FOREIGN TRADE POLICY &HANDBOOK OF PROCEDURES

2004-2009 (ANNUAL SUPPLEMENT FOR 2006-07 )

This Annual Supplement is the second in the series supplementing

the Foreign Trade Policy 2004-09. The new revised Foreign Trade
Policy Annual Supplement announced by the Hon'ble Minister of
Commerce & Industry on 7th April 2006.

Following are the highlights of the Foreign Trade Policy and Hand
Book of Procedures 2006 revised up to 2009, with particular
reference to Gems and Jewellery. Following are the only briefs of
the Foreign Trade Policy and Procedures. For details kindly refer
the relevant paragraphs and chapters mentioned in these highlights.

Major highlights of Policy are as under: -

i. Introduction of Focus Market and Focus Product Schemes, which

allows 2.5% credit facility of the FOB value subject to the terms and
conditions of the scheme.
ii. Feature of Transfer of both the scrip and the imported inputs have
been added to Served from India Scheme with other aspects.
iii. Value addition norms for Gems and Jewellery have been reduced
from 7% to 4.5% with other relaxations.
iv. Features of the Advance Licence scheme and DFRC have been
clubbed to evolve a new scheme to named Duty Free
Authorisation Scheme. The scheme allows import of inputs before
exports. It further allows the transferability of scrip once the export
obligation is completed.
v. Incidence of Service tax and FBT shall be factored in various duty
neutralisation and remission schemes.
vi. Delay in refunds would be liable for interest.
vii. Flexibility in relation to maintenance of average export obligation
under EPCG Scheme with extension of period of export obligation by
2 years subject to the conditions in the scheme.

Because of rich tradition of craftsmanship, enterprise and

availability of skilled, low cost manpower India has the potential to
become an international hub for Gems and Jewellery.

This number of measures introduced for facilitating export of value

added products catering to changing needs of the market and
facilitating easier product movement across the border s a n d
allowing import of precious metal scrap for refining are as under:-
(a) With a view to ensure productive utilization of the large unutilised
melting, refining and jewellery-making production capacity,
import of precious metal scrap and used jewellery will now
 be allowed for melting, refining and re-export of jewellery.
However, such import will not be allowed through hand baggage.
(b) Gems & Jewellery exporters will now be allowed to r e-import the
rejected precious metal jewellery subject to refund of duty
exemption benefits on the inputs only and not the duty on
jewellery as was being done earlier.

(c) Jewellery unsold in the foreign markets because of changing

designs and other such factors, the Gems & Jewellery exporters
will now be allowed to export jewellery on consignment basis.
(d) Gems & Jewellery exporters will now be allowed to export cut
and polished precious and semi-precious stones for
treatment to enhance the quality and afford higher value in the
international market. However such cut and polished precious
and semi-precious stones will subsequently be required to be re-
imported within a period of 120 days.
(e) With the increase of gold and silver prices in the international market over the
past few years, the present value addition norms on export of gold & silver
jewellery appear highly unrealistic. The value addition norm for gold & silver
jewellery has been reduced from 7% to 4.5%.

Further the following additions/amendments have been

announced to boost the exports of our industry.

CHAPTER 2
Particulars Headings Amendments and Additions Foreign Trade Policy
FTP/PRO and Para 2006-07 2005-06
Second Hand Addition of a Import of second hand capital Import of second hand
Goods Para 2.17 new PARA goods, including refurbished/ re- capital goods, including
of FTP conditioned spares shall be refurbished /re-
allowed freely. However, second conditioned spares
hand personal computers/ shall be allowed freely.
laptops, photocopier machines,
air conditioners, diesel
generating sets will only be
allowed against a license issued
in this behalf.

Import of re-manufactured
goods shall be allowed only
against a licence issued in this
behalf.
Easing Of -Restoration of Pending the finalisation of Single Deleted
Documentation Earlier Para Common Document (SCD) for
Requirement international trade, the
Government Departments dealing
Para 2.47 of FTP with exports and imports will
honour the permission
license/certificate issued by the
other Government departments
based on the verification of the
export documents Like shipping
bill, bank realization certificate,
Packing list, bill of lading etc .and
will not insist upon fresh
submission of these documents.
Chapter 3
Star Export House Double Exporters in the Small Scale O n l y M a n u f a c t u r e r
Para 3.5.2 of FTP - weightage Industry/…………. exporters were allowed
Note 1 allowed to The Double Weightage shall be double weightage.
Merchant admissible to Merchant as well as
Exporters Manufacturer Exporters. However,
a shipment can get double
weightage only once in any one of
the above categories.
-

In case the recognition

Note 1.a Transfer of export performance is claimed based upon
from one to another is not the current year’s
permitted. Therefore disclaimer export performance,
Note 4. system shall not be allowed for same shall be
counting of export turnover. considered only in case
the exporter has export
Recognition of One Star Export performance during
House status shall be considered any one of the
only in case the exporter has preceding three years
minimum export performance of as well.
Rs. 15 Crores or more during
any two years out of the current
and preceding three years.
Privileges to Star vi. Target plus benefit deleted Entitlement for
Export House consideration under the
Para 3.5.2.1 of FTP Target Plus Scheme;
viii. –Addition Two Star Export Houses and
above shall be permitted to
establish Export Warehouses, as
per the guidelines issued by
Department of Revenue in this
regard.
Services Exports Addition of Services include all the 161 Services include all the
Para 3.6.1 of FTP receipt of tradable services covered under 161 tradable services
payment in the General Agreement on Trade covered under the
Indian Rupees in Services where payment for General Agreement on
such services is received in free Trade in Services
foreign exchange or in Indian where payment for
 foreign exchange or in Indian where payment for
Rupees, which are otherwise such services is
considered as having been paid r e c e i v e d i n free
for in free foreign exchange by foreign exchange.
RBI.
SERVED FROM Addition of All Service providers of services All Service providers
INDIA SCHEME receipt of listed in Appendix-10 of Handbook who have a total
Eligibility - Para payment in of Procedures (Vol. I) who have a foreign exchange
3.6.4.2 of FTP Indian Rupees total foreign exchange earning earning of at least
or earning in Indian Rupees Rs.10 lakhs in the
which are otherwise considered preceding or current
as having been paid for in free financial year shall be
foreign exchange by RBI of at eligible to qualify for a
least Rs.10 lakhs in the preceding duty credit entitlement.
or current financial year shall be
eligible to qualify for a duty credit
scrip.
Entitlement -Para Service All Service providers; including All Service providers
3.6.4.3 of FTP Providers Healthcare and Educational (other than hotels and
category Service providers as well as restaurants) shall be
Engine e r i n g P r o c e s s entitled to duty credit
Outsourcing (EPO) and equivalent to 10% of
Knowledge Process the foreign exchange
Outsourcing (KPO) service earned by them in the
providers; of services listed in p r e c e d i n g f i nancial
Appendix-10 of Handbook of year.
Procedures (Vol. I) (other than
service providers covered by Para
3.6.4.4) shall be entitled to duty
credit scrip equivalent to 10% of
the foreign exchange earned by
them in the preceding financial
year.
Remittances Para Addition The foreign exchange earned
3.6.4.3.1 of FTP- through International Credit
Cards and other instruments as
permitted by RBI for rendering of
service by the service providers
shall also be taken into account for
t h e purposes of computation of
duty credit entitlement under the
scheme.
Imports allowed Duty credit Duty credit scrip may be used for Duty credit entitlement
Para 3.6.4.5 of FTP scrip-Imports import of any capital goods may be used for import
liberalized including spares, office equipment of any capital goods
and professional equipment, office including spares, office
furniture and consumables; that equipment and
are otherwise freely importable professional
under ITC (HS) Classification of equipment, office
Export and Import items. The furniture and
imports shall relate to any consumables, related
service sector business of the to the main line of
applicant. business of the
applicant.
Special provisions Benefit Para deleted to extend the benefit The scheme shall not
Para 3.6.4.8 of FTP extended to of the scheme to EOUs, SEZ, be available for 100%
EOUs, SEZ, STPI & EHTP EOUs and units
STPI & EHTP operating under SEZ,
STPI and EHTP
Schemes. The clubbing
of turnover of services
rendered by these units
with the turn over of the
DTA units shall also not
be allowed.
Import under Additional Utilization of duty free credit scrip -
Lease Para 3.6.4.9 benefit earned under the scheme
of FTP financing shall be permitted for
payment of duty in case of import
of capital goods under lease
financing in terms of provision in
Para 2.25 of this Policy.
Target Plus Deleted Benefit withdrawn w.e.f Text not produced
Scheme Para 3.7 31.03.2006
of FTP
FOCUS MARKET Para of 3.9 of
SCHEME FTP - New
Incentive for
export to
specified
countries-
Appendix 37-C

Objective Para 3.9.1 of The objective is to offset the high

FTP freight cost and other disabilities to
select international markets with a
view to enhance our export
competitiveness to these
countries.

Eligibility Para 3.9.2 of Exports of all products to the

FTP notified countries shall be entitled
for duty credit scrip equivalent to
2.5% of the FOB value of exports
for each licensing year
commencing from 1st April 2006.
The scrip and the items imported
against it would be freely
transferable.

Para 3.9.2.1 of Under the Scheme, export to all

FTP countries as given in Appendix-37-
C of Handbook of Procedures
(Vol. I) shall qualify for export
benefits as per Para 3.9.2 above.
Items which are restricted or
prohibited for export under
Schedule-2 of the Export Policy in
the ITC (HS) Classification of
 the ITC (HS) Classification of
Export and Import items shall not
be eligible for any benefits under
Para 3.9.2.

Para 3.9.2.2 of The following exports shall not be

FTP taken into account for calculation
of export performance or for
computation of entitlement under
the scheme:a. Export of imported
goods covered under Para 2.35 of
the Foreign Trade Policy or
exports made through
transshipment.b. Export turnover
of units operating under SEZ/EOU/
EHTP/STPI/ BTP Schemes or
supplies made to such units or
products manufactured by them
and exported through DTA units.c.
Deemed Exports.d. Service
Exports.e. Diamonds and other
precious, semi precious stones.f.
Gold, silver, platinum and other
precious metals in any form,
including plain and studded
Jewellery.g. Ores and
Concentrates, of all types and in
all forms.h. Cereals, of all types.i.
Sugar, of all types and in all
forms.j. Crude / Petroleum Oil &
Crude / Petroleum based Products
covered under ITC HS codes 2709
to 2715, of all types and in all
forms.

Para 3.9.2.3 of Exporters shall have the option to

FTP apply for benefit either under the
Focus Market Scheme or under
the Focus Product Scheme or
under Vishesh Krishi and Gram
Udyog Yojana in respect of the
same exported product/s.

Imports allowed Para 3.9.3 of The Duty Credit may be used for
FTP import of inputs or goods including
capital goods, provided the same
is freely importable under ITC
(HS). Imports from a port other
than the port of export shall be
allowed under TRA facility as per
the terms and conditions of the
notification issued by Department
of Revenue.
Cenvat /Drawback Para 3.9.4 of Additional customs duty/excise
FTP duty paid in cash or through debit
under this scrip shall be adjusted
as CENVAT Credit or Duty
Drawback as per rules framed by
the Department of Revenue.

Special provisions Para 3.9.5 of Government reserves the right in

FTP public interest, to specify from time
to time the export products or
exports to such countries, which
shall not be eligible for calculation
of entitlement.
FOCUS PRODUCT Para3 . 1 0 o f
SCHEME FTP - N e w
Incentive for
export to
specified
products
Appendix 37-D

Para 3.10.1 of
Objective FTP The objective is to incentives
export of such products which
have high employment intensity in
rural and semi urban areas so as
to offset the inherent infrastructure
inefficiencies and other associated
costs involved in marketing of
these products.
Para 3.10.2 of
Eligibility FTP
Exports of notified products to all
countries shall be entitled for duty
credit scrip equivalent to 2.5% of
the FOB value of exports for each
licensing year commencing from
1st April, 2006. However only 50%
of the export turnover of such
products shall be counted for
benefits under the Scheme. The
scrip and the items imported
against it would be freely
Para 3.10.2.1 transferable.
of FTP
Under the Scheme, export of such
products as given in Appendix-37-
D of Handbook of Procedures
(Vol. I) shall qualify for export
benefits as per Para 3.10.2 above.
(Provisions of para 3.9 stand
applicable)
Chapter 4
ADVANCE Nomenclature of the erstwhile
AUTHORISATION Advance License changed It allows
SCHEME transferability of scrip once the
(ERSTWHILE export obligation is complete. The
ADVANCE scheme will come into effect from
LICENCE 1st May, 2006
SCHEME)
Advance Addition However, the Director General of
Authorization Para Foreign Trade, by means of Public
4.1.3 of FTP Notice, may in public interest
exclude any product (s) from the
purview of advance Authorization.
Para 4.1.6 of FTP Relaxation for However, for physical exports for However, for physical
supplies to SEZ which payments are not received in exports for which
under the freely convertible currency, the payments are not
scheme same shall be subject to value received in freely
addition as specified in Appendix- convertible currency,
11 of Handbook of Procedures the same shall be
(Vol.1). In case of supplies to subject to value addition
SEZ Units, irrespective of t h e a s s p e c i f i e d in
currency of realization, Advance Appendix-1 1 o f
Authorization shall be issued Handbook (Vol.1).
with a positive value addition.
Provision for BIFR Para 4.1.9 A of Export Obligation Period Extension, Not there
units FTP as mentioned above, shall be
without the payment of composition
fee for cases where rehabilitation
package has been announced/
approved.
Prohibited Items Para 4.1.13 of The State Trading Enterprises are Not there
FTP also allowed to sell the goods on
High Sea Sale basis to the holders
of Advance Authorisation/ DFIA/
DFRC
Duty Entitlement Para 4.3.1 of Under the DEPB scheme, an Under the DEPB
Passbook Scheme FTP – Relaxation exporter may apply for credit, as a scheme, an exporter
(DEPB) for SEZ supply specified percentage of FOB value may apply for credit, as
of exports, made in freely a specified percentage
convertible currency o r t h e of F OB value of
payment made from the Foreign exports, made in freely
Currency Account of the SEZ convertible currency.
unit in case of supply by DTA to
SEZ unit.
DUTY FREE Para 4.4.1 of A Duty Free Import Authorisation is
IMPORT FTP – N e w l y issued to allow duty free import of
AUTHORISATION Inserted inputs, which are used in the
SCHEME manufacture of the export product
(making normal allowance for
wastage), and fuel, energy, catalyst
etc. which are consumed or utilised
 etc. which are consumed or utilised
in the course of their use to obtain
the export product. However, the
Director General of Foreign Trade,
by means of Public Notice, may in
public interest, exclude any
product(s) from the purview of this
scheme. This scheme will come
into force from 1st May, 2006.
Entitlement Para 4.4.2 of The Authorisation shall be issued
FTP - addition on the basis of inputs and export
items given under Standard Input
and Output Norms (SION). The
import entitlement shall be limited
to the quantity mentioned in SION.

Duty Free import of mandatory

spares upto 10% of the CIF value
of Authorisation which are required
to be exported/ supplied with the
resultant product may also be
allowed under the scheme.

Such Authorisation can be issued

either to a manufacturer exporter or
merchant exporter tied to
supporting manufacturer(s):
i) for Physical exports (including
exports to SEZ); and/ or
ii) for Intermediate supplies; and /or
iii) to the main contractor for supply
of goods to the categories
mentioned in paragraph 8.2 (b), (c),
(d), (e), (f), (g), (i) and (j) of the
Policy; for import of inputs required
in the manufacture of goods. In
addition, in respect of supply of
goods to specified projects
mentioned in paragraph 8.2 (d), (e),
(f), (g) and (j) of the Policy, a DFIA
can also be availed by the s u b-
contractor of the main contractor to
such project provided the name of
the sub contractor(s) appears in the
main contract.

Such Authorisation can also be

issued for supplies made to United
Nations Organisations or under the
Aid Programme of the United
Nations or other multilateral
agencies and paid for in free
foreign exchange.
 A manufacturer exporter or a
merchant exporter tied up with the
supporting manufacturer can apply
for the Authorisation under the
Scheme. Before affecting exports
under scheme, an applicant is
required to file an application to the
Regional Authority.

Such Authorisation shall be initially

issued with actual user condition
and shall be exempted from
payment of basic custom duty,
additional customs duty, education
c e s s , a n t i-dumping duty and
safeguard duty, if any.

Import items Para 4.4.3 of Prohibited items of imports

FTP mentioned in ITC(HS) shall not be
- Addition imported under the Authorisation
issued under the Scheme.
Duty Free procurement from
domestic market will be available
as in case of advance Authorisation
scheme against ARO/ invalidation
letter/back to back inland letter of
credit etc.

Provisions of paragraph 4.1.13 of

FTP shall be applicable for the
DFIA holder.
Value Addition Para 4.4.4 of A minimum 20% value addition
FTP - Addition shall be required for issuance of
such Authorisation except for items
in gems and jewellery sector for
which value addition as given in
paragraph 4A.2.1 of the Handbook
of Procedures (Vol.1) and items for
which higher value addition is
prescribed under Advance
Authorisation Scheme shall be
applicable.
Export Obligation Para 4.4.5 of Procedure related to fulfilment of
FTP- Addition Export Obligation under the
scheme and the time period
allowed to fulfil it has been laid
down in chapter 4 of Handbook of
Procedure, Vol. I

Transferability Para 4.4.6 of Once export obligation has been

FTP - Addition fulfilled, request for transferability of
the Authorisation or the inputs
imported against it may be made
before the Regional Authority.
Once, transferability is endorsed,
the Authorisation holder will be at
liberty to transfer the duty free
inputs, other than fuel and any
other item(s) notified by DGFT for
this purpose.
However, in respect of Standard
Input Output Norms, which are
subject to “actual user” condition or
for import of fuel under the general
norms or where Standard Input
Output Norms allow import of
Acetic Anhydride, Ephedrine and
Pseudo Ephedrine, DFIA shall be
issued with actual user condition for
these inputs and no transferability
shall be allowed for these inputs
even after fulfilment of the export
obligation. Transfer of items that
are restricted for imports or the
DFIA for such items shall be
allowed under the DFIA scheme
only against a specific import
licence for that item.
However, for fuel, the import
entitlement may be transferred only
to the companies, which have been
granted Authorization to market fuel
by the Ministry of Petroleum &
Natural Gas.

CENVAT Facility Para 4.4.7 of No CENVAT credit facility shall be

FTP – Addition available for inputs either imported
or procured indigenously against
the Authorization.

Drawback Facility Para 4.4.8 of The drawback shall be available in

FTP – Addition respect of any of the duty paid
material, whether imported or
indigenous, used in the goods
exported, as per the drawback rate
 exported, as per the drawback rate
fixed by Ministry of Finance. The
drawback shall, however, be
restricted to the duty paid materials
mentioned in the application.
Facility of Para 4.20.5 of H o w e v e r clubbing of erstwhile
Clubbing FTP – Addition Value based Advance licences
shall not be allowed.
Export of Cut & Para 4A.2 of FTP Gem and Jewellery exporters may
Polished - Addition be permitted to send cut &
Diamonds for polished diamonds each weighing
Certification/ 0.25 of a carat and above for
Grading certification/grading to Indian
Diamond Institute, Surat, Gujarat.
In addition, Gem and Jewellery
exporters with a track record of at
least three years and having an
annual average turnover of Rs.5
crores and above during the
preceding three licensing years or
the authorized offices /agencies in
India of Gemological Institute of
America (GIA), The Robert
Mouawad Campus, International
Gemological Institute (IGI) and
European Gemological Laboratory
(EGL) in USA, Hoge Road Voor
Diamond, Antwerp, (HRD), World
Diamond Centre of Diamonds High
Council, Antwerp, Belgium, Central
Gem Laboratory, Miyagi Building,
5-15-14 Ueno Taito-Ku, Tokyo,
Japan, American Gem Society
Laboratories (AGS Laboratories),
8917 West Sahara Avenue, Las
Vegas, Nevada 89117 and
Diamond Trading Company,
Maidenhead, U.K.
may also be permitted to export cut
& polished diamonds each
weighing 0.25 of a carat and above
to the said
laboratories/agencies for the
purpose of certification/grading
reports by them with a condition
that the same should be re
imported with the ertificate/grading
reports issued by them without any
import duty at the time of re-import.

GEMS & JEWELLERY Insertion of following paras: -

Export of cut & Para 4A.20.1 of Gems & Jewellery exporters shall
Polished precious FTP be allowed to export cut and
and semi-precious polished precious and semi-
stones for precious stones for the treatment
stones for precious stones for the treatment
treatment and re- and re-import as per customs rules
import and regulations.
Import of precious Para 4A.21 of Import of precious metal
metal scrap/used FTP scrap/used jewellery shall be
jewellery for allowed for melting, refining and re-
melting and re- export of jewellery as per the
export of jewellery procedure laid down in the
Handbook of Procedures, Vol. I..
However, such import shall not be
allowed through hand baggage.
Re-import of Para 4A.22 of Gems & Jewellery exporters shall
rejected jewellery FTP be allowed to re-import the rejected
precious metal jewellery as per the
procedure laid down in Para 4A.32
and 4A.32.1 of Handbook of
Procedure, Vol. I.
Export of Para 4A.23 of Gems & Jewellery exporters shall
Jewellery on FTP be allowed to export jewellery on
consignment basis consignment basis as per the
procedure given in chapter 4 of the
Handbook of Procedures, Vol. I
and as per the Customs rules and
regulations in this behalf.
Chapter 4, Para Entitlement The CIF value of one or more such The CIF value of one or
4.7.1 of HBoP authorisations shall be 500% of the m o r e s u c h
FOB and/or FOR value of authorisations shall be
preceding year exports and/or 200% of the FOB and/or
supplies in case of status holders FOR value of preceding
and Rs. 5 crore or 500% of the year exports and/or
FOB and/or FOR value of supplies in case of
preceding year exports and/or status holders and Rs. 1
supply, whichever is more, for crore or 100% of the
others. However, in cases where FOB and/or FOR value
NC has already ratified the norms of preceding year
for the same export and import exports and/or supply,
products in respect o f a n whichever is more, for
authorisation obtained under others. However, in
paragraph 4.7, such norms shall be cases where ALC has
valid for a period of six months already ratified the
reckoned from the date of norms for the same
ratification. The authorisation export and import
holder in such cases shall be products in respect of a
entitled for further authorisation(s) licence obtained under
as per the norms ratified by NC paragraph 4.7, such
without the need for subsequent norms shall be valid for
ratification by NC. In such cases a period of six months
the applicant would file the reckoned from the date
application under Adhoc Norms of ratification. The
Fixed category. However, NC licence holder in such
should ensure that such adhoc cases shall be entitled
norm(s), if not notified already, are for further licence(s) as
notified within a period of one per the norms ratified by
month after six months of ALC without the need
ratification of such adhoc norm(s). for subsequent
 ratification of such adhoc norm(s).
Entitlement Para 4.7.2 0f Once the norms are fixed by NC,
HBoP - Addition the value limits mentioned in sub
paragraph 4.7.1 above would not
be applicable to Advance
Authorizations issued under this
paragraph. Such authorizations,
subsequent to fixation of norms by
NC, may be enhanced.
It is mandatory for the industry
to provide production data etc.
as may be required
DGFT/EPC for fixation of SION.
Otherwise, the applicant shall
not be allowed to take the benefit
of Advance Authorization
scheme for taking repeat
advance authorization on self-
declared basis.
Licence in Excess Para 4.7.5 of The applicant shall give an
of Entitlement HBoP - Addition undertaking that he shall abide by
the norms fixed by NC a n d
accordingly pay duty, together with
15% interest, on the unutilised
inputs as per norms fixed by NC.
However the holder of the
authorisation has the option to
undertake additional export
obligation in proportion to the
excess unutilized inputs. In case
the application is rejected by the
NC, then the authorization holder
shall pay the customs duty
saved along with 15% interest on
the imported inputs.
In addition, an amount
equivalent to 3% of the CIF value
of unutilised imported material
shall be required to be deposited
through a TR in the authorised
branch of Central Bank of India
indicating the “Head Account:
1453, Foreign Trade and Export
Promotion and Minor Head 102”.
The Authorisation holder shall
also be required to obtain a
separate import licence f o r
regularisation of the excess
imported input(s). However, the
for subsequent
ratification by ALC. In
s u c h c a s e s the
applicant would file the
application under Adhoc
Norms Fixed category.
Once the norms are
fixed by ALC, the value
limits mentioned in sub
paragraph 4.7.1 above
would not be applicable
to Advance licence
issued under this
paragraph. Such
licences subsequent to
fixation of norms by
ALC, may be enhanced
by
The applicant shall give
an undertaking that he
shall abide by the norms
fixed by NC and
accordingly pay duty,
together with 15%
interest, on the
unutilised inputs as per
norms fixed by NC.
However the holder of
the licence has the
option to undertake
additional export
obligation in proportion
to the excess unutilized
inputs
 imported input(s). However, the
provisions of this sub-paragraph
shall not be applicable if the
unutilised imported material was
freely importable on the date
of import.
Advance Para 4.13 of The application for grant of The application for grant
Authorization or HBoP - Addition Advance Authorisation or DFRC or of Advance licence or
DFRC or DFIA for DFIA for Intermediate supply may DFRC for Intermediate
Intermediate be made on the basis of a tie-up supply may be made on
Supplies agreement with the exporter the basis of a tie-up
(physical / deemed) holding an agreement with the
Advance authorization or DFRC or exporter
DFIA. The Regional Authority (physical/deemed)
concerned shall consider such holding an Advance
requests. The Advance licence or DFRC. The
Authorization or DFRC or DFIA for licensing authority
Intermediate supply shall be issued concerned shall
after making the Authorisation/ consider such requests.
Certificate invalid for direct import T h e A d v a n c e
of items to be supplied by the Authorization or DFRC
intermediate manufacturer. In such for Intermediate supply
cases, a copy of the invalidation shall be issued after
letter will be given to the making the invalid for
Authorization/Certificate holder and direct import of items to
copy thereof will be sent to the be supplied by the
intermediate suppliers well as the intermediate
Regional Authority of the manufacturer. In such
intermediate supplier. The cases, a copy of the
Authorization / Certificate holder invalidation letter will be
in such case has an option either given to the license
to supply the intermediate holder and copy thereof
product to holder of Advance will be sent to the
authorization / DFRC / DFIA or to intermediate supplier as
e x p o r t ( p h y s i c a l / d e e m e d) well as the licensing
directly. However, once the authority of the
Electronic message transfer intermediate supplier.
facility among the Regional The licence holder in
Authorities becomes fully such case has an option
operational, the requirement of either to supply the
sending a copy of the intermediate product to
invalidation letter/ARO to the holder of Advance
jurisdictional Regional Authority licence or to export
shall not be required. (physical/deemed)
directly.
Redemption Para 4.26 of After redemption, the Regional
HBoP - Addition Authority shall forward a copy of
the redemption letter indicating the
shipping bill number(s), date(s),
FOB value in Indian rupees as per
shipping bill(s) and description of
export product to the Customs
Authority at the port of registration.
Such details shall also be placed
by the zonal offices in their
website immediately after
issuance of the export obligation
discharge/ redemption letter/No
Bond Certificate and by DGFT
Hq. in DGFT website on monthly
basis for the Customs Authority
to access it from the website.
Before discharging BG/LUT against
Physical Exports, the Customs
shall verify that the details of the
exports as given in the
“Redemption Certificate”, are as
per their records. However before
discharging BG/LUT against
Intermediate Supplies and Deemed
Exports, the Customs shall verify
the details of the supplies from the
Central Excise Authorities/Bond
Officer.
Ordinarily, redemption of BG/LUT
shall not preclude the customs
authority from taking action against
the Authorization holder for any
misrepresentation, mis-declaration
and default detected subsequently.
Further the Regional Authority
shall also take action against the
Authorization holder in case of
non-submission of Appendix 23,
duly filled in, as stipulated in
Paragraph 4.30 of this Handbook
or for any misrepresentation,
mis-declaration And default
detected subsequently in the
details declared and furnished in
Appendix 23. An endorsement to
this effect shall be made by the
Regional Authority in the
redemption certificate.
After redemption, the
Regional Authority shall
forward a copy of the
redemption letter
indicating the shipping
bill number(s), date(s),
FOB value in Indian
rupees as per shipping
bill(s) and description of
export product to the
Customs Authority at
the port of registration.
Before discharging
BG/LUT against
Physical Exports, the
Customs shall verify that
the details of the exports
as given in the
“Redemption
Certificate”, are as per
their records. However
before discharging BG/
L U T a g a i n s t
Intermediate Supplies
and Deemed Exports,
the Customs shall verify
the details of the
supplies from the
Central Excise
Authorities/Bond Officer.
Ordinarily, redemption
o f B G /LUT shall not
preclude the customs
authority from taking
action against the
Authorisation holder for
any misrepresentation,
mis-d e c l a r a t i o n a n d
default detected
subsequently
Regularization of Para 4.28 (v) of The Regional Authority shall
Bonafide Default HBoP – Addition compare the relevant
portion of Appendix-2 3 d u l y
verified and certified by
Chartered Accountant with that
of norms allowed in the
Authorisation(s) and the actual
quantity imported against the
Authorisation(s) in the beginning
of the financial year for all such
Authorisations redeemed in the
preceeding licensing year. In this
verification process, in case if it
is found that the Authorisation
holder has consumed lesser
quantity of inputs than imported,
the authorisation holder shall be
liable to pay customs duty on
the unutilized value of imported
material alongwith interest @
15% per annum thereon or effect
additional export within the
export obligation period.

Maintenance of Para 4.30 of E v e r y A d v a n c e Authorisation Every Advance

Proper Accounts HBoP - Addition holder shall maintain a true and Authorisation holder
proper account of consumption and shall maintain a true and
utilisation of duty free imported / proper account of
domestically procured goods consumption and
against each authorisation as utilisation of
prescribed in Appendix-23. These domestically procured
records are required to be sent goods against each
to the concerned Regional authorisation as
Authority(ies) at the beginning prescribed in Appendix-
of each licensing year for all 23.
those authorisations, which have
been redeemed in the previous Such records should be
licencing year. However, these preserved for a period of
records in the said format are at least three years
required to be submitted for from the date of
authorisations issued on or after redemption.
13-05-2005. Such records should
be preserved for a period of at least
three years from the date of
redemption.
Application for Para 4.43 of An application for grant of credit An application for grant
DEPB HBoP under DEPB may be made to the of credit under DEPB
Regional Authority concerned in may be made to the
the form given in ‘Aayaat Niryaat Regional Authority
Form’ alongwith the documents concerned in the form
prescribed therein. The agency given in ‘Aayaat Niryaat
commission shall be allowed for Form’ alongwith the
the DEPB entitlement upto the documents prescribed
limit of 12.5% of FOB value only. therein. The FOB value
The FOB value in free foreign in free foreign exchange
 The FOB value in free foreign
exchange shall be converted into
Indian rupees as per the exchange
rate for exports, notified by Ministry
of Finance, as applicable on the
date of order of “Let Export” by the
Customs.
Application for Para 4.43B of An application for grant of credit for
DEPB HBoP supplies from DTA to SEZ can be
made by the DTA unit or the SEZ
unit. The DTA unit may claim the
benefits either from the Regional
Authority or the Development
Commissioner concerned.
Frequency of Para 4.48 of All the shipping bills in any one
Application HBoP application must relate to exports
made from one Custom House
only. There is no limit on the
number of shipping bills which can
be filed through EDI mode in a
single application.
Duty Free Import Para 4.54 to The Policy relating to the Duty Free
Authorization Para 4.72 of Import Authorisation Scheme is
(DFIA) Scheme HBoP – N e w l y prescribed in Chapter 4 of the
inserted in HBoP Policy.
Para 4.55 of In case of export of gold /silver /
HBoP platinum jewellery and articles
thereof, the quantity, wastage and
the value addition norms shall be
as prescribed in paragraph 4A of
the Policy and Handbook of
Procedure(vol.1).
Value Addition Para 4A.2.1 of The minimum value addition shall The minimum value
HBoP be as mentioned below addition shall be as
mentioned below:
S.No. Item of Export Minimum S.No. Item of Export
Value Addition Minimum Value Addition
a) Plain gold/platinum /silver
jewellery/ Articles 4.5% and
ornaments like Mangalsutra
Containing gold and black beads/
Imitation stones, precious stones
in free foreign exchange
shall be converted into
Indian rupees as per the
exchange rate for
exports, notified by
Ministry of Finance, as
applicable on the date of
order of “Let Export” by
the Customs.
An application for grant
of credit for supplies
from DTA to SEZ can be
made by the DTA unit or
the SEZ unit. or the
Development
Commissioner
concerned.
The applicant may file
one or more application
subject to the condition
that each application
shall contain not more
than 25 shipping bills.
All the shipping bills in
any one application
must relate to exports
made from one Custom
House only. This limit
shall not apply to t h e
applications filed
through EDI mode.
a)Plain gold/ platinum /
silver jewellery/Articles
7% and ornaments like
Mangalsutra Containing
gold and black beads/
 Imitation stones, precious stones gold and black beads/
and semi precious stones, cubic Imitation stones,
zirconia , diamonds, precious & precious stones and
semi-precious stones. semi precious stones,
cubic zirconia,
diamonds, precious &
semi-precious stones.
Value Addition- Appendix –14-I-C The minimum value addition on
Sector Specific – Sr. No.11 - each consignment shall be in terms
Requirements for of para 4.A.2.1 of the Hand Book of
EOU Units Gem and Procedures.
Jewellery
Products -
Addition
Export Against Para 4A.15 of In case of direct supply of In case of direct supply
Supply by Foreign HBoP gold/silver/platinum, alloys, findings of gold/silver/platinum,
Buyer and mountings of alloys, findings
gold/silver/platinum and plain semi- and mountings of
finished gold/silver/platinum gold/silver/ platinum and
jewellery to status holder/ exporter, plain semi-finished
the Status Holder/exporter shall gold/silver/platinum
furnish a Bank Guarantee/LUT, as jewellery to status
per Customs Rules and holder/ exporter, the
regulations to the Customs Status Holder/ exporter
equivalent to the Customs Duty shall furnish a Bank
leviable on imported gold/ silver/ Guarantee as per
platinum, alloys, findings and Customs Rules a n d
mountings of gold/ silver/ platinum regulations to the
and plain semi-finished gold/ silver/ Customs equivalent
platinum jewellery etc. to the Customs Duty
leviable on imported
gold/ silver/ platinum,
alloys, findings and
mountings of gold/
silver/ platinum and
p l a i n s e m i -finished
gold/silver/ latinum
jewellery etc.

Export Through Para 4A.17 of Personal Carriage of gems & Personal Carriage of
Exhibitions/Export HBoP – Para jewellery or export through gems & jewellery
Promotion 4A.18(a) (ii) airfreight/post parcel route for --
Tours/Export of Export Promotion Tours/ photo Personal carriage/
Branded Jewellery shoots/fashion shows overseas: gold/silver/ latinum
jewellery, cut and
Personal carriage/export through polished diamonds,
airfreight/post parcel route of precious, semi-precious
gold/silver/ platinum jewellery, stones, beads and
cut articles as samples upto
and polished diamonds, precious, US$ 100,000 for export
semi-precious stones, beads and promotion tours and
articles as samples upto US$ temporary display/ sale
100,000 for export promotion abroad is also permitted
tours/photo shoots/ with the approval of
Gem & Jewellery &
fashion shows and temporary Gem & Jewellery &
display/ sale abroad is also Jewellery Export
permitted with the approval of Gem Promotion Council
& Jewellery & Jewellery Export subject to the condition
Promotion Council that the promoter would
subject to the condition that the bring back the jewellery
promoter would bring back the / goods or repatriate the
jewellery / goods or repatriate the sale proceeds within 45
sale proceeds within 45 days from days from the date of
t h e d a te of departure through departure through
normal banking channel. In case normal banking channel.
of personal carriage for export In case
promotion tours, the exporter shall of personal carriage for
declare personal carriage of such export promotion tours,
samples to the Customs while the exporter shall
leaving the country and obtain declare personal
necessary endorsement on the carriage of such
E x p o r t C e r tificate issued by samples to the Customs
Jewellery Appraiser of the while leavin g t h e
Customs. In such cases the country and obtain
exporter shall book with the necessary endorsement
nominated agency, within 120 days on the Export
after the export promotion tour or Certificate issued by
the expiry of the stipulated period Jewellery Appraiser of
of 45 days, whichever is earlier, the Customs. In such
gold/silver/ platinum for the cases the exporter shall
purpose of replenishment content book with
against the items sold abroad. the nominated agency,
within 120 days after the
export promotion tour or
the expiry of the
stipulated period of 45
days, whichever is
earlier, gold/silver/
platinum for the purpose
of replenishment
content against the
items sold abroad.
Loan Basis Para 4A.23 The exporter may obtain the The exporter may obtain
required quantity of precious metal the required quantity of
on loan basis subject to furnishing precious metal on loan
of Bank Guarantee f o r t h e basis subject to
precious metal and Bank furnishing of Bank
Guarantee/LUT, as the case may Guarantee to the
be, for the customs duty to the Nominated Agencies for
Nominated Agencies for an amount an amount as may be
as may be prescribed by the prescribed by the
Nominated Agencies. On failure to Nominated Agencies.
effect exports within the period On failure to effect
prescribed, the Nominated exports within the period
Agencies shall enforce the Bank prescribed, the
Guarantee and /or LUT. Nominated
Agencies shall enforce
the Bank Guarantee and
/or LUT.
Replenishment Para 4A.28 of A Replenishment Authorisation for A Replenishment
Authorisation for HBoP – duty free import of consumables, Authorisation for duty
Import of Change equal to 2 % of FOB value of free import of
Consumables exports of the preceding year may consumables, equal to 2
be issued on production of % of FOB value of
Chartered Accountant’s Certificate exports of the preceding
indicating the export performance. year may be issued on
This Authorisation shall be non- production of Chartered
transferable and subject to actual Accountant’s Certificate
user condition. This Replenishment indicating the export
Authorisation shall be valid for duty per f o r m a n c e . T h i s
free import of consumables as Authorisation shall be
notified by the non-transferable and
Customs. subject to actual user
condition. This
Application for import of Replenishment
consumables as given above Authorisation shall be
may be made to the concerned valid for duty free import
Regional Authority in the form of consumables as
given in ‘Aayaat Niryaat Form’. notified by the
Customs.

Application for import of

consumables or import
of plain/ studded
jewellery as given above
may be made to the
concerned Regional
Licensing Authority in
theform given in Aayaat
Niryaat Form.
Personal Carriage Para 4A.29 Personal Carriage of gems & Personal Carriage of
of Gems and jewellery parcels by Foreign Bound gems & jewellery
Jewellery Export Passengers from all EOU/SEZ parcels by Foreign
Parcels units and all firms in DTA through Bound Passengers from
the Airports in Delhi, Mumbai, all EOU/SEZ units and
K o l k a t a , C h e n n a i , Cochin, all firms in DTA through
Coimbatore, B a n g a l o r e , the Airports in Delhi,
 Coimbatore, B a n g a l o r e , the Airports in Delhi,
Hyderabad, Jaipur is permitted. Mumbai, Kolkata,
The procedure for Personal Chennai, Cochin,
Carriage of exports shall be as Coimbatore, Bangalore,
prescribed by Customs. The export Hyderabad, Jaipur
proceeds shall, however, be is permitted. The
realised through normal banking procedure for Personal
channel. For claiming the Carriage of exports shall
Replenishment in case of Personal be as prescribed by
Carriage of Exports by Foreign Customs. The export
Bound passenger, documents shall proceeds shall,
be the same as mentioned under however, be realised
p a r a g r a p h 4 A . 21.2 of this through normal banking
Handbook. Authorised Courier channel. For
Companies are also permitted to claiming t h e
operate on the above lines Replenishment in case
of Personal Carriage of
Exports by Foreign
Bound passenger,
documents shall be the
same as mentioned
under paragraph
4A.21.2 of this
Handbook.
Authorised Courier
Companies are also
permitted to operate
on the above lines.
Diamond & Para 4A.33 of The policy for Diamond and The policy for Diamond
Jewellery Dollar HBoP Jewellery Dollar Accounts is given and Jewellery Dollar
Accounts i n p a r a g r a p h 4A.19 of FTP. Accounts is given in
Detailed procedure for its operation paragraph 4A.20 of
will be notified separately. FTP. Detailed procedure
for its operation will be
notified separately.
Import of Precious Para 4A.34 of The policy for Import of precious Not there
metal scrap/used HBoP metal scrap/used jewellery for
jewellery for melting and re-export of jewellery is
melting and re- given in paragraph 4A.21 of FTP.
export of jewellery The procedure is laid as under:
– New Para
inserted Imported precious metal
scrap/used jewellery shall be
allowed to be cleared by the
Customs subject to the condition:
a) that the importer files a bond
along with Bank Guarantee for a
sum equivalent to one and half
times the customs duty leviable on
the said used jewellery/precious
metal scrap;

b) the importer fulfils the export

obligation and value addition as
notified by Central Government;
 notified by Central Government;

c) such import will not be allowed

through Hand Baggage.

The detailed procedure including

value addition requirement
and export obligation period etc. for
operationalisation of the
Facility under this paragraph shall
be notified separately by DGFT.
Export Obligation 5.4 – Deletion of Deleted The import of capital
under para 4 of 5.4.i goods for creating
EPCG Scheme storage and distribution
facilities for products
manufactured or
services rendered for
export by the EPCG
licence holder would be
permitted under the
EPCG Scheme.
CHAPTER 6
Export and Import 6.2 (a) of FTP – a. An EOU/EHTP/STP/BTP unit
of Goods Insertion of may ------
additional para Procurement and supply of export
for promotional promotion material like brochure /
activities of literature, pamphlets, hoardings,
business catalogues, posters etc. upto a
maximum value limit of 1.5% of
Addition of actual FOB value of previous years
user condition at exports shall also be allowed.
the end of para
b. An EOU/EHTP/STP/BTP unit
may -----
Substitution of Goods imported by a unit shall be
para providing with actual user condition and shall
export during be utilized for export production.
warranty period
and inclusion in
NFE calculation h. Procurement and expor t o f
spares/components upto 1.5% of
the FOB value of exports may be
allowed to the same
consignee/buyer of the export
article within the warranty period.

Investment Criteria Para 6.6(d) of The Board of Approval (BOA) may

FTP - Addition also allow establishment of EOUs
with a lower Investment criteria.
DTA Sale of 6.8 of FTP – a.) Such DTA sale shall also not be
Finished Products/ Withdrawn of permissible to units engaged in the
Rejects/ Waste/ permission to activities of packaging / labelling /
Scrap/ Remnants certain activities segregation / refrigeration
and By-products /compacting/micronisation/
pulverization/granulation/
 pulverization/granulation/
conversion of monohydrate form of
chemical to anhydrous form or vice-
versa.
Other Supplies in 6.9. of FTP b. – Deleted Supplies affected in
DTA Relaxation DTA against payment
removed for from the Exchange
payment through Earners Foreign
EEFC Account Currency (EEFC)
Account of the buyer in
the DTA or against
foreign Exchange
remittance received
from overseas.
Inter Unit Transfer 6.13 of FTP– Transfer of manufactured goods
Permission is from one EOU/ EHTP/STP/BTP
required for unit to another EOU/EHTP/STP/
transfer of BTP unit is allowed with prior
manufactured intimation to the concerned
goods Development Commissioner and
Customs authorities following the
procedure of inbound movement of
goods.
CHAPTER 7

SPECIAL CHAPTER-7 The policy relating to Special Economic

ECONOMIC Zones is governed by SEZ Act 2005, and
ZONES the Rules framed there under
FREE TRADE & CHAPTER The policy relating to Free Trade and
WARE - HOUSING 7A Warehousing Zones is governed by SEZ
ZONES Act 2005, and the Rules framed there
under.
CHAPTE R 8

Deemed Exports
Categories of Para 8.2 of Supply and installation of goods and
Supply FTP - equipment (single responsibility of turnkey
Addition contracts) to projects financed by
multilateral or bilateral agencies/finds as
notified by Department of Economic Affairs,
Ministry of Finance under International
Competitive Bidding in accordance with the
procedures of those agencies/finds, which
the bids may have been invited and
evaluated on the basis of Delivered Duty
Paid (DDP) prices for the goods
manufactured abroad.
CHAPTER 9
Definitions Para 9.8 Definition of Advance Licence "ALC" means the
Deleted Committee Advance Licensing
Committee in the
Directorate General
of Foreign Trade
for recommending
grant of licences
under Duty
Exemption Scheme
a n d f o r
recommending
Input Output norms
and value addition
norms to be
notified by Director
General of Foreign
Trade
Standing Para 9.9.1 “Authorisation” means a permission as
Grievance included in Section 2 (g) of The Foreign
Committee Trade (Development and Regulation)
Act, 1992 (No.22 of 1992) to import or
export as per provisions of this policy.