Export-Import Policy for Small Scale Sector

1. Recognition of Export Houses/ Trading Houses, etc.

With a view to recognise established exporters so that they may build marketing
infrastructure and expertise required for export production, merchant as well as
manufacturer exporters, EOU etc. are recognised as Export House, Trading Houses, Star
Trading Houses and Super Star Trading Houses on the basis of certain criteria as laid
down in the Export-Import Policy 1997-2002. The eligibility criteria for such recognition
is based either on the basis of FOB or Net Foreign Exchange value of exports of goods
and services made directly by the exporters during the preceding three licensing years or
the preceding licensing year. In an attempt to encourage exports from the small scale
sector, the exports made by small scale sector manufacturer-exporters are given triple
weightage for the purpose of recognition as EH/TH/STH/SSTH. Accordingly, in terms of
provisions contained at para 12.7(a) of the Exim Policy 1997-2002 (amended upto
31/3/99), triple weightage on FOB or net foreign exchange on the export of products
manufactured and exported by units in the small scale industry (SSI)/ Tiny sector/
Cottage sector and double weightage on FOB or net foreign exchange to merchant
exporter exporting products reserved for SSI units and manufactured by units in the
SSI/Tiny Sector is give. These Export Houses, Trading Houses, etc. are entitled to certain
benefits under the current Export-Import Policy.

2. Special Import Licence (SIL)

Exporters recognised as Export Houses, Star Trading House, Trading Houses, etc. Are
eligible for grant of special Import Licence (SIL) @ certain percentage of their FOB
value of exports/NFE. However, 2 percent additional SIL is granted for exports of
Products manufactured by units registered as SSI, provided the exports of these products
is more than 50% of the exports during the period (provisions contained in para 12.7(b)
of Hand Book of Procedure 1997-2000 refers).

3. Eligibility condition for Small Scale Exporters for SIL

In case of small scale exporters holding ISO 9000 (Series) or IS/ISO 9000 Series of
quality certification, the FOB value (excluding deemed exports) of exports for becoming
eligible for Special Import Licence (SIL) @4% of the FOB value of exports is Rs. 3
crores and above in the preceding licensing year or on an average FOB value of Rs. 1
crores or above during the preceding three licensing years instead of the limit of Rs. 5
crores and Rs. 2 crores respectively prescribed for others (Para 11.11 (a) & (b) of Hand
Book of Procedures 1997-2002 refers in this context).

Salient Features of the Exim Policy - 1997-2002 (As amended on 31/3/99).

4. Duty Exemption Scheme made Flexible

A provision for annual advance licence has been made to reduce the avoidable interface
between the exporter and the DGFT. This facility would provide necessary flexibility in
the import of duty free inputs. The exporter would now be able to import any prescribed
inputs as per input-output norms right through the year without approaching DGFT. The
licence would be issued without stipulation of minimum value addition.

5. Benefit of Zero Duty EPCG Scheme Extended to Other Sectors

Threshold limit for EPCG Zero-Duty Scheme for several sub-sectors under the
Chemicals, Plastics and Textiles sectors has been brought down from Rs. 20 crores to Rs.
1 crore.

No additional Customs Duty would be charged on import of Capital Goods under Zero-
Duty EPCG Scheme in Marine and Electronics Sectors.

6. EOU/EPZ - Further Rationalisation

Net foreign exchange earning as a percentage of exports (NEEP) requirement for the
units operating in EPZ and EOUs has been made uniform at 20%. However, for
Hardware Units, Bio-technology and Toys sectors, this NFE requirement has been
reduced to positive NFEP.
The entitlement of DTA sale has been increased to 50% of the FOB value of the
preceding year.
The procedure for operation of the units in the EPZ and EOUs have been simplified
considerably and a number of operations have been permitted on the basis of self-
certification.

The EOU/EPZ imots shall have the option to supply the goods to Bonded Warehouse for
exports.

7. Export House/ Trading House/ Star Trading House/ Super Star Trading House

All such exporters who attain Export House/ Trading House/ Star Trading House/ Super
Star Trading House status for three successive terms or more shall be eligible for Golden
Status Certificate which would enable them to enjoy all the benefits in perpetuity
irrespective of their actual performance in future.

8. Other Steps

In line with the facility of free imports of components for textile garments sector, leather
garment and handicraft exporters have been allowed
export of samples upto US$10,000 per consignment has been allowed. Limit of import of
bonafide technical and trade samples appearing in restricted list has been increased from
Rs. 3,000/- per consignment to Rs. 1,00,000/- per consignment.

9. Integration of Indian Economy with Global Economy

To ensure easy access to inputs and to integrate with the global economy as many as 894
items have been added to the free list of imports. 414 additional items have also been put
in the SIL list of imports.]

Out of aforesaid 894 items shifted to OGL list, 245 items are having small scale angle
either due to their reservation for manufacture in the small scale sector or having a strong
production base. Out of 245 items, 158 items pertained to Reservation list and 87 are
having strong small scale production base. Further, these 158 items pertained to 76
product groups which are reserved for manufacture in the small scale sector. Out of these
76 product groups, certain items in respect of 12 reserved items were already under OGL.
As such, there was a net addition of 64 reserved items to OGL list on 1/4/99.

Prior to 3/2/99, 518 items reserved for manufacture in the small scale were allowed for
import under OGL. Subsequently, 6 items were dereserved on 3/2/99. Therefore, the total
reserved items allowed for import prior to 31.3.99 were 512 and as on 1/4/99, 576 (512 +
64) items are allowed for import under OGL. Liberalisation of Import Policy, for small
scale sector means easy availability of raw material and other inputs for the SSI units. It
will also encourage SSI units to become efficient and competitive in terms of Price and
Quality so as to compete in the world market.

10. Free Trade Zones

Free Trade Zones will become operational from 1.7.99. Units in free trade Zone shall be
permitted to carry out any manufacturing or trading activities. They shall not be subjected
to any predetermined value addition, export obligation, input-output/wastage norms.
They shall be treated as outside the Customs territory of the country and the Customs
shall be manning only entry and exit points. Sale in the DTA will be permitted on
payment of full Custom Duty.