formulation of their business growth strategies. In India, the trade policy Le., export-import policy is formulated by the Ministry of Commerce, Government of India in terms of section 5 of the Foreign Trade (Development and Regulation) Act,1992Besides, the Government of India also announced on January 30,2002 a Medium Term Export strategy, to guide the formulation the Export-Import Policy: 2002 - 07 with the, objective of achieving a share of 1 % in world trade by the end of 2006 - 07 from the present I share of 0.6% (2000 - 01). The text of this strategy is given as Appendix VII at the end of the book. The present Export - Import Policy was announced on 31.3.2002 for a period of 5 years with effect from 1.4.2002 to 31.3.2007 co-terminus with Tenth Five Year Plan. It covers both the trade in merchandise and services. The present chapter explains legal framework affecting foreign trade of India particularly with reference to Export-Import Policy; 2002 - 2007. It also discusses the preferential trading arrangements affecting exports and imports of India. Meaning The foreign trade of India is guided by the Export-Import (Exim) Policy of the government of India arid is regulated by the Foreign Trade (Development and Regulation) Act, 1992. Exim Policy contains various policy decisions taken by the government in the sphere of foreign trade, i.e., with respect to imports and exports from the country and more especially export promotion measures, policies and procedures related thereto. It is prepared and announced by the Central Govern-

(ii) Regulating exports wherever it is necessary for the purposes of either avoiding competition among the Indian exporters or ensuring domestic availability of essential items of mass consumption at reasonable prices.

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The government of India announced sweeping changes in the trade policy during the year 1991. As a result, the new ExportImport policy came into force from April I, 1992. This was an important step towards the economic reforms of India. In order to bring stability and continuity, the policy was made for the duration of 5 years. In this policy import was liberalised and export promotion measures were strengthened. The steps were also taken to boost the domestic industrial production. The more aspects of the export-import policy (1992-97) include: introduction of the duty-free Export Promotion Capital Goods (Epcg) scheme, strengthening of the Advance Licensing System, waiving of the condition on export proceeds realisation, rationalisation of schemes related to Export Oriented Units and units in the Export Processing Zones. The thrust area of this policy was to liberalise imports and boost exports. The need for further liberalisation of imports and promotion of exports was felt and the Government of India announced the new Export-Import Policy (1997, 2002). This policy has further simplified the procedures and reduced the interface between exporters and the Director General of foreign Trade (Dgft) by reducing the number of documents required for export by half. Import has been further liberalised and efforts have been made to promote exports. The new Exim Policy 1997-2002 aims at consolidating the gains made so far, restructuring the schemes to achieve further liberalisation and increased transparency in the changed trading environment. It focusses on the strengthening the domestic industrial growth and exports and enabling higher level of employment with due recognition of the key role played by the SSI sector. It recognises the fact that there is no substitute for growth, which creates jobs and generates income. Such trade activities also help in stimulating expansion and diversification of production in the country. The policy has focussed on the need to let exporters concentrate on the manufacturing and marketing of their products globally and operate in a hassle free environment. The effort has been made to simplify and streamline the procedure. The objectives will be achieved through the coordinated efforts of all the departments of the government in general and the ty1inistry of Commerce and the Directorate General of Foreign Trade and its network of Regional Offices in particular. Further it will be achieved with a shared vision and commitment and in the, best spirit of facilitation in the interest of export. Objectives of the Exim Policy 1997-2002 The principal objectives of the EXIM Policy 1997 -2002 are as under: a. To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits fro~ expanding global market opportunities. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production.

c.

To enhance the technoloca1 strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness. To generate new employment. Opportunities and encourage the attainment of internationally accepted standards of quality. To provide quality consumer products at reasonable prices. Period of the Policy

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d.

e. a.

Highlights of the Exim Policy 1997-2002

b.

This policy is valid for five years instead of t}:1ree years as in the case of earlier policies. It is effective from 1st April 1997 to.31st March 2002. A very important feature of the policy is liberalisation. It has substantially eliminated licensing, quantitative restrictions and other regulatory and discretionary controls. All goods, except those coming under negative list, may be freely imported or exported.

Liberalisation

c.

Imports Liberalisation Of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have been transferred to Open General Licence (OGL) List. Export Promotion Capital Goods (EPCG) Scheme

d.

e.

The duty on imported capital goods under EPCG scheme has been reduced from 15% to 10%. Under the zero duty EPCG Scheme, the threshold limit has been reduced from Rs. 20 crore to Rs. 5 crore for agricultural and allied! Sectors Under Advance License Scheme, the period for export obligation has been extended from 12 months to 18 months. payment of 1 % of the- value of unfulfilled exports.

Advance Licence Scheme

A further extension for six months can be given on

f. Duty Entitlement Pass Book (DEPB) Scheme Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.

g.

Such credit can be can be utilised for import of raw materials, intermediates, components, parts, packaging materials, etc. for export purpose. 150 items from the restricted list have been transferred to SIL. to 2%.

Special Import Licence (SIL) :-

SIL on exports from SSIs has been increased from 1 % Export houses and all forms of trading houses are
eligible for additional SIL of 1 % on exports of products from SSIs from North Eastern States.

b.

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 Additional SIL has been declared for exploration of

new markets and for export of agro products.

The SIL entitlement of exporters holding ISO 9000

certification has been? Increased from 2% to 5% of the FOB value of exports. h. Export Houses and Trading Houses

Under the zero duty EPCG Scheme, the threshold level has been reduced from Rs. 20 crore to Rs. 5 crore for agriculture and allied sectors.

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Implications of the Exim Policy 1997 - 2002 The major implications of the EXIM Policy 1997-2002 are :-

(a) Globalisation of Indian Economy : The EXIM policy 1997-02 (Amount In Rs. Crores) For 2000-01 Period proposed to prepare a framework Fob Criterion Nfe Criterion for globalisation of Indian economy. Annual FOB value Annual FOB value Average FOB of export Average FOB of export This is evident from the very first value of export made value of export made objective of the policy, which states made during during made during during To accelerate the economy from preceding 3 preceding preceding 3 preceding low level of economic activities tolicensing licensing licensing years licensing high level of economic activities by years years making it a globally oriented Eh 15 22 12 18 vibrant economy and to derive maximum benefits from expanding Th 75 112 62 90 global market opportunities. Sth 375 560 312 450 The Indian economy has been Ssth 1125 1680 937 1350 exposed to more foreign competition. The regime of high The criteria for recognition of export houses and all forms of protection is gradually vanishing. trading houses has been modified. (i) Deemed Exports . Deemed exports facilities have been extended to oil and gas sectors in addition to power sector. Software

(j)

It means, in order to survive, Indian companies will have to pay due attention to cost reduction, improvement in quality, delivery schedules and after sales service. At the same time, Indian industrys have also been given an opportunity to globalise their business by allowing them to import machineries and raw materials from abroad on liberal terms. In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give boost to Indias industrial growth and generate employment opportunities in non-agricultural sector. The reduction of duty from 15% to 10% under EPCG scheme will enable Indian firms to import capital goods. This will improve the quality and productivity of the Indian industry. However, liberalisation of imports by transferring 542' items from restricted list to OGL and SIL list would adversely affect the growth of, consumer goods industry in India, as most of .these items are consumer goods items.

Software units can undertake exports using data communication links or through courier service. Import of computer systems has been brought under the purview of EPCG scheme. . By 1998, most DGFT transactions will be on line so as reduce paper work and avoid delay in disposal of applications. SIL on exports from SSls has been increased from 1 % to 2%. Export houses and all forms of trading houses are eligible for additional SIL of 1 % on exports of products from SSls from North eastern States. 20 crore under EPCG scheme will benefit SSls.

(k) Computerisation of DGFT Offices

(a) Impact on the Indian Industry :

(l)

SSI Units

Reduction of threshold level to Rs. 5 crore from Rs.

(m) Agriculture Sector

Double weightage will be given for agro exports in calculating the eligibility for export houses and all forms of trading houses. Additional SIL of 1 % has been declared for export of agro products. EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the domestic tariff area (DT1) on payment of duty.

(b) Impact on Agriculture Many encouraging steps have been taken in order to give a boost to Indian agricultural sector.

Double weightage for agro exports while calculating the eligibility for export houses and all forms of trading houses. Additional SIL of 1 % for export of agro products. EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the domestic tariff area (DTA) on payment of duty.

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Under .the zero duty EPCG Scheme, the threshold level has been reduced from Rs. 20 crore to Rs.. 5 crore for agriculture and allied sectors. In order to encourage foreign investment in India, the EXIM policy 1997-02 has permitted 100% foreign equity participation in the case of 100% EOUs, and units set up in EPZs. Due to liberalisation of procedural formalities, foreign companies may bee attracted to set up manufacturing units in India. Full Convertibility of Indian Rupee on revenue account would also give a fillip to foreign investment in India. The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to 5% of the FOB value of exports. This would encourage Indian industries to undertake research and development programmers and upgrade the quality of their products. Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods. One of the long-term objectives of the Indian planning is to become self- reliant. This objective is well reflected in the EXIM Policy 1997-02. The policy aims at encouraging domestic sourcing of raw materials, so as to build up a strong domestic production base. In order to achieve this the policy has also extended the benefits given to exporters to deemed exporters. This would lead to import substitution. Oil, power and natural gas sectors have also been brought under the purview of deemed exports.

(c) Impact on. Foreign Investment .:.

(d) Impact on Quality Upgradation

The main policy provisions are given in the policy document entitled Export -Import Policy 2002-2007. An exporter will have to refer to the Handbook of Procedures Volume-I to know the procedures, the agencies and the documentation required to take advantage of a certain provision of the policy. There is a para-by-para correspondence between the Policy and the Handbook of Procedures Volume-I. Thus, if an exporter finds that para 6.2 of the policy is relevant for his business enterprise then he should also refer to the corresponding para of the Handbook of Procedures Volume- I to know precisely what is to be done t01ake advantage of the policy provision. The Handbook of Proce-dures Volume-II provides a very vital information as regards the standard input-output norms in regard to items of export from India. Based on these norms, exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Scheme/Duty Remission Scheme. The policy regarding import or export of a specific item is given in the document entitled ITC (HS) Classifications of Export Import Items. In addition to these policy documents, an export enterprise should also refer to the various policy circulars and trade notices issued by various regulatory authorities deal-ing with different aspects of foreign trade. One can refer to these notices either by visiting the relevant web site of the authority concerned or by referring to various trade magazines which circulate them. Objectives of The Export- Import Policy 2002 - 2007 The export-import policy 1997-2002 carried forward the process of liberalization and globalization set in motion by the process of economic reforms initiated since June, 1991. These reforms had aimed at restructuring the Indian economy to increase the productivity and competitiveness of foreign trade enterprises in order to achieve a higher rate of growth in exports. It also enabled the foreign trade grow in an environment of liberalization from licensing procedures, quantitative restrictions, discretionary bureau-cratic controls and cumbersome documentation procedures. The present Export-Import-Policy: 2002-2007 aims at facilitating the growth in exports to attain a share of at least 1 % of global merchandise trade by the end of 2006-07. Specifically, main objectives of the present policy are as follows: 1). To stimulate sustained economic growth by providing access to essential raw ma- terials,intermediates, components, consumables and capital goods required for augmenting production and providing services. 2). To enhance the technological strength and efficiency of Indian agriculture, indus-try and services, thereby improving their competitive strength while generating new employment opportunities and encourage the attainment of internationally accepted standards of quality; and 3). To provide consumers with good quality products and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers

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(e) Impact on Self-reliance

However, the globalisation policy of the government may harm the interests of SSls and cottage industries, as they may not be able to compete with MNCs. Export- Import Policy 2002 - 2007 The Export- Import Policy: 2002 - 2007 deals with both the export and import of merchandise and services. It is worth mentioning here that the Export -Import Policy: 1997 - 2002 had accorded a status of exporter to the business firm exporting services with effect from1.4.1999. Such business firms are known as Service Providers. The Export- Import Policy has been described in the following documents:

Export- Import Policy: 2002- 2007 Handbook of Procedures Volume I Handbook of Procedures Volume II ITC(HS) Classification of Export- Import Items

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Features of Exim Policy Union Commerce and Industry Minister Mr. Murasoli Maran announced the Exim policy for the 5 year period (2002-07) on March 31, 2002. The main thrust of the policy is to push Indias exports aggressively by undertaking several measures aimed at augmenting exports of farm goods, the small scale sector, textiles, gems and jewellery, electronic hardware etc. Besides these, the policy aims to reduce transaction cost to trade through a number of measures to bring about procedural simplifications. In addition, the Exim policy removes quantitative restrictions (QRs) on exports, except a few sensitive items. 1. Special Economic Zones (SEZs) (a) Offshore Banking Units (OBUs) shall be permitted in Special Economic Zones (SEZs). (b) Units in SEZ would be permitted to undertake hedging of commodity price- risks, provided such transactions are undertaken by the units on stand- alone basis. (c) Units in SEZ shall be permitted External Commercial Borrowings (ECBs) for a tenure of less than three years. (d) Four existing EPZs have been converted into SEZs and 13 New SEZs have already been given approval. 2. Employment Oriented Measures:- Exim (2002-07) policy initiated a number of measures which would help employment orientation. Among them were the following:

(c) Small Scale Industry With a view to encouraging further development of centres of economic and export excellence such as Tirpur for hosiery, woollen blankets in Panipat, woollen knitear in Ludhiana, following benefits would be available to small-scale sector.

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EPCG facility for the common service providers in these areas. Market Access Initiative (MAl) for creating focused technological services and marketing abroad to the recognised associations of units in SSI.

Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others. (d) Leather Duty free imports upto 3% of f.o.b. value combined to leather garments has been extended to all leather products.

(e) Textiles

Sample fabrics permitted duty free within the 3% limit for trimmings and embellishments. Additional items such as zip fasteners, inlay cards, eyelets, rivets, toggles, Velcro tape, cord and cord stopper included in input output norms. Duty Entitlement Passbook (DEPB) rates for all kinds of blended fabrics permitted. Import of rough diamonds is allowed freely at 0% customs duty. Licensing regime for rough diamond is being abolished. Value addition norms for export of plain jewellery reduced to 7% and for all merchandised unstudded jewellery to 3%. Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well.

(f) Gem and Jewellery :

(a) Agriculture Removal of quantitative and packaging restrictions on wheat and its products, Butter, pulses, grain and flour of barley, maize, bajra, ragi and jowar. Removal of restrictions on export of all cultivated (other than wild) varieties of seed, except jute and onion. 20 Agricultural Export Zones have been notified. Transport subsidy for export of fruits, vegetables, floriculture, poultry and dairy products. 3% special DEPB rate for primary and processed foods exported in retail packaging of 1 kg. or less. An amount of Rs. 5 crore under Market Access Initiative (MAl) has been earmarked for promoting cottage sector exports coming under the Khadi and Village Industries Commission (KVIC). Market Access Initiative (MAI) scheme for the development of website for virtual exhibition of products from the handicrafts sector. , Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others. Entitlement to duty free imports of an enlarged list of items as embellishments upto3% of FOB value of exports.

Technology Oriented (a) Electronic Hardware

Conversion of the Electronic Hardware Technology Park (Ehtp) into zero duty regime under the ITA (Information Technology Agreement)-I Net Foreign Exchange as Percentage of Exports (Neep) to be made positive in 5 years. No other export obligation for units in Ehtp. 65% of DEPB rate for pesticides formulations. No limit on export of samples. . Reimbursement of 50% of registration fees on registration of drugs. Free import of equipment and other goods used abroad for more than one year.

(b) Cottage Sector and Handicrafts :

(b) Chemicals and Pharmaceuticals :-

(c) Projects:

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Growth Oriented (a) Strategic Package for Status Holders:

Licence, certificate, permissions. and customs clearances for both imports and exports on self-declaration basis. Priority finance for medium and long term capital requirement as per conditions notified by the RBI. Exemption from compulsory negotiation of documents through banks, However, the remittance would continue to be received through banking channels. 100% retention of foreign exchange in Exchange Earners Foreign Currency 1EEFC) account. Enhancement in normal repatriation period from 180 days to 360 days,

The percentage of physical examination of export cargo has already been reduced to less than 10% except for a few sensitive destinations. Fixation of special brand rate of drawback within 15 days. Direct negotiation of export documents to be permitted. 100% retention in Exchange Earners Foreign Currency (EEFC) accounts. Enhancement in normal repatriation period from 180 days to 360 days.

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(c) Banks

Trust Based (a) Import and export of samples to be liberalised for encouraging product up gradation (b) Penal interest rate for bonafide defaults to be brought down from 24% to 15%. (c) No penalty for non-realisation of export proceeds in respect of cases covered. by ECGC insurance package. (d) No seizure of stock in trade so as to disrupt the manufacturing process affecting delivery schedule of exporters. (e) Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realisation Certificate for documents negotiated directly. (f) Optional facility to convert from one scheme to another scheme. In case the exporter is denied the benefit under one scheme, he shall be entitled to claim benefit under some other scheme. (g) Newcomers. to be entitled for licences without any verification against execution of Bank Guarantee. Duty Neutralisation Instruments (a) Advance Licence

(b) Diversification of Markets :Setting up of Business Centre in Indian missions abroad for visiting Indian exporters/businessmen.. ITPO portal to host a permanent virtual exhibition of Indian export products. Focus Latin American Countries (LAC) has been extended upto March 2003. Focus Africa has been launched for developing trade relations with the Sub-Saharan African region. The exporters exporting to these markets shall be given Export House Status. on export of Rs. 5 crore. Links with the Commonwealth of Independent States (CIS) countries to be revived. Transport subsidy for exports to be given to units located in North East, Sikkim and-Jammu and Kashmir so as to offset the disadvantage of being far from ports. Fuel costs to be rebated for all export products. This would enhance the cost competitiveness of our export products.

(c) North Eastern States, Sikkim and Jammu and Kashmir :

(d) Neutralising High Fuel Cost:

Procedural Reforms (a) Dgft

Duty Exemption Entitlement Certificate (DEEC) book to be abolished. Redemption on the basis of Shipping Bill and Bank Realisation Certificate. Withdrawal of Advance Licence for Annual Requirement (AAL) scheme. The exporters can avail Advance Licence for any value. Value cap exemption granted on 429 items to continue. DEPB rates slashed on 8 out of 10 items. Reduction in rates only after due notice. No Present Market Value (PMV) verification except on specific intelligence Same DEPB rate for exports whether as CBUs or in CKD/SKD form. . DEPB for transport vehicles to Nepal in free foreign exchange.

The new 8 digit commodity classification for imports introduced by the Director General of Foreign Trade (DGFT) would also be adopted by the Customs and Director: General of Commercial Intelligence and Statistics (DGCI&S) shortly. This will eliminate the classification disputes and hence reduce transaction costs and time. The maximum fee limit for electronic application under various schemes has been reduced from Rs. 1.5 lakh to Rs. 1.00 lakh. Same day licensing introduced in all regional offices. Adoption and harmonisation of the 8 digit Indian Trade Classification (ITC) Harmonised System (HS) code.

(b) Duty Entitlement Passbook (DEPB) Scheme :

(b) Customs

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(c) Export Promotion Capital Goods (EPCG):

EPCG licences of Rs. 100 crore or more to have 12 year export obligation period with 5 year moratorium period. Export obligation fulfillment period extended from 8 years to 12 years in respect of units in Agricultural Export Zones and in respect of companies under the revival plan of BIFR. . Supplies under Deemed Exports to be eligible for export obligation fulfilment along with deemed export benefit

competitiveness, the following facilities have been extended to this sector :

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Incentives such as Market Access Initiative (MAl), duty free imports upto 3% of FOB value of exports, EPCG facility, etc. Entitlement for Export House Status at Rs. 5 crore instead of Rs.15crore for others. These steps would encourage units in cottage industries to develop their export potentiality.

Implications of The Exim Policy 2002- 07 The implications of the EXIM Policy 2002-07 are as follows :(a) All-round Development of Indian Economy:. The Exim 2002-07emphasises all-round development of Indian economy by giving due weightage to different sectors of the economy. That is why. the policy has been described as

(d) Implications on Small Scale Industry :- With a view to encourage further development of centres of economic and export excellence as Tripura for hosiery, woollen blankets in Panipat, woollen knitwear in Ludhiana, the following benefits have been made available to the small scale sector : Common service providers in these areas shall be entitled for facility of EPGC Scheme. .

Employment Oriented. Technology Oriented. Growth Oriented. . This has also been reflected in its objectives :To facilitate sustained growth in exports. To stimulate sustained economic growth. To enhance the technological strength and efficiency of Indian agriculture, industry and services. To generate new employment opportunities To attain internationally accepted standards of quality. To provide consumers with good quality goods and services at internationally competitive prices.

Availability of Market Access Initiative Scheme for creating focused technological services and marketing abroad.

Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others. These steps would lead to development of new centres of economic and export excellence. (e) Implications on Gem and Jewellery Industry :. Having already achieved leadership position in diamonds, the Exim. Policy 2002-07 aims at achieving a quantum jump on jewellery exports as well. In order to achieve this, the following steps have been taken in the new Exim Policy

Import of rough diamonds is allowed freely at 0% custom duty. Abolition of licensing regime for rough diamonds would help the country emerge as a major international centre for diamonds. Value addition norms for export of plain jewellery reduced to 7% and for all merchandised unstudded jewellery to 3%

(b) Implications on Agricultural Sector :- Agriculture being the backbone of Indian economy, the EXIM policy has initiated a series of measures for its growth and development, especially for promotion of exports from agricultural sector.

Removal of quantitative and packaging restrictions on certain agricultural products and on export of all cultivated varieties of seed would give a major boost to the export of these items. Identification of 20 Agricultural Export Zones would help in development Of specific geographical areas for export of specific products. Extension of export obligation fulfilment period from 8 years to 12 years in respect of units in Agricultural Export Zones. Other measures such as transport subsidy, 3% special DEPB rate, would definitely give a fillip to exports from agricultural sector.

Personal carriage of jewellery allowed through Hyderabad and Jaipur airports as well. (f) Implications on Industrial Sector

Liberalisation of EPCG scheme would help Indian industries to promote. quality up gradation and would also enable sick units to revive. Extension of repatriation period for realisation of export proceeds from180 days to 360' days -would help Indian industries to be more competitive in offering liberal payment terms to foreign importers. Licence, certificate, permissions and customs clearances for both imports and exports on self-declaration basis, priority finance for medium and long term capital requirement and 100% retention of foreign exchange in Exchange Earners Foreign Currency (EEFC) account would definitely benefit Indian industries and would encourage Indian producers to enter the export field.

(c) Implications on Development of Cottage Industries :. The small scale sector, alongwith the cottage and handicraft sector, has been contributing to more than half of the total exports of the country. In recognition of the export performance of these sectors and to further increase their
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Exemption from compulsory negotiation of documents through banks would help exporters to save bank charges. Transport subsidy for exports from units located in North East, Sikkim and Jammu and Kashmir would offset the disadvantage of being far from ports.

Fixation of special brand rate of drawback within 15 days. Reduction. in percentage of physical examination of export cargo to 10%. Penal interest rate for bonafide defaults to be brought down to 15%. No penalty for default where payment is covered by ECGC policy. No seizure of stock in trade. . Same day licensing introduced in all regional offices. Newcomers to be entitled for ljcences against execution of Bank Guarantee. Optional facility to convert from one scheme to another scheme.

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(g) Diversification of Indian Industrial Sector :- In order to promote Indian industries to diversify their business and markets, the following measures have been taken in the Exim Policy 2002-07

Setting up of Business Centre in Indian missions abroad would enable India exporters and businessmen to visit abroad. Launching of Focus LAC (Latin American Countries) in Novernber 1997 has greatly accelerated Indian trade with Latin American countries. Extension of this programme upto March 2003 would enable Indian exporters to consolidate the gains of this programme. There is a tremendous potential for trade with the SubSaharan African region. Launching of Focus Africa programme would help exporters to diversify their exports to these markets. . Permission granted to External. Commercial Borrowings (ECBs) for tenure of less than three years in SEZs would provide opportunities for accessing working capital loan for these units at internationally competitive rates. Conversion of Electronic Hardware Technology Park (Ehtp) into zero duty regime under the ITA (Information Technology Agreement)- I would give encouragement to setting up of more units in EHTP. Liberalisation of import and export of samples would encourage product upgradation. Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods.

Questions Bank
Q.1. What is an EXIM Policy? What are its objectives? Q.2. What are the objectives of EXIM policy 1997-02 ? Q.3. Explain the major highlights of EXIM policy 1997-02. Q.4. Explain the effect of EXIM Policy 1992-97 on the following:(i) Foreign Exchange. (ii) Technology Upgradation. (iii) Export Promotion. Q;5. What are the objectives of EXIM policy 2002-07 ? .. Q.6. Explain the major highlights of EXIM policy 2002-07. Q.7. Explain the implications of the EXIM Policy 2002-07. Terms Used in EXIM Policy Notes.

(h) Implications on Technology Upgradation :

Special Economic zones (SEZs) Agriculture Export zones. (AEZs) Negative List for Exports. Open general Licence. Export Obligations. Counter Trade.

(i)

This would also encourage Indian industries to undertake research and development programmes and upgrade the quality of their products. Implications on Procedural Formalities :- Various procedural simplifications would reduce transaction costs and save time. Some of such steps include :

Adoption of a new 8 digit commodity classification for imports by Customs and Director General of Commercial Intelligence and Statistics (DGCI&S) would eliminate the classification disputes and hence reduce transaction costs and time. Reduction of the maximum fee limit for electronic application under various schemes from Rs. 1.51akh to Rs. 1.00 lakh. Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realisation Certificate for documents negotiated directly.

Note on Special Economic Zones (Sezs) Special Economic Zones (SEZs) Scheme in India was conceived by the Commerce and Industries Minister Murosoli Maran during a visit to Special Economic Zones in China in 1999. The scheme was announced at the time of annual review of EXIM Policy effective from 1.4.2000. The basic idea is to establish the zones as areas where export production could take place free from all roles and regulations governing imports and exports and to give them operational flexibility. Special Economic Zone (SEZ) is a specifically delineated duty free enclave, which shall be deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. . Features of Special Economic Zones (Sezs) (a) Goods going into the SEZ area from DTA shall be treated as. deemed exports and the domestic suppliers are. eligible for deemed export benefits. Similarly, goods coming from the SEZ area into DTA shall be treated as if the goods are being imported.
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(b) SEZ units may be set up (or manufacture of goods and rendering of services, production, processing, c:l.8sembling, trading, repair, remaking, reconditioning, reengineering including making of gold, silver or platinum jewellery and articles thereof. (c) Foreign Direct Investment (FDI) upto 100% is allowed through automatic I route for all manufacturing activities except arms and ammunition, items of defense equipments, narcotic. And psychotropic substances, hazardous chemicals, brewing of alcoholic drinks, cigarettes and tobacco. (d) Procurement of raw materials and exports of finished products are exempted from central levies (e) The entire production of the units in the SEZs must be. exported and DTA sales is permitted only on the payment of full applicable customs duties. (e) SEZ units are eligible for a corporate tax holiday upto 2010, under the I . provisions of section 10A of the Income Tax Act. (f) SEZ units can retain 100% of their exports proceeds in Exchange Earners Foreign Currency (EEFC) account. (g) Realisation of exports proceeds extended to 12 months from the date of export. (h) State Trading Enterprises Policy will not apply to SEZ manufacturing units. (i) Creating special windows under existing rules and regulations of the Central Govt. and State Govt. for SEZ is developing a framework State Government have a lead role in the setting up of SEZ.

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Zone Kandla SEZ SEEPZ, SEZ Cochin SEZ Surat SEZ Noida SEZ Madras SEZ Vishakhapatnam SEZ Faltz SEZ Total :

2000-2001 (Rs millions) 5278.90 51937.00 3043.00 622.80 10342.00 6908.40 2190.80 5199.70 85523.00

2001-2002 (Rs millions) 4759.80 52256.00 2585.00 3118.60 9804.10 7625.90 2530.20 9236.30 91895.50

2002-2003 (Rs. millions) 7292.90 60830.20 2704.20 2807.10 10011.70 8191 3572.7 5123.90 100533.70

Special Economic Zones- Legal Prospective Eligibility (a) Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs (b) Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported (c) SEZ units may be set up for manufacture of goods and rendering of services Export and Import of Goods (a) SEZ units may export goods and services including agroproducts, partly processed goods, sub-assemblies and components except prohibited items of exports in ITC (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS) Classification of Export and Import Items. SEZ units, other than trading/ service unit, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer, subject to RBI clearance, if any. (b) SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS). However, any permission required for import under any other law shall be applicable. Goods shall include raw material for making capital goods for use within the unit. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients. (c) Sez units may procure goods required by it without payment of duty, from bonded warehouses in the DTA

(j)

Special Packages for Sezs in The Exim Policy 2002-07 (a) Offshore Banking Units (OBUs) shall be per1Ilitted in Special Economic Zones (SEZs). (b) Units in SEZ would be permitted to undertake hedging of commodity price-risks, provided such transactions are undertaken by the units on stand- alone basis.. (c) Units in SEZ shall be permitted External Commercial Borrowings (ECBs) for a tenure of less than three years. (d) Four existing EPZs namely, Kandla, Santacruz, Kochin and Surat have been converted SEZs and 13 New SEZs have already been given approval. Export Performance Of The Four Functional Sez Export performance of the four functional SEZ are as given below

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set up under the Policy and/or under Section 65 of the Customs Act and from International Exhibitions held in India. (d) Sez units, may import/procure from Dta, without payment of duty, all types of goods for creating a central facility for use by units in SEZ. The Central facility for software development can also be accessed by units in the Dta for export of software (e Gem & Jewellery units may also source gold/ silver/ platinum through the nominated agencies

Dta Sales and Supplies (a) Sez unit may sell goods, including by-products, and services in DTA in accordance with the import policy in force, on payment of applicable duty. (b) Dta sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. Similarly for units undertaking manufacturing and services/ trading activities against a single LOP, DTA sale shall be subject to achievement of NFE cumulatively. (c) The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfilment of positive NFE: (i) Supplies made to bonded warehouses set up under the Policy and/or under Section 65 of the Customs Act. (ii) Supplies to other EOU/SEZ/ EHTP/ STP units provided that such goods are permissible for procurement by units (iii) Supplies against special entitlement of duty free import of goods. (iv) Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance. (v) Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI. (vi) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items indicated in the Appendix 14-II of Handbook. Export through Status Holder SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/ STP unit. Inter-unit Transfer (a) SEZ units may transfer manufactured goods, including partly processed/semi-finished goods and services from one SEZ unit to another SEZ/EOU/ EHTP/STP unit. (b) Goods imported/procured by a SEZ unit may be transferred or given on loan to another unit within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance (c) Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/ EHTP/ STP unit with prior permission of the Development Commissioner and Customs authorities concerned. (d) Transfer of goods in terms of sub-paras (a) and (b) above within the same SEZ shall not require any permission but the units shall maintain proper accounts of the transaction. Sub- Contracting (a) Sez unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/ EHTP/ STP, with the annual

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(f) Sez units may import/procure goods and services from Dta without payment of duty for setting up, operation and maintenance of units in the Zone Leasing of Capital Goods (a) Sez unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case the SEZ unit and the domestic/ foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty. Net Foreign Exchange Earning (Nfe) SEZ unit shall be a positive Net Foreign exchange Earner. Net Foreign Exchange Earning (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given in Appendix -14-II of the Handbook (Vol-I) Monitoring of Performance (a) The performance of SEZ units shall be monitored by the Unit Approval Committee (b) The performance of SEZ units shall be monitored as per the guidelines given in Appendix 14-II of Handbook (VolI). Legal Undertaking The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force. Approvals and Applications (a) Applications for setting up a unit in SEZ other than proposals for setting up of unit in the services sector (except software and IT enabled services, trading or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per procedure indicated in Annexure to Appendix 14-II of Handbook (Vol-I) . In other cases approval may be granted by the Board of Approval. (b) Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.

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permission of Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. (b) Sub-contracting by SEZ gems and jewellery units through other SEZ units or EOUs or units in DTA shall be subject to following conditions. (i) Goods, finished or semi finished, including studded jewellery, taken outside the zone for sub- contracting shall be brought back to the unit within 30 days. No cut and polished diamonds, precious and semi-precious stones (except precious and semi precious stone having zero duty) shall be allowed to be taken outside the zone for subcontracting.

eligibility criteria of that Scheme and standard conditions for exit indicated in Appendix 14-II of Handbook (Vol-I). Export Through Exhibitions/ Export Promotion Tours/ Export Through Show Rooms Abroad /Duty Free Shops:Sez, Units May (a) Export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner. (b) Personal carriage of gold/ silver/ platinum jewellery, precious, semi-precious stones, beads and articles. (c) Export of jewellery is also permitted for display/ sale in the permitted shops set up abroad (d) Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents (e) Set up show rooms/retail outlets at the International Airports. Personal Carriage of Export/ Import Parcel Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. Import/export through personal carriage for units, other than gem and jewellery unit , shall be allowed provided the goods are not in commercial quantity. Export /Import by Post/ Courier Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs. Disposal of Rejects/Scrap/ Waste/ Remnants Rejects/scrap/waste/remnants arising out of production process or in connection therewith may be sold in the DTA on payment of applicable duty. No duty shall be payable in case scrap/waste/ remnants/ rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the SEZ with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, and precious and semi precious stones. Replacement/ Repair of Goods (a) The general provisions of Policy relating to export of replacement/ repaired goods shall apply equally to SEZ units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner. (b) The goods sold in the DTA and found to be defective may be brought back for repair/ replacement under intimation to Development Commissioner. (c) Goods or parts thereof, including gem stones and precious metal components for jewellery making, on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorised agents in India or the indigenous suppliers. Destruction shall however not apply to gem stones and precious metals.
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(ii) Receive plain gold/silver/platinum jewellery from DTA in exchange of equivalent quantity of gold/silver/ platinum, as the case may be, contained in the said jewellery. (iii) SEZ units shall be eligible for wastage as applicable for sub-contracting and against exchange (iv) The DTA unit undertaking job work or supplying jewellery against exchange of gold/silver/platinum shall not be entitled to export benefits. (c) All units, including gem and jewellery, may sub-contract part of the production or production process through other units in the same SEZ without permission of Customs authorities subject to records being maintained by both the supplying and receiving units. (a) Sez units other than gems and jewellery units may be allowed to undertake job-work for export, on behalf of Dta exporter, provided the finished goods are exported directly from SEZ units. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. (b) Scrap/waste/remnants generated through job work may either be cleared from the job workers premises on payment of applicable duty or returned to the unit. (c) SEZ units engaged in production/processing of agriculture/horticulture products, may on the basis of annual permission from the Customs authorities take out inputs and equipments to the DTA farm subject to the procedure indicated in

Appendix 14-II of The Handbook (Vol-I)

Exit From Sez Scheme

(a) SEZ unit may opt out of the scheme with the approval of the Development Commissioner. Such exit from the scheme shall be subject to payment of applicable Customs and Excise duties on the imported and indigenous capital goods, raw materials etc. and finished goods in stock. In case the unit has not achieved positive NFE, the exit shall be subject to penalty, that may be imposed by the adjudicating authority under Foreign Trade (Development and Regulation) Act, 1992. (b) SEZ unit may also be permitted by the Development Commissioner, as one time option, to exit from SEZ scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the
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(d) Goods may be transferred to DTA/abroad for repair/ replacement, testing or calibration, quality testing and R & D purpose under intimation to Customs authorities and subject to maintenance of records. Management of Sez (a) SEZ will be under the administrative control of the Development Commissioner. (b) All activities of SEZ units within the Zone, unless otherwise specified, including export and re-import of goods shall be through self certification procedure Setting up of SEZ in Private/Joint/ State Sector A SEZ may be set up in the public, private, joint sector or by state Government as per details indicated in Appendix 14-II of the Handbook(Vol-I). Samples:-SEZ units may, on the basis of records maintained by them, and on prior intimation to Customs authorities:(a) Supply or sell samples in the DTA for display/ market promotion on payment of applicable duties; (b) Remove samples without payment of duty, on furnishing a suitable undertaking to Customs authorities for bringing the goods back within a stipulated period (c) Export free samples, without any limit, including samples made in wax moulds, silver mould and rubber moulds through all permissible mode of export including through couriers agencies/post Sale of Un-Utilised Material/ Obsolete Goods (a) In case an SEZ unit is unable, for valid reasons, to utilize the goods, including capital goods and spares, it may dispose them in the DTA in accordance with the import policy in force and on payment of applicable duties or export them (b) Capital goods and spares that have become obsolete/ surplus may either be exported or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA. (c) No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged and scrap/waste/ remnants/rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the Zone with the permission of Custom authorities. However destruction shall not apply to precious and semi precious and precious metals (d) SEZ unit may be allowed by Customs authorities concerned to donate imported/ indigenously procured computer and computer peripherals without payment of duty, two years after their import/procurement and use by the units, to recognized non-commercial educational institutions, registered charitable hospitals etc as per the details given in Appendix 14-II in Handbook (Vol-I) Entitlement for SEZ Developer: - For development, operation and maintenance of infrastructure facilities in SEZs, the developer shall be eligible for the following entitlements (a) Income tax exemption as per 80 IA of the Income Tax Act.
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(b) Import/ procure goods without payment of Customs/ Excise duty (c) Exemption from Service tax (d) Exemption from CST. Difference Between Sezs and Epzs The main difference between the SEZ and the EPZ is that the SEZ is an integrated township with fully developed infrastructure on international standards whereas EPZ is just an industrial part. In fact, all existing EPZs have been asked to convert themselves into SEZs. However, some units are not interested in the conversion on account of the sale into DTA at concessional rate of duty is not available in SEZs. The Government has asked such units to move out to the Domestic Tariff Area (Dta). A Note Agriculture Export Zones (Aezs) Agricultural. Export Zones (AEZs) have been set up by. the Ministry of Commerce, GOI, with a view to promote agricultural exports from the country and provide remunerative returns to the farming community in a substantial manner. Further, with the intention to give primacy to promotion of agricultural exports, it has been decided to identify product specific Agricultural Export Zone from geographically contiguous area. State Governments may identify product specific Agri export zone for end to end development for export of specific products from a geographically contiguous area. State Government may evolve a comprehensive package of services provided by all State Government Agencies, State Agricultural Universities and all institutions and agencies of the Union Government for intensive delivery in these zonesSuch services which would be managed and co-ordinated by State Government would include provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related research & development, etc. APEDA will supplement, within its schemes and provisions, efforts of State Governments for facilitating such exports. Objective In a fast changing international trade environment and with a view to providing remunerative returns to the farming community in a sustained manner, efforts will be made to provide improved access to the produce/ products of the Agriculture and Allied sectors in the international market. Epcg Scheme Agriculture exporters shall be eligible for the facility of EPCG scheme as described in Chapter-6 of the Policy. The export obligation shall be determined in accordance with paragraph 6.2 of the Policy but the licence holder shall not be required to maintain the average level of exports as specified in sub paragraph 6.5(v) of the Policy. Such exporter shall have the facility to move or to shift the capital goods within the zone provided he maintains accurate record of such movements. However such equipments shall not be sold or leased by the licence holder. This facility shall also be available to service providers, setting up common infrastructural facilities such as sorting, grading, polishing,

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packaging, cold storage, transport equipment/ refrigerated vans, vapour treatment heat treatment plant, X-ray screening facility etc. The units setup in the notified Agriculture Export Zone shall be entitled to the benefits available under the scheme. A service provider in the Agriculture Export Zone may import equipment under the EPCG scheme for supplying services to agriculture exports. The export obligation may be offset by the service provider by earning foreign exchange in lieu of services rendered. Duty Exemption/Remission Scheme (a) The agriculture exporter shall be entitled to the facility for import of inputs like fertilizers, pesticides, insecticides, packing material etc. under Advance Licence/DFRC/DEPB scheme as given in Chapter-7 of the Policy subject to the eligibility criteria and conditions enumerated under the scheme. (b) The agriculture exporter shall be eligible for recognition as Export House/Trading House/Star Trading House/ Super Star Trading House on achieving the performance level as mentioned below.

Some Important Agricultural Export Zones

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Location

West Bengal Karnataka Gherkins Uttaranchal Lychee Punjab Uttar Pradesh Punjab Andhra pradesh

Name of product (s) Pineapple

Location Maharashtra Tripura Uttar Pradesh Maharashtra Jammu &Kashmir Tamil Nadu Madhya Pradesh

Name of Product (s) Grapes & Grape Wine Pineapple Mangoes Mangoes Apple Flowers Potatoes, Onions & Garlic

Vegetables Potatoes Potatoes Mangopulp & Fresh Vegetables

AEZ would be identified by the State Government, who may evolve a comprehensive package of services provided by all State Government agencies, State agricultural universities and. all institutions and agencies of the Union Government for intensive delivery in these zones.

Category

Average FOB Value During The Preceding Three Licensing Years, In Rupees (2) 4 Crores 20 Crores 100 Crores 300 Crores

FOB Value During The Preceding Licensing Year, In Rupees

Average NFE Earnings Made During The Preceding Three Licensing Years, In Rupees (4) 3 Crores 15 Crores 75 Crores 225 Crores

NFE Earned During The Preceding Licensing Year, In Rupees

Such services, which would be managed and coordinated by the State Government, would include provision of pre-harvest and post-harvest treatment and operations; plant protection, processing, packaging, storage and related research and development, etc. Agricultural and Processed Food Products Export Development Authority (APEDA) will supplement, within its schemes and provisions, efforts of the State Governments for facilitating such exports. Facilities for Units Located In Aezs (a) The agriculture .exporters are entitled to import of capital goods under EPCG Scheme... The agricultural exporters are entitled to imports of inputs like, fertilizers, pesticides, insecticides; packing materials, etc., under Advance Licence, Duty Free Replenishment Certificate (DFRC) and Duty entitlement Passbook (DEPB) Schemes.

(1) Export House Trading House Star Trading House Super Star Trading House

(3) 6 Crores 30 Crores 150 Crores 450 Crores

(5) 5 Crores 25 Crores 125 Crores 375 Crores

(b)

In addition to the double weightage available under paragraph 12.7, the double weightage on FOB or NFE on the export of agriculture product for recognition as status holders shall be available. Information Requirements A database on agricultural products and markets including aspects of commercial intelligence relevant to exports will be established. Assistance shall be provided to the exporters, growers organisations, trade association for conducting surveys/ feasibility studies, market studies etc.

A Note on Negative List of Exports 2002-07:The negative list consists of goods the import or export of which is either .prohibited, restricted through licensing or otherwise to be canalised through a designated government agency. The negative list of exports, as per the Exim Policy 2002-07, contains the following four categories of export items (a) Prohibited Items :- The prohibited items are completely banned from exports. The following categories of. items are banned from exports : All forms of wild animals including their parts and products.

Special chemicals as notified by the DGFT. Exotic birds as notified by the DGFT.

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Beef. Sea shells, as specified. Human skeleton. Peacock tail feathers including handicrafts and articles made there of. Manufactured articles and shavings of Shed Antlers of Chital and Sambhar.

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Items Onions (Except Banglore Rose onion and Krishnapuram onion) Niger Seeds

Canalising Agency Export permitted through Specified STEs

All items of plants as specified by the DGFT. Tallow, fat and/or oils of any animal origin excluding
fish oil.

Tribal Cooperative Marketing Federation of India(TRIFED), NEW Delhi. National Agriculture Coopertive Marketing Federation Of India (NAFED)

Sandalwood items as notified by the DGFT. Red sanders wood in any form. .. ,

Gum Karaya

(b) Restricted Items :- The restricted items are allowed for exports under special licence issued by the DGFT. Some of restricted export items are as follows: Dress materials, ready-made garments, fables or textile its wit imprints of excerpts or verses of the Holy Quran.

Iron ore, manganese ore, and Chrome ore. Crude oil

Tribal Coopertives Marketing Federation of India (TRIFED), New Delhi. Metals and Minerals Trading Corporation (MMTC)

Horses - Kathiawadi, Marwari and Manipuri breeds. , Fresh and frozen silver prom frets of weight less than
300 gms.

Indian oil Corporation Limited.

Paddy (Rice in husk). Seaweeds of all types. ,

(d) Freely Exportable Items :- The freely exportable items, can be exported without an export licence or permission from the DGFT. However, export of such items is subject to certain procedures or conditions.
Item Description Military stores as notified by DGFT Procedures or Conditions 'No objection certificate from the Department of Defence Production and supplies.

Fodder including wheat and rice straw. Chemical fertilizer of all types. Whole human blood and all products derived from it. Silkworm, silkworm seeds and silkworm cocoons. Deoiled groundnut cakes containing more than 1% oil.

(c) Canalised Items :- The canalised items can be, exported without an export licence through designated State Trading Enterprises (STEs). Some of the canalised items are

Exotic birds, Such as bangali finches, White finches and Zebra finches. Bones and bone products

Subject to Pre-shipment inspection; Subject to a certificate from Chemicals and Allied Products' Export ,Promotion Council Subject to registration of contracts with the Agricultural and processed Food products export Development Authority (APEDA)

Basmati Rice

A Note on Open General Licence (Ogl) List Open General Licence (OGL) list contains those items, which can be exported without any restrictions or licensing formalities to all permitted destinations. The following four OGLs are in operation : Copy Right: Rai University

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(a) OGL No.1 :- Applies to export by land to any country adjacent to India and having no sea port of its own. (b) OGL No.2 :- Applies to export of bonafide samples. (c) OGL No.3 :- Applies to the items that can be exported on fulfilment of the conditions against each of the items. I(d) OOL No.4:. Applies to items that can be exported directly by the canalising agency mentioned against each items. A Note on Export Obligation Export obligation means the obligatioI1 of the importer to undertake export of product or products in term of quantity, value or both, as may be prescribed or specified by the licensing or competent authority in order to compensate for the imports undertaken. Objectives of Export Ob1igation (al The main objective of export obligation is to compensate for the outflow of foreign currency due to imports undertaken under certain schemes such as EPCG scheme. (b) The EPCG scheme enables the Indian exporters to import capital goods at 5% customs duty subject to export obligation. Advantages of Export Obligations (a) Accessibility to imported raw materials and capital goods subject to export obligation would enhance the competitiveness of Indian exporters in terms of quality up gradation. (b) Due to, export obligation, importers will be required to export compulsorily. This would increase exports and would generate foreign exchange for the economy. A Note on Counter Trade Counter trade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payments; In the modern economies, most transactions involve monetary payments and receipts, either immediate or deferred. As against this, counter trade refers to a variety of unconventional international trade practices which link exchange of goods, directly or indirectly, in an attempt to dispense -with currency transactions. The Philippine International Trade Corporation (PITC) is tasked with countertrade, an international transaction premised on some form of reciprocity. It is used to leverage government importation with trade and investments to be provided by foreign suppliers. Counter trade helps government offices or other local institutions by facilitating the introduction of investments, technology transfer, research and development, donations, specialized training/skills and related activities without additional cost to the government. Forms of Counter Trade (a) Barter: Barter refers to direct exchange of goods against goods of equalvalue, with no money and no third party involved in it.

(b) Compensation Deal: Under this arrangement, the seller receives a part of the payment in cash and the .rest in products. (c) Buy Back: Under the buy back agreement, the supplier of plant, equipment or technology agrees to purchase goods manufactured with that equipment or technology. (d) Counter purchase : Under the counter purchase agreement, the seller receives the full payment in cash but agrees to spend an equivalent amount of money in that country within a specified period. (d) Trade-for-Debt or Debt-for-Goods. A loan or credit obtained by the government is paid for (fully or partially) in goods or services of the debtor country. (e) Offset. Foreign suppliers commit to introduce investments, technology transfer, training and skills upgrade, research and development, donation or other similar products that will promote the industrial and economic growth of the country as well as provide employment opportunities, support social and civic programs, generate/save foreign exchange, and fund and support environmental projects for sustainable growth. Checklist for Counter-Trade Counter-trade and barter are trading techniques used by countries with a limited supply of foreign currency, but which need to import goods. Instead of paying in precious hard currency, the customer asks to pay in goods. In many cases these will not be goods for which there are already established trading patterns, rather they will be goods that would not otherwise be exported. This will mean that there is unlikely to be a means of pricing them (as there would be, for example, for a fixed grade of a mineral).

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Use a lawyer to write the agreements Use a counter-trade specialist (e.g a commodity trader with counter-trade expertise) Insure the risk of the traders insolvency Arrange payment for sales of the customers (exported) product before you lose control of your goods Use an escrow account for receipts, and export goods to the value of the amount of hard currency in escrow (foreign exchange permission for the escrow account may be needed from the buyers country) Ask the customer to provide a government guarantee for any shortfall of the amounts expected from the proceeds of sale counter-traded goods, especially if you are committing resources to make goods to order Insure the risk of non-honoring of the government guarantee Obtain political risk cover on the buyers country in relation to the risk of frustration of your export contract and on the frustration of the import contract .

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Question Bank
Q.1 Write a note on the Negative List of Export. Q.2 Write a brief note on canalisation of exports. Q.3 Explain Niche Marketing as an export strategy. Q.4 Write note on the Open General Licence (OGL). Q.5 Write note on the Special Economic Zones. Q.6 Write note on the Agriculture Export Zones.

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