Chapter Ome Invoducion to Exports and Inpors © 13 Facilitation of Imports and Augmentation of Exports The Central Gover (DGFT) to advise the government in the formulation of the export and import policy and ment was empowered to appoint the Director General of Foreign Trade to carry out that policy to facilitate imports and augment exports. Provide for Related and Incidental Matters The Act also contains additional provisions empowering the Central Government to take care of related and incidental issues like search, seizure, penalty, confiscation, appeals and On the whole, this Act provides the full framework of formalities, procedures and respective presc exporting out of and importing into India. cd authorities for regulating The Act covers a complete varie including powers of the c EXIM policy, DGFT, Importer/Exporter code number, licensing provisions, seatch, { seinure provisions, penalties for contravention of prescribed provisions, appeals issues related to the complex field of foreign trade al government, provisions of prohibition and restriction, the inspect and revisions, Any foreign trade transaction in India, that is, exports or imports, can be carried out only as per the provisions of this Act. Foreign Exchange Regulation Act, 1973 (FERA) [As amended by the Foreign Exchange Regulation (Amendment) Act, 1993] FERA was an Act implemented to regulate foreign exchange and foreign securities dealings. ‘The main objec of FERA was the conservation of foreign exchange resources of India ation for bette and their proper uti economic development of the nation, ct 0 consolidate and amend the law regulating certain payments, dealings in foreign «and securities, eransactions indirectly affecting foreign exchang export of currency, for the conservation of the foreign exchange resources of the country and the proper utilisation thereofin the interests ofthe economic development of the country. ad the import and The main provisions of this Act were Restrictions on Dealing in Foreign Exchange PERA imp. n exchange was permitted unless ictions on every dealing involving foreign exchange. No dealing in ed by the RBI. Under Section 8, except with eral oF special permission of the Reserve Bank, no person, other than an forci authorised dealer, could deal in India. Also, no person residing in India, other than an authorise dealer, could outside India, purchase or otherwise acquire, borrow from, sell, transfer or exchange with any person who not is an authorised dealer, any foreign exchange.4 © Export ad import Management Restrictions on Payments in Foreign Currency FERA imposed restrictions on making payments in foreign currency. Under Section 9, any remittance into India from abroad could be made only through an authorised dealer unless the Reserve Bank of India gave a special or general permission to the contrary. Payment for Exported Goods ‘The Act required all exporters to furnish to the prescribed authority (RBI), a declaration in the prescribed form (Form GR) declaring the full export value of the goods or if the full export vaiue of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing marker conditions, expects to receive on, the sale of goods in the overseas market, ‘The exporter also had to affirm in the said declaration that the full export value of the goods has beén, or will (within the prescribed period) be, paid in the prescribed manner, ‘The Act placed restrictions on import and export of certain currencys»payment for lease, hire or other arrangement, export and transfer of secutities. Besides, the Act also provided for Authorised Dealers and Moneychangers in forcign exchange. “This Act was too strict and its provisions seemed to strangulate the users, as all violations under it were treated as criminal offenses. The Act was replaced with another more liberal and reasonable Act, known as Foreign Exchange Management Act (FEMA), in the year 1999, Foreign Exchange Management Act, 1999 (FEMA) ‘An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting orderly development and maintenance of foreign exchange market in India, ‘The Act aims to regulate and manage forcign exchange transactions through the RBI. ‘As per the Act, except with the general or special permission of the Reserve Bank, no person can a. Deal in or transfer any foreign exchange or foreign security to any person who is not authorized. b. Make any payment to or for the credit of any person residing outside India in any manner. ©. Receive otherwise through an authorised person, any payment by order or on behalf of any person residing outside India in any manner.Chapter Ome Invoducton to Expats and Inport © 1S dd. Enter into any financial cransaction in India as consideration for or in association with acquisition or creation or transfer ofa right to acquire, any asset outside India by any person ‘The Act maintains that no person residing in India can acquire, hold, own, possess or transfer any foreign exchange, foreign security or immovable property situated outside India, except with the general or special permission of the Reserve Bank. Other salient features of the Act are: Current Account Transactions ‘Any person may sell or draw foreign exchange to or from an authorised person, if such sale cor withdrawl is a current account transaction. Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions, for current account transactions as may be prescribed, Capital Account Transactions Any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction, The Reserve Bank may, in consultation with the Central Government, specify: a. Any class or classes of capital account transactions which are permissible b. The limit upto which foreign exchange shall be admissible for such transactions; provided that the Reserve Bank shall not impose any restriction on the withdrawal of forcign exchange for payments due on account of amortisation of loans or for depreciation of direct investments, in the ordinary course of business. Powers of the RBI ‘The Reserve Bank can, by regulation prohibit, restrict or regulate the following: a. Transfer or issue of foreign security by a person resident in India. b, Transfer or issue of any security by a person resident outside India. c. Transfer or issue of any security or foreign security by any branch, office or agency in India, of a person resident outside India. d. Any borrowing or lending in foreign exchange in whatever form or by whatever name known, €. Any borrowing or tending in rupees in whatever form or by whatever name known, between a person resident in India and a person resident outside India, £Deposits between persons resident in and outside India,16 © Expr and Inport Management & Export, import or holding of currency or currency notes. h, Transfer of immovable property outside India, other than a lease nor exceeding five years, by a person reSident in India. i, Acquisition or transfer of immovable property in India, other than alease not exceeding five years, by a person resident outside India j. Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred (i) by a person resident in India and owed to a person resident outside India or (ii) by a person resident outside Ini Export of Goods and Services Every exporter of goods must: a. Furish to the Reserve Bank or o such other authority a declaration in such form and in such manner as may be specified, containing true and correct material particulars, including the amount representing the full export value of, ifthe Full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India. b, Furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realisation of the export proceeds by such exporter. “The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market-conditions, is received without any delay, direct any exporter to comply with such requirements as it deems fit. Every exporter of services shal furnish to the Reserve Bank oF to such other authorities a declaration in such form and in such manner as may be specified, containing the true and correct material, particularly in relation to payment for such services. ‘Where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and in such manner, as may be specified by the Reserve Bank. Customs Act, 1962 “This Act provides for levy and collection of customs duty and prescribes procedures for import and export of goods. The main objective of this Act was to consolidate and amend. the law relating to Customs in India. Customs duty is an indirect tax that is paid at the time of importing or exporting any goods. The basic law for levy and collection of customs duty is the Customs Act, 1962 on imports and exports of goods from India.Chapter One Insoducton to Exports and Inpos © 17 “The Acc uses customs laws and levy of customs duty as means to achieve the following: Restricting imports for conserving forcign exchange. # Protecting Indian industry from undue competition. # Prohibiting import and export of goods for achieving policy objectives of the Government. Regulating exports. Coordinating legal provisions with other laws dealing with foreign exchange such as Foreign Trade (Development & Regulation) Act, Foreign Exchange Regulation Act, Conservation of Foreign Exchange and Prevention of Smuggling Act, etc. In addition to the Customs Act, 1962, there is the Customs Tariff Act, 1975 that prescribes the rates of duties of Customs Duty on import and export of various goods. ‘This Act has two schedules: Schedule 1 classifies the goods for import and prescribes the rate of import duties, ‘Schedule 2 classifies the goods for export and prescribes the rate of export duties. ‘The Act also provides for additional duties, preferential duties, anti-dumping duties, protective duties etc. Various rules, regulations and notifications are used to govern the customs laws. A brief description of each is given, below: Rules “The Central Government has the power to make rules in order to carry out the purposes of. the Act. Various rules have been framed under these rules such as Customs Valuation Rules, 1988 for valuation of imported goods for calculating custom duty payable, Customs and Central Excise Duties Drawback Rule, 1971 for calculating rates of duties as drawbacks oon exports, etc. However, if there is any conflict between the provisions of the Act and Rules, the provisions of the Act shall prevail. Regulations “The Central Board of Excise and Customs (CBEC) have been empowered to make regulations to carry out the provisions of the Act. However, if there is any conffict between the provisions of the rules and regulations, the provisions of the rules shall prevail. Various regulations have been framed such as Customs House Agents Licensing Regulations, 1984 for regulating the functioning of custom house agents. Notifications “The Central Government may also issue notifications in the Official Gazette for the purposes of the Act. The Central Government has several notifications under various sections such as partial or full exemption from duty, prohibiting certain imports and exports.