BBA-MBA Integrated Programme Batch 2016-21

Term – IX

Export Import Management (IB601)

Group Assignment

Export of “Natural or Cultured pearls, Precious or emiprecious

stones, pre. metals, clad with pre. metal and artcls thereof; Imit.
Jewlry; Coin.” (HS Code: 71) to USA

Submitted to:
Prof. P.K. Chugan

Group No. 3

Roll No. Name of Student Students’ Sign

167104 Aditya Jain
167221 Himanshi Chaudhary
167223 Jaimin Choksi
167225 Janvi Vishanwani
167227 Keshav Choudhary
167234 Muskan Agarwal

Submitted on:
Monday, 26th October, 2020
Contents
Introduction ..................................................................................................................................................... 2
Product Characteristics ................................................................................................................................ 2
Product Groups ............................................................................................................................................ 2
Trends .......................................................................................................................................................... 3
HMTLP Analysis................................................................................................................................................ 5
His Own Country’s Trade Regulations ......................................................................................................... 5
Foreign Exchange Regulations in India .................................................................................................... 5
Credit Policy ........................................................................................................................................... 10
Kimberly Process (KP) Certificate .......................................................................................................... 12
Documents required: Export Import Procedure.................................................................................... 13
CASE Analysis ................................................................................................................................................. 23
C: How much to charge: CIF................................................................................................................... 23
A: How much of the Product is Available .............................................................................................. 23
S: To which Countries we can export .................................................................................................... 24
E: Worth of Efforts ................................................................................................................................. 24
STEPIN Model Analysis .................................................................................................................................. 25
Social and Cultural Factor .......................................................................................................................... 25
Technology Factors .................................................................................................................................... 26
Economic Factors ....................................................................................................................................... 28
Introduction to USA’s Economy............................................................................................................. 28
Characteristics of US Economy .............................................................................................................. 29
Foreign Trade Policies ............................................................................................................................ 32
Economic Data ....................................................................................................................................... 34
Political Factors.......................................................................................................................................... 37
Introduction to the US Political System ................................................................................................. 37
Trade with the US .................................................................................................................................. 37
Trade Policy Components Affected by Political Environment ............................................................... 38
Political Risk ........................................................................................................................................... 39
International Relations .............................................................................................................................. 40
Significance of India-U.S. Trade and Economic Relations...................................................................... 40
India - U.S. Trade and Economic Relations by the Turn of the Twenty First Century ........................... 40

0
 Challenges in Trade Relations ................................................................................................................ 41
India-US relations with China ................................................................................................................ 43
Competition ................................................................................................................................................... 44
Diamond Imports into the United States (Direct Competition) ................................................................ 44
US Diamond Production (Indirect Competition) ....................................................................................... 45
Limitations on Market Access ........................................................................................................................ 46
Trade Act of 2002 .................................................................................................................................. 46
Customs Bonds ...................................................................................................................................... 46
Are Precious Gems Duty-Free? .............................................................................................................. 47
Kimberley Process.................................................................................................................................. 47
Trade Agreements ................................................................................................................................. 48
Import Policies ....................................................................................................................................... 48
Taxes ...................................................................................................................................................... 50
Increased competitiveness due to third party tariff rates..................................................................... 51
Kimberly Process Certificate (KP certificate) to import rough diamonds. ............................................. 51
Import of rough diamonds as per Reserve Bank regulations. ............................................................... 52
Conditions as per Hazardous Wastes management, handling and Trans boundary movement rules. 52
Permission from Environment department to import Precious metals, Imitation Jewelry, stones, and
coins ....................................................................................................................................................... 52
Test report of analysis from Laboratory to import Precious metals, Imitation Jewelry, stones, and
coins ....................................................................................................................................................... 52
Penalization by re-exporting Precious metals, Imitation Jewelry, stones, and coins............................ 53
Certificate from Pollution control board to import rough diamonds.................................................... 53
Pre shipment inspection Certificate to import Precious metals, Imitation Jewelry, stones, and coins 53
Infrastructure Facilities, Incentives (Tax)............................................................................................... 54
General Factors.............................................................................................................................................. 55
Hub: Ability to serve as a Hub.................................................................................................................... 55
Infrastructure Facilities, Incentives (Tax)................................................................................................... 55
Government Policy and Regulations ......................................................................................................... 56
Ethnic Factors ............................................................................................................................................ 57
Infrastructure............................................................................................................................................. 57
Labour Cost and Productivity .................................................................................................................... 58
Works Cited ................................................................................................................................................... 60

1
 Introduction
Product Characteristics
About 3,900 different species of minerals are known today. This huge variety of minerals is
usually divided into two main product groups: precious stones (or gemstones) and semi-precious
stones. The market for precious and semi-precious stones should be divided into two parts:
diamonds and all other precious and semi-precious stones.

Product Groups

Precious Stones:
Precious stones can be defined as the most wanted and highly valued stones for jewellery
purposes. Physical properties such as colour, lustre, clarity and hardness determine whether a stone
is suitable for jewellery purposes or not. Good colour, lustre and clarity make a stone optically
attractive. Hardness gives the stone the durability that is required for use in jewellery.

Rough Stones:
Rough stones are generally all the unworked precious stones. This group consists of stones for
decoration and collecting purposes. The latter group is normally referred to as minerals. The stones
are wanted for decoration mainly because of their beauty of colour, shape or crystals. The minerals
are interesting for collection purposes because of properties mentioned or because of their rarity,
origin, chemical properties and other subjects of interest to collectors. Important properties are
type of matrix (host rock or mother rock), specific trace elements and inclusions. Combinations of
these three properties, together with size and weight of the piece, determine the price.

Cut Stones:
Cut stones are generally all cut-and-polished stones. They have been subjected to an operation of
polishing, carving, cutting and drilling. Cut stones can be divided into two main groups: worked
stones mainly for jewellery purposes and worked stones other than for jewellery purposes. These
can be carvings, decorative objects like slabs, spheres and eggs or all kind of utensils like ashtrays,

2
bowls, paperweights, spoons, table tops, pendulums, massage crystals, etc. (Ceres Company,
2002)1

Semi-precious Stones:
Semi-precious stone is the general name for all the crystallised minerals not being precious stones.
The division between rough and cut stones, as described above, is also applicable in this group. It
consists of a wide variety of different types which are divided into various subdivisions.

Natural and synthetic stones:

Apart from natural stones, the market also consists of (wholly or partly) unnatural stones. Because
of improved techniques to make such stones, an increasing number appears on the market. As the
quality of these stones is improving, it makes it more difficult to distinguish them from natural
stones. Five groups are distinguished:

1. Synthetically grown (man-made) stones

2. Imitations: natural or synthetic stones that resemble a natural stone and can be used to
imitate this stone. For example, cubic zirconia is a diamond imitation.
3. Composites like doublets or triplets are combinations of natural/natural or natural/synthetic
stones
4. Reconstructed stones are artificially manufactured stones of natural „ingredients‟
5. Treated natural stones: heat treated, irradiated, dyed, stabilised (with artificial resin) or
treated with various chemicals in order to improve and/or change the colour and/or the
clarity. (Ceres Company, 2002)2

Trends
An important stimulation of demand for precious and semi-precious stones is caused by the New
Age fashion. Therapists and medical doctors seek many stones due to their supposed therapeutic
properties. Consumers are increasingly interested in the so-called metaphysical aspects of stones.
This trend leads to demand for special cutting forms as:

1
http://docplayer.net/55435395-Precious-and-semi-precious-stones.html
2
http://docplayer.net/55435395-Precious-and-semi-precious-stones.html
3
  Pyramids
 Spheres
 Pendulums
 Massage crystals
 „Touch stones‟ (various rounded shapes that are pleasant to touch and small enough to
carry in one‟s pocket)

Several of these items are not new but take on a new life in this new application. For example,
tumbled stones, lose or mounted, have always been used for decorative purposes. However, less
decorative stones with metaphysical purposes are now also in demand. The trend is clearly towards
higher quality precious and semi-precious stones, as consumers become increasingly critical
towards quality aspects.

Further the so-called „power bead‟ wrist laces have grown tremendously in popularity. These
products are increasing the market for semi-precious stones and might even surpass the existing
market. Minerals bought for collection are becoming smaller and of higher quality. As space to
display minerals is limited, collectors tend to buy smaller, but more expensive stones.

Another trend favours pure, untreated stones, so the real character of the stone is saved. For
example, citrine must be natural citrine and not the heat-treated amethyst that is mostly sold as
citrine.

Fashion trends also have a big influence on precious and semi-precious stones. For example, a
trend in jewellery fashion can be detected towards using more coloured stones. The same applies
to cultured pearls, especially fresh-water pearls. This market grew explosively because of fashion
influence. Presently the market seems to be saturated with supplies big enough to satisfy demands.
(Ceres Company, 2002)3

3
http://docplayer.net/55435395-Precious-and-semi-precious-stones.html
4
 HMTLP Analysis
His Own Country’s Trade Regulations

Foreign Exchange Regulations in India

1.) Declaration of exports:

(1) In case of exports taking place through Customs manual ports, every exporter of goods or
software in physical form or through any other form, either directly or indirectly, to any place
outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in
one of the forms set out in the Schedule and supported by such evidence as may be specified,
containing true and correct material particulars including the amount representing –

(i) The full export value of the goods or software; or

(ii) if the full export value 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 or the
software in overseas market, and affirms in the said declaration that the full export value of goods
(whether ascertainable at the time of export or not) or the software has been or will within the
specified period be, paid in the specified manner.

(2) Declarations shall be executed in sets of such number as specified.

(3) For the removal of doubt, it is clarified that, in respect of export of services to which none of
the Forms specified in these Regulations apply, the exporter may export such services without
furnishing any declaration, but shall be liable to realise the amount of foreign exchange which
becomes due or accrues on account of such export, and to repatriate the same to India in
accordance with the provisions of the Act, and these Regulations, as also other rules and
regulations made under the Act.

(4) Realization of export proceeds in respect of export of goods / software from third party should
be duly declared by the exporter in the appropriate declaration form. (Kanungo, 2016)4

4
https://www.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=10256
5
2.) Indication of importer-exporter code number:
The importer-exporter code number allotted by the Director General of Foreign Trade under
Section 7 of the Foreign Trade (Development & Regulation) Act, 1992 (22 of 1992) shall be
indicated on all copies of the declaration forms submitted by the exporter to the specified authority
and in all correspondence of the exporter with the authorised dealer or the Reserve Bank, as the
case may be.

3.) Evidence in support of declaration:

The Commissioner of Customs or the postal authority or the official of Department of Electronics,
to whom the declaration form is submitted, may, in order to satisfy themselves of due compliance
with Section 7 of the Act and these regulations, require such evidence in support of the declaration
as may establish that –

a) The exporter is a person resident in India and has a place of business in India;

b) The destination stated on the declaration is the final place of the destination of the goods
exported;

c) The value stated in the declaration represents –

1) The full export value of the goods or software; or

2) Where the full export value of the goods or software 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 the overseas market.

4.) Manner of payment of export value of goods:

Unless otherwise authorised by the Reserve Bank, the amount representing the full export value of
the goods exported shall be paid through an authorised dealer in the manner specified in the
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 as amended
from time to time.

For the purpose of this regulation, re-import into India, within the period specified for realisation
of the export value, of the exported goods in respect of which a declaration was made under
Regulation 3, shall be deemed to be realisation of full export value of such goods.

6
5.) Period within which export value of goods/software/ services to be
realised:
The amount representing the full export value of goods / software/ services exported shall be
realised and repatriated to India within nine months or within such period as may be specified by
the Reserve Bank, in consultation with the Government, from time to time, from the date of export,
provided

(a) that where the goods are exported to a warehouse established outside India with the permission
of the Reserve Bank, the amount representing the full export value of goods exported shall be paid
to the authorised dealer as soon as it is realised and in any case within fifteen months or within
such period as may be specified by the Reserve Bank, in consultation with the Government, from
time to time from the date of shipment of goods;

(b) Further that the Reserve Bank, or subject to the directions issued by that Bank in this behalf,
the authorised dealer may, for a sufficient and reasonable cause shown, extend the said period.

Provided further that the Reserve Bank, or subject to the directions issued by the Bank in this
behalf, the authorised dealer may, for a sufficient and reasonable cause shown, extend the said
period.

The Reserve Bank may for reasonable and sufficient cause direct that the said exporter/s shall
cease to be governed by sub-regulation (2);

Provided that no such direction shall be given unless the unit has been given a reasonable
opportunity to make a representation in the matter.

(c) on such direction, the said exporter/s shall be governed by the provisions of sub-regulation (1),
until directed otherwise by the Reserve Bank.'

For the purpose of this regulation, the “date of export” in relation to the export of software in other
than physical form, shall be deemed to be the date of invoice covering such export.

6.) Submission of export documents:

The documents pertaining to export shall be submitted to the authorised dealer mentioned in the
relevant export declaration form, within 21 days from the date of export, or from the date of
certification of the SOFTEX form:

7
Provided that, subject to the directions issued by the Reserve Bank from time to time, the
authorized dealer may accept the documents pertaining to export submitted after the expiry of the
specified period of 21 days, for reasons beyond the control of the exporter.

7.) Transfer of documents:

Without prejudice to Regulation 3, an authorised dealer may accept, for negotiation or collection,
shipping documents including invoice and bill of exchange covering exports, from his constituent
(not being a person who has signed the declaration in terms of Regulation 3):

Provided that before accepting such documents for negotiation or collection, the authorised dealer
shall–

a) Where the value declared in the declaration does not differ from the value shown in the
documents being negotiated or sent for collection, or

b) where the value declared in the declaration is less than the value shown in the documents being
negotiated or sent for collection, require the constituent concerned also to sign such declaration
and thereupon such constituent shall be bound to comply with such requisition and such
constituent signing the declaration shall be considered to be the exporter for the purposes of these
Regulations to the extent of the full value shown in the documents being negotiated or sent for
collection and shall be governed by these Regulations accordingly.

8.) Payment for the Export:

In respect of export of any goods or software for which a declaration is required to be furnished
under Regulation 3, no person shall except with the permission of the Reserve Bank or, subject to
the directions of the Reserve Bank, permission of an authorised dealer, do or refrain from doing
anything or take or refrain from taking any action which has the effect of securing –

(i) That the payment for the goods or software is made otherwise than in the specified manner; or

(ii) That the payment is delayed beyond the period specified under these Regulations; or

(iii) That the proceeds of sale of the goods or software exported do not represent the full export
value of the goods or software subject to such deductions, if any, as may be allowed by the
Reserve Bank or, subject to the directions of the Reserve Bank, by an authorised dealer;

8
Provided that no proceedings in respect of contravention of these provisions shall be instituted
unless the specified period has expired and payment for the goods or software representing the full
export value, or the value after deductions allowed under clause (iii), has not been made in the
specified manner within the specified period.

(iv) Export of services to which no Form specified in these Regulations apply, the exporter may
export such services without furnishing any declaration, (i), (ii) & (iii) above shall apply.

9.) Delay in Receipt of Payment:

Where in relation to goods or software export of which is required to be declared on the specified
form and export of services, in respect of which no declaration forms has been made applicable,
the specified period has expired and the payment therefore has not been made as aforesaid, the
Reserve Bank may give to any person who has sold the goods or software or who is entitled to sell
the goods or software or procure the sale thereof, such directions as appear to it to be expedient,
for the purpose of securing,

(a) The payment therefore if the goods or software has been sold and

(b) The sale of goods and payment thereof, if goods or software has not been sold or reimport
thereof into India as the circumstances permit, within such period as the Reserve Bank may specify
in this behalf;

Provided that omission of the Reserve Bank to give directions shall not have the effect of
absolving the person committing the contravention from the consequences thereof.

10.) Advance payment against exports:

(1) Where an exporter receives advance payment (with or without interest), from a buyer / third
party named in the export declaration made by the exporter, outside India, the exporter shall be
under an obligation to ensure that

i) The shipment of goods is made within one year from the date of receipt of advance payment;

ii) The rate of interest, if any, payable on the advance payment does not exceed the rate of interest
London Inter-Bank Offered Rate (LIBOR) + 100 basis points and

iii) The documents covering the shipment are routed through the authorised dealer through whom
the advance payment is received;
9
Provided that in the event of the exporter's inability to make the shipment, partly or fully, within
one year from the date of receipt of advance payment, no remittance towards refund of unutilized
portion of advance payment or towards payment of interest, shall be made after the expiry of the
period of one year, without the prior approval of the Reserve Bank.

(2) Notwithstanding anything contained in clause (i) of sub-regulation (1), an exporter may receive
advance payment where the export agreement itself duly provides for shipment of goods extending
beyond the period of one year from the date of receipt of advance payment.

Credit Policy

Sanction of Export Credit Proposals

1.) Time Limit for Sanction

(i) The sanction of fresh/enhanced export credit limits should be made within 45 days from the
date of receipt of credit limit application with the required details/information supported by
requisite financial/operating statements. In case of renewal of limits and sanction of ad hoc credit
facilities, the time taken by banks should not exceed 30 days and 15 days respectively.

2.) Ad hoc Limit

(i) At times, exporters require ad hoc limits to take care of large export orders which were not
foreseen earlier. Banks should respond to such situations promptly. Apart from this, banks should
adopt a flexible approach in respect of exporters, who for genuine reasons are unable to bring in
corresponding additional contribution in respect of higher credit limits sought for specific
orders. No additional interest is to be charged in respect of ad hoc limits granted by way of pre-
shipment/post-shipment export credit.

(ii) In cases where the export credit limits are utilised fully, banks may adopt a flexible approach in
negotiating the bills drawn against L/Cs and consider in such cases delegating discretionary/higher
sanctioning powers to branch managers to meet the credit requirements of the exporters. Similarly
branches may also be authorised to disburse a certain percentage of the enhanced/ad hoc limits,
pending sanction by the higher authorities/board/committee who had originally accorded sanctions,
to enable the exporters to execute urgent export orders in time.

10
3.) Other Requirements

(i) All rejections of export credit proposals should be brought to the notice of the Chief Executives
of the banks explaining the reasons for rejection.

(ii) The internal audit and inspection teams of the banks should comment specifically on the timely
sanction of export credit limits within the time schedule prescribed by RBI.

(iii) The export credit limits should be excluded for bifurcation of the working capital limit into
loan and cash credit components.

(iv) Banks should nominate suitable officers as compliance officers in their foreign
departments/specialised branches to ensure prompt and timely disposal of cases pertaining to
exporters.

(v) It is necessary to submit a review note at quarterly intervals to the Board on the position of
sanction of credit limits to exporters. The note may cover among other things, number of
applications (with quantum of credit) sanctioned within the prescribed time-frame, number of
cases sanctioned with delay and pending sanction explaining reasons therefore.

4.) Pre-shipment credit to Diamond Exporters - Conflict Diamonds - Implementation of

Kimberley process Certification Scheme (KPCS)

Trading in conflict diamonds has been banned by U. N. Resolutions Nos. 1173 and 1176 as the
conflict diamonds play a large role in funding the rebels in the civil torn areas of Sierra Leone.
There is also a Prohibition on the direct / indirect import of all rough diamonds from Sierra Leone
and Liberia in terms of UN Resolution No. 1306(2000) and 1343(2001) respectively. India, among
other countries, has adopted a UN mandated new Kimberley Process Certification Scheme to
ensure that no rough diamonds mined and illegally traded enter the country. Therefore, import of
diamonds into India should be accompanied by Kimberley Process Certificate (KPC). Similarly,
exports from India should also be accompanied by the KPC to the effect that no conflict/ rough
diamonds have been used in the process. The KPCs would be verified /validated in the case of
imports/ exports by the Gem and Jewellery Export Promotion Council. In order to ensure the
implementation of Kimberley Process Certification Scheme, banks should obtain an undertaking in

11
the format given in Annexure 2 from such of the clients who have been extended credit for doing
any business relating to diamonds.(RAO, 2003)5

Kimberly Process (KP) Certificate

The Kimberley Process Certification Scheme (KPCS) is an international scheme to stop the trade
in „conflict” diamonds” and to ensure that diamond purchases were not financing violence by
rebel movements and their allies seeking to undermine legitimate governments.

Under the KPCS, a KP licence from Customs is required for the import and export of rough
diamonds. The company must be registered with Customs and has a valid Inter-Bank Giro (IBG)
account with Customs.

The company will be required to comply with the terms and conditions of the KP licence which
include the following:

a) To export or import rough diamonds except under a licence issued by the Director-General of
Customs;

b) To import and export rough diamonds from and to only participants of the KPCS;

c) To allow Singapore Customs to submit the import and export data with regards to shipment
declared under the KPCS;

d) To comply with section 46 of the GST Act to keep all import and export documentation for a
period not less than 5 years;

e) To comply with all terms and conditions as stated in the licence and the KP certificate; and

f) To pay the prescribed fees.

To export rough diamonds from exporting country, a valid KP certificate, issued by Customs, is
required to accompany the sealed and secured parcel of rough diamond. The KP certificate must be
produced together with the relevant export permit and supporting documents to Checkpoint
Officers at the time of clearance for endorsement.

5
https://www.rbi.org.in/SCRIPTs/BS_FemaNotifications.aspx?Id=1488
12
The Customs reserves the right to conduct inspection of both your import and export of rough
diamonds at our Headquarter at Revenue House or at any other venue as specified by us. For
export, the KP certificate will only be issued when the inspection (if any) of the rough diamonds is
found to be in order. (Kimberly Process Certificate, 2019)6

Documents required: Export Import Procedure

 Bank account
 Income Tax Permanent Account Number
 Import-Exporter code Number (IEC)
 Registration Cum Membership Certificate (RCMC)
 Enrolment No
 Identity Cards
 Profile of Importer/Exporter
 Export / Import of Rough Diamonds with KPCS
(Export-Import Procedure of the Gem and Jewellery)7

Any person/firm/company, desiring to establish export and/or import business should have the
following:

Bank account:

First of all a name should be chosen for the firm/company to be established and either a
Savings Bank account or Current Account, in the chosen name, should be opened with a
bank. For opening a bank account with the bank the following documents are required:

i. Photocopies of the ration card

ii. Photographs of the authorized signatories
iii. Photocopy of the Pan number. In case of the PAN number is not relieved at the
time of opening the account, a declaration in the form no.16 in cases of

6
https://howtoexportimport.com/Kimberly-Process-Certificate-KP-certificate-to-exp-1400.aspx
7
https://gjepc.org/admin/PolicyHandbook/4310_Export%20Import%20Procedure%20for%20Gems%20&%20Jeweller
y.pdf
13
 proprietorship firms and partnership firms and form 57 in case of companies
should be submitted. This is a declaration that the account holder has applied for
the PAN number and the same would be submitted to the bank, no sooner the
account opener receives it.
iv. A board resolution to open account duly signed by the Chairman, in case of
company and a copy of the Memorandum and articles of association duly signed
by the Chairman of the Company or a copy of the partnership deed in case of
partnership firms.

These documents have to be submitted along with the account opening form dully filled and
signed by the authorized signatories with details of operation instructions. The account
should be recommended by another person/firm or company, who is already having an
account in the bank.

Income Tax Permanent Account Number:

The exporter should make an application for the allotment of an income tax permanent
account number in Form No.49A. This is normally done through the Chartered Accountant
of the applicant. The PAN is intimated the Income Tax Department through a letter and
subsequently a laminated card with the photograph of the applicant and the PAN embossed
on it is sent to the applicant.

14
Import-Export code Number (IEC)

As per para 2.12 of the Foreign Trade Policy no export or import shall be made by any
person without an IEC number, unless specifically exempted. An IEC number shall be
granted on application by competent authority in accordance with procedure specified in
HBP v1. If anybody who is already a holder of IEC number has not imported or exported in
the preceding licensing year, such IEC shall be made inoperative by the DGFT.
Para 2.8 of the Hand book of Procedure 2009-14 mentions the exempted categories from
obtaining IEC No. as under:

i. Importers covered by clause 3(1) {except sub-clauses (e) and (I)} and exporters covered
by clause 3(2) {except sub clauses (i) and (K)} of foreign trade (exemption from
application of Rules in certain cases) order, 1993.
ii. Ministries/Department of Central or state Government.

iii. Persons importing and exporting goods for personal use not connected with trade or
manufacture or agriculture.
iv. Persons importing/exporting goods from/to Nepal, Mayanmar through Indo-Myanmar
border areas and China (through Gunji, Namgaya Shipkila and Natula ports),
provided CIF value of a single consignment does not exceed Indian Rs.25,000. In
case of Natural port, the applicable value ceiling will be Rs.100,000/-

Further, exemption from obtaining IEC shall not be applicable for export of Special
Chemicals Organisms, Materials‟, Equipments and Technologies (SCOMET) as
listed in Appendix-3, Schedule-2 of ITC (HS) except in case of exports by
category (ii) above.

The list of IEC numbers which shall be used by non-commercial PSUs and categories of
importers/ exporters mentioned against them for import/export purposes in
mention in Para 2.8 (b) of Handbook of Procedure 2009-14

15
 Note: Commercial Public Understanding (PSU), who obtained PAN, will however be
required to obtain IEC number. The permanent IEC number as mentioned above shall be
used by non- commercial PSU‟s.

The procedure for obtaining the Importer-Exporter code number is given in

Para 2.9 Hand Book of Procedures:
An application should be made in duplicate as per Annexure 3 of Hand Book of
Procedures and it is to be submitted to the office of the Regional Licensing Authority,
by the registered office in the case of company and head office in the case of others
under whose jurisdiction it is situated with the following enclosures:

i. Bank receipt in duplicate/pay order/demand draft drawn in favor of the Regional

Licensing Authority for Rs.1000/-

ii. One passport size photograph of the proprietor in the case of proprietorship
firm/any one of the partners in the cases of partnership firms and any one of the
directors in the case of companies, duly attested by the banker of the applicant.

iii. A copy of the PAN issued by the Income Tax Department duly attested by the
applicant.

iv. A certificate on the letter head of the applicant‟s banker addressed to the licensing
authorities, as per annexure I to Appendix 3 of Hand book.

16
Registration Cum Membership Certificate (RCMC)

As per para 2.44 of the policy, any person applying for a license/certificate/permission
to import or export,(except restricted items as per the policy) or any other benefit or
concession under the export import policy shall be required to furnish RCMC granted
by the competent authority unless specifically exempted under the policy. For getting
the RCMC the member will have to become the member of the Gem and Jewellery
Export Promotion Council. On being admitted to membership, the applicant shall be
granted a membership, the applicant shall be granted forthwith RCMC. They need to
mention their main line of business in the application.

The application for RCMC should be made with the following documents:

i. Form of application for RCMC, wherein the product for which the
registration required is to be specified.
ii. A self certified copy of IEC number, issued by the licensing authorities
concerned.

iii. Bank certificate of the IEC number, issued by the licensing authorities
concerned.
iv. SSI/IEM certificate in case the registration is sought as a manufacturer
exporter.
v. A declaration regarding the exports and imports effected during the
preceding financial year.
vi. A copy of Memorandum of Association & Articles of Association in the
case o f companies/partnership deed in the case of partnership firms.

The application form should be sponsored by another member exporter of the EPC, who
is not an associate or a sister concern of the applicant. He should also be a member with
17
the GJEPC for more than three years.

18
Enrolment No.

As per Trade Notice No.14/98 dated 15/12/1998 all the firms/companies should get
registered with the office of the Joint Director General of Foreign Trade and an
Enrollment number should be obtained. For obtaining this enrolment number, a simple
application on the letter head of the firm/company should be submitted along with the
following details:

vii. Profile of the exporter as per Appendix 2 in duplicate

viii. A copy of Importer/exporter code number certificate
ix. A copy of registration cum membership certificate
x. Copies of latest Income Tax Returns
xi. Copies of latest sales tax returns
xii. A copy of central excise registration certificate, if applicable
xiii. A copy of permanent account number certificate
xiv. Copies of the passports of Proprietor/Partners/Directors, as the case may be
xv. Number of Identity card holders, with names and their designation
xvi. Copies of proof of Address of the firm/company, like telephone bills etc.

After submitting the application, the originals of the above documents should be shown
to the licensing authorities for their verification. Once the documents are in order an
enrolment number would be issued to the applicant who would be communicated
through a letter. This enrolment number should be quoted on all the license application.

19
Identity Cards

Identity cards are issued to the Proprietor/Partners/Directors and the authorized

employees to facilitate collection of licenses/certificates/permissions and other
documents from the licensing authorities. Maximum of three identity cards per company
for three employees can be applied for. An application for identity card should be made
as per the form given in Appendix -5. The identity card issued is valid for a period of
three years.

Profile of Importer/Exporter

As per para 2.6 of the Handbook, each importer/exporter is required to file their profile,
once with the licensing authority in the form in Appendix-2. Licensing authorities shall
enter the information furnished in this format in this format in their data base so as to
dispense with the need for asking repetitive information. In case of any change in the
information given in Appendix 2, importer/exporter shall intimate the same to the
licensing authority.

Export / Import of Rough Diamonds with KPCS

o As per DGFT Notification No-21/2002-07 dated 26th December 2002 no import

export of rough diamonds shall be permitted unless the shipment is accompanied by
Kimberley Process Certificate required under the procedure specified by the Gem
and Jewellery Export Promotion Council.

o The earlier para 2.2 of FTP has been included under the appendices ITC HS Code-
Export Import as uploaded in the DGFT website http://www.dgft.gov.in.

o It may be noted that all exports and imports are also bound for physical checking &
inspection as per Customs Act 1962. Hence, Circular No.53 of 2003-Cus dated
23rd June, 2003 is to be followed for the Kimberley Process Certification Scheme
and its implementation.

o The trading in export / import of rough diamonds can be done only with the KP
20
 Participating countries as available on the website www.kimberleyprocess.com

o The circulars related to Kimberley Process issued by GJEPC are available under
Kimberley Info section on the Council's website www.gjepc.org.

21
Export through Exhibitions/Export Promotion tours/Export of Branded
Jewellery
Nominated agencies shall produce to Customs Authorities letter in original or its certified
copy, containing Government‟s approval for holding exhibition/export of branded
jewellery. Any other person shall produce to Asst. Commissioner, customs letter in
original or its certified copy containing GJEPC‟s approval for holding exhibitions/ export
promotion tour/export of branded jewellery.

(b) In case of re-import, such items, on arrival, shall be verified along with export
documents before clearance.

RBI Policy for Export

The Reserve Bank of India, as per their authorized dealer (banks) circular No. 1 dated 12.02.1994
had liberalized the procedures for the exports of Gem and Jewellery. Hence, even in the absence
of letters of credit or advance remittances, prior permission from the Reserve Bank of India for
exports, is not required.

22
 CASE Analysis
C: How much to charge: CIF
Cost: Cost includes all the money spent in value addition at various stages. This also includes profit
margin.

Insurance: This includes cost of Transit Insurance.

Freight: This includes cost to ship the material to the port + Shipping charges (incurred to ship to
destination country)

A: How much of the Product is Available

Below are the top countries that exported the highest dollar value worth of diamonds during 2019.

1. India: US$21.9 billion (20.4% of total exported diamonds)

2. United States: $17.7 billion (16.5%)

3. Hong Kong: $14 billion (13%)

The listed 15 countries shipped 96% of global diamonds exported in 2019 by value.

Among the top exporters, two top countries grew the value of their diamonds shipped compared to
2015 namely Russia (up 1.9%) and India (up 0.2%).
Those countries that posted declines in their exported diamonds sales were led by: Botswana (down
-42.2%), Israel (down -35.8%), United Arab Emirates (down -33%), Belgium (down -24.0%) and
China (down -22.2%).

Data shows that India has enough potential to increase exports. (Workman, Diamonds Export by
Country 2019, 2020)8

8
http://www.worldstopexports.com/diamond-exports-country/

23
S: To which Countries we can export
UK

Israel

USA

Belgium

Botswana

Ireland

(Export Import Data Bank)9

E: Worth of Efforts
Imports of these diamonds are on increasing trend as income of people increases. In last few years,
it is seen that exports from India is increasing. This also has significant amount of exports when
compared to overall exports. Large number of people are involved in this industry and are
employed from this industry. So it has been seen that Exports of Diamonds are worth efforts.

9
https://commerce-app.gov.in/eidb/ecomcntq.asp

24
 STEPIN Model Analysis
Social and Cultural Factor

Symbol of Commitment
A diamond is gifted by loved ones to each other as a symbol of commitment for their life ahead.
They commit to be with one another through success and failure. The expressions of modern
romantic love are manifold. Engagement and marriage are no longer the only ways to show
romantic love. It is increasingly expressed in relationships before and outside marriage, and in
celebrations during married life. Diamonds as symbols of love address both the explicit and the
implicit expressions of love through the choice of designs, occasions and presentations. Among
Millennial women, the love-related opportunities for diamond acquisition are even bigger. The
strength of diamonds as a symbol of engagement continues in the main diamond markets, and use
of diamonds in wedding rings is growing in the US. Around 72% of the US brides acquire a
diamond engagement ring10.

Gifting of natural diamonds by cohabiting couples in the US

Cohabiting is a growing trend in the US. Cohabiters are younger and have lower average household
incomes than married couples, which determines their lower average spend on diamond jewellery.
However, cohabiting women desire diamonds as much as married women and gifting represents
nearly 72% of the value of their diamond acquisitions. Cohabiting women represent 10% of the
female diamond market value. Cohabiting women are younger than married women and less likely
to have children.

Woman’s first gift

When a girl is graduating, parents often gift their child a set of beautiful diamond earrings or a
pendant, this would be the first diamond gift she has received. Although this trend is only seen in

10
https://www.debeersgroup.com/~/media/Files/D/De-Beers-Group/documents/reports/insights/the-diamond-
insight-report-2019.pdf

25
the upper-class section of society of the USA as diamonds are not that easily affordable to all the
sections of the society.

Increase in sales through online mode

With changing times, people are now preferring to buy diamonds online from trusted sites. online
spending by consumers have rose significantly. The growth opportunity for the sales of various
gems and jewellery through online channel has forced online vendors to improve shopping
experience in terms of security and reliability, which, in turn, has propelled the demand for these
products. Some of the policies that encourage consumers to purchase online includes secured
transactions, cash on delivery options, convenient return policies, integrated and centralized
customer service11.

Technology Factors
To widen the margin of competitive strength, investments in advanced technology plays a key role.
To make the most out of a situation, countries are combining the advantage of low-cost labour with
the investments in advanced technologies as a part of their effort towards economic growth. These
countries include India, Thailand and China.
In case of US, the situation is a little different.

Advances in technology have also played a role in removing standard lapidary work from the hands
of U.S. cutters. Computerized machinery can now calibrate standard cuts faster and more easily
than a person can, often working a multiple number of stones at one time. However, most of the
U.S. industry has not invested in equipment processing primarily because of cost. The U.S. sector is
comprised mostly of individual cutters and small-size operations.

Most advanced mining technologies along with cutting technologies are required for cost-effective
processing which is also competitive enough in comparison to the other countries in order to locate
the mines, mine the precious stones and cut and polish them in a time-effective manner

11
https://www.globenewswire.com/news-release/2018/12/10/1664291/0/en/Global-Gems-Jewelry-Market-Outlook-
to-2023-Increase-in-Sales-Through-Online-Stores.html

26
27
 Economic Factors

Introduction to USA’s Economy

The United States has a mixed economy. That means it operates as a free market economy in
consumer goods and business services and as a command economy in defence, retirement
programs, some aspects of medical care, and other areas.12 The U.S. Constitution created and now
protects America's mixed economy. Although the largest economy in terms of GDP, when
measured on PPP terms, the USA economy now lags behind China13.

Component Percentage of U.S.A. GDP

Consumer Spending 70%

Government Spending 17%

Business Investment 16%

Net Exports -5%

TOTAL GDP 100%

Source: https://www.thebalance.com/how-does-the-us-economy-work-4802698

- Consumer spending comprises approximately 70% of the total GDP. It includes the
sub-components of goods and services. Goods can be either durable goods, like automobiles,
or nondurable goods (which are immediately consumed and used up), like gasoline. Services
consist of things like banking, childcare, and health care. In 2019, services made up 45% of
the economy, while goods made up 25%.

- Government spending is the second-largest component, driving approximately 18%

of GDP. This includes national defence spending, Social Security benefits, and health care.
It also includes state and municipal budgets.
- Business investment makes up approximately 16% of GDP. It includes elements such
as manufacturing, real estate construction, and intellectual properties.

12 th
Retrieved from https://moneyandmarkets.com/7-factors-of-how-the-us-economy-works/ as on 20 October, 2020.
13
Retrieved from https://www.imf.org/en/Publications/SPROLLs/world-economic-outlook-
th
databases#sort=%40imfdate%20descending as on 20 October, 2020.

28
 - Net exports make up the fourth component. It is the sum of exports, which add to the
nation's economy, and imports, which subtract from it. The United States has a trade deficit,
which means it imports more than it exports. This is why the U.S. net exports figure has a
negative value.

The U.S. budget is total federal income and spending. The government receives most of its revenue
from income taxes. Most of its spending goes toward three large expenses: Social Security
benefits, military spending, and Medicare. When spending is higher than revenue, there is a budget
deficit. The federal government has had a deficit every year since 1970 in all but four years (1998-
2001).14 Each year's deficit gets added to the debt. The U.S. debt is more than $26 trillion.15 That's
more than the country's entire economic output. The statistic that describes this is the debt-to-GDP
ratio. When it's more than 77%, the country enters a dangerous tipping zone. The U.S. ratio was
below 77% until the 2008 financial crisis, and it is expected to grow over the next several years.16

Characteristics of US Economy
The first ingredient of a nation's economic system is its natural resources. The United States is rich
in mineral resources and fertile farm soil, and it is blessed with a moderate climate. It also has
extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico.
Rivers flow from far within the continent, and the Great Lakes -- five large, inland lakes along the
U.S. border with Canada -- provide additional shipping access. These extensive waterways have
helped shape the country's economic growth over the years and helped bind America's 50 individual
states together in a single economic unit.

The second ingredient is labour, which converts natural resources into goods. The number of
available workers and, more importantly, their productivity help determine the health of an
economy. Throughout its history, the United States has experienced steady growth in the labour
force, and that, in turn, has helped fuel almost constant economic expansion. Until shortly after
World War I, most workers were immigrants from Europe, their immediate descendants, or
African-Americans whose ancestors were brought to the Americas as slaves. In the early years of

14
Accessed from https://www.pgpf.org/blog/2016/10/debt-vs-deficits-whats-the-difference as on 20th October,
2020.
15
Retrieved from https://treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm as on 21st October, 2020.
16 th
Accessed from https://www.thebalance.com/us-economy-facts-4067797#citation-20 as on 20 October, 2020.

29
the 20th century, large numbers of Asians immigrated to the United States, while many Latin
American immigrants came in later years.

The United States is a capitalist economy. I'm sure you've heard that before, but you might wonder
just what capitalism is. Well, it's the economic system that goes the best with our democratic form
of government, for starters. It allows anyone selling a legal product to start a business and keep the
profits. People who start businesses are entrepreneurs and free enterprise allows them to do just that
- start businesses.

But natural resources and labour account for only part of an economic system. These resources
must be organized and directed as efficiently as possible. In the American economy, managers,
responding to signals from markets, perform this function. The traditional managerial structure in
America is based on a top-down chain of command; authority flows from the chief executive in the
boardroom, who makes sure that the entire business runs smoothly and efficiently, through various
lower levels of management responsible for coordinating different parts of the enterprise, down to
the foreman on the shop floor. Facing heightened global competition, American businesses are
seeking more flexible organization structures, especially in high-technology industries that employ
skilled workers and must develop, modify, and even customize products rapidly. Excessive
hierarchy and division of labour increasingly are thought to inhibit creativity. As a result, many
companies have "flattened" their organizational structures, reduced the number of managers, and
delegated more authority to interdisciplinary teams of workers.

In the United States, the corporation has proved to be an effective device for accumulating the funds
needed to launch a new business or to expand an existing one. The corporation is a voluntary
association of owners, known as stockholders, who form a business enterprise governed by a
complex set of rules and customs. Some institutions, especially banks, also lend money directly to
corporations or other business enterprises. Federal and state governments have developed detailed
rules and regulations to ensure the safety and soundness of this financial system and to foster the
free flow of information so investors can make well-informed decisions.

The American free enterprise system emphasizes private ownership. Private businesses produce
most goods and services, and almost two-thirds of the nation's total economic output goes to
individuals for personal use (the remaining one-third is bought by government and business). The
consumer role is so great, in fact, that the nation is sometimes characterized as having a "consumer

30
economy." This emphasis on private ownership arises, in part, from American beliefs about
personal freedom. From the time the nation was created, Americans have feared excessive
government power, and they have sought to limit government's authority over individuals --
including its role in the economic realm. In addition, Americans generally believe that an economy
characterized by private ownership is likely to operate more efficiently than one with substantial
government ownership.

While consumers and producers make most decisions that mould the economy, government
activities have a powerful effect on the U.S. economy in at least four areas.

-Stabilization and Growth: Perhaps most importantly, the federal government guides the
overall pace of economic activity, attempting to maintain steady growth, high levels of
employment, and price stability. By adjusting spending and tax rates (fiscal policy) or managing
the money supply and controlling the use of credit (monetary policy), it can slow down or speed
up the economy's rate of growth -- in the process, affecting the level of prices and employment.
-Regulation and Control: The U.S. federal government regulates private enterprise in
numerous ways. Regulation falls into two general categories. Economic regulation seeks, either
directly or indirectly, to control prices. Traditionally, the government has sought to prevent
monopolies such as electric utilities from raising prices beyond the level that would ensure them
reasonable profits. At times, the government has extended economic control to other kinds of
industries as well. In the years following the Great Depression, it devised a complex system to
stabilize prices for agricultural goods, which tend to fluctuate wildly in response to rapidly
changing supply and demand. A number of other industries -- trucking and, later, airlines --
successfully sought regulation themselves to limit what they considered harmful price-cutting.
Another form of economic regulation, antitrust law, seeks to strengthen market forces so that
direct regulation is unnecessary. The government -- and, sometimes, private parties -- have used
antitrust law to prohibit practices or mergers that would unduly limit
competition. Government also exercises control over private companies to achieve social
goals, such as protecting the public's health and safety or maintaining a clean and healthy
environment.
-Direct Services: Each level of government provides many direct services. The federal
government, for example, is responsible for national defence, backs research that often leads to

31
 the development of new products, conducts space exploration, and runs numerous programs
designed to help workers develop workplace skills and find jobs. Government spending has a
significant effect on local and regional economies -- and even on the overall pace of economic
activity.
-Direct Assistance: Government also provides many kinds of help to businesses and
individuals. It offers low-interest loans and technical assistance to small businesses, and it
provides loans to help students attend college. Government-sponsored enterprises buy home
mortgages from lenders and turn them into securities that can be bought and sold by investors,
thereby encouraging home lending. Government also actively promotes exports and seeks to
prevent foreign countries from maintaining trade barriers that restrict imports.

Foreign Trade Policies

U.S. foreign trade and global economic policies have changed direction dramatically during the
more than two centuries that the United States has been a country. In the early days of the nation's
history, government and business mostly concentrated on developing the domestic economy
irrespective of what went on abroad. But since the Great Depression of the 1930s and World War
II, the country generally has sought to reduce trade barriers and coordinate the world economic
system. This commitment to free trade has both economic and political roots; the United States
increasingly has come to see open trade as a means not only of advancing its own economic
interests but also as a key to building peaceful relations among nations.

The United States dominated many export markets for much of the post-war period -- a result of its
inherent economic strengths, the fact that its industrial machine was untouched by war, and
American advances in technology and manufacturing techniques. By the 1970s, though, the gap
between the United States' and other countries' export competitiveness was narrowing. What's
more, oil price shocks, worldwide recession, and increases in the foreign exchange value of the
dollar all combined during the 1970s to hurt the U.S. trade balance. U.S. trade deficits grew larger
still in the 1980s and 1990s as the American appetite for foreign goods consistently outstripped
demand for American goods in other countries. This reflected both the tendency of Americans to
consume more and save less than people in Europe and Japan and the fact that the American
economy was growing much faster during this period than Europe or economically troubled Japan.

32
Mounting trade deficits reduced political support in the U.S. Congress for trade liberalization in the
1980s and 1990s. Lawmakers considered a wide range of protectionist proposals during these years,
many of them from American industries that faced increasingly effective competition from other
countries. Congress also grew reluctant to give the president a free hand to negotiate new trade
liberalization agreements with other countries. On top of that, the end of the Cold War saw
Americans impose a number of trade sanctions against nations that it believed were violating
acceptable norms of behaviour concerning human rights, terrorism, narcotics trafficking, and the
development of weapons of mass destruction.

Despite these setbacks to free trade, the United States continued to advance trade liberalization in
international negotiations in the 1990s, ratifying a North American Free Trade Agreement
(NAFTA), completing the so-called Uruguay Round of multilateral trade negotiations, and joining
in multilateral agreements that established international rules for protecting intellectual property and
for trade in financial and basic telecommunications services.

Still, at the end of the 1990s, the future direction of U.S. trade policy was uncertain. Officially, the
nation remained committed to free trade as it pursued a new round of multilateral trade
negotiations; worked to develop regional trade liberalization agreements involving Europe, Latin
America, and Asia; and sought to resolve bilateral trade disputes with various other nations. But
political support for such policies appeared questionable. That did not mean, however, that the
United States was about to withdraw from the global economy. Several financial crises, especially
one that rocked Asia in the late 1990s, demonstrated the increased interdependence of global
financial markets. As the United States and other nations worked to develop tools for addressing or
preventing such crises, they found themselves looking at reform ideas that would require increased
international coordination and cooperation in the years ahead.

An open trading system requires that countries allow fair and non-discriminatory access to each
other's markets. To that end, the United States is willing to grant countries favourable access to its
markets if they reciprocate by reducing their own trade barriers, either as part of multilateral or
bilateral agreements. While efforts to liberalize trade traditionally focused on reducing tariffs and
certain nontariff barriers to trade, in recent years they have come to include other matters as well.
Americans argue, for instance, that every nation's trade laws and practices should be transparent --
that is, everybody should know the rules and have an equal chance to compete. The United States

33
and members of the Organization for Economic Cooperation and Development (OECD) took a step
toward greater transparency in the 1990s by agreeing to outlaw the practice of bribing foreign
government officials to gain a trade advantage.

The United States also frequently urges foreign countries to deregulate their industries and to take
steps to ensure that remaining regulations are transparent, do not discriminate against foreign
companies, and are consistent with international practices. American interest in deregulation arises
in part out of concern that some countries may use regulation as an indirect tool to keep exports
from entering their markets.

Despite general adherence to the principles of non-discrimination, the United States has joined
certain preferential trade arrangements. The U.S. Generalized System of Preferences program, for
instance, seeks to promote economic development in poorer countries by providing duty-free
treatment for certain goods that these countries export to the United States; the preferences cease
when producers of a product no longer need assistance to compete in the U.S. market. Another
preferential program, the Caribbean Basin Initiative, seeks to help an economically struggling
region that is considered politically important to the United States; it gives duty-free treatment to all
imports to the United States from the Caribbean area except textiles, some leather goods, sugar, and
petroleum products.

Economic Data

Economic Growth
According to the most recent forecast released at the Federal Open Market Committee (FOMC)
meeting on Sept. 16, 2020, U.S. GDP growth is expected to contract by 3.7% in 2020. It may
rebound up to a 4.0% growth rate in 2021. Growth could slow to 3.0% in 2022, and 2.5% in 2023.

Unemployment
The unemployment rate is expected to average 7.6% in 2020. It will fall to 5.5% in 2021, 4.6% in
2022, and 4.0% in 2023. The rate peaked at 14.7% in April 2020 as workers were let go from their
jobs in response to the pandemic.

The real unemployment rate includes the underemployed, the marginally attached, and discouraged
workers. For that reason, it is around double the widely-reported you typically see in news articles.

34
Inflation
The median core inflation rate is predicted to be 1.2% in 2020, 1.7% in 2021, 1.8% in 2022, and
2.0% in 2023. The Fed's target inflation rate is 2.0%. The core inflation rate strips out volatile gas
and food prices. The Fed prefers to use that rate when setting monetary policy.

Interest Rates
On Sept. 16, 2020, the FOMC announced it would keep the benchmark rate at its current level until
inflation reached 2.0% over a long period of time. The Fed's forecast said that wouldn't occur until
at least 2023.

In March 2020, the FOMC held an emergency meeting to address the economic impact of the
COVID-19 pandemic. It lowered the fed funds rate to a range between 0.0% and 0.25%.

The Fed is also working on keeping long-term rates low. It restarted its quantitative easing (QE)
program. In March, the Federal Reserve announced it would purchase $500 billion in U.S.
Treasuries and $200 billion in mortgage-backed securities. It soon expanded QE purchases to an
unlimited amount. By June 2020, its balance sheet had grown to a record of $7.2 trillion.

Oil and Gas Prices

The U.S. Energy Information Administration (EIA) provides an outlook on oil and gas prices from
2020 to 2050. It predicts crude oil prices will average $42/b in the fourth quarter of 2020 and $47/b
in 2021 for Brent global and $45/b for West Texas Crude in 2021.

West Texas Intermediate (WTI) is the benchmark for U.S. oil prices. North Sea Brent oil comes
from Northwest Europe and is the benchmark for global oil prices.

The EIA's energy outlook through 2050 predicts rising oil prices. By 2025, the average Brent oil
price could increase to $183/b in 2050, adjusted for inflation. By then, the cheap sources of oil will
have been exhausted, making crude oil production more expensive. This forecast does not take into
account government efforts to increase renewable energy production to stop global warming. It also
does not factor in the pandemic's impact on oil prices.

35
Jobs
The Bureau of Labour Statistics (BLS) publishes an occupational outlook each year. It goes into
great detail about each industry and occupation. Overall, the BLS expects total employment to
increase by 6 million jobs between 2019 and 2029.

Health care occupations are projected to 3.1 million jobs. Computer and math occupations, and
those based on alternative energy production, will also grow rapidly. For example, the BLS predicts
jobs for wind turbine service technicians will increase by 60.7% from 2019 to 2029.

Manufacturing will continue shedding jobs. Retail sales are also expected to lose jobs, as e-
commerce continues to grow. That same shift could increase jobs in transportation and
warehousing. Other declines will occur in the postal service, agriculture, and some information-
related industries. 17

17
Retrieved from https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20200916.html as on 21st October,
2020

36
 Political Factors
Introduction to the US Political System
Two political parties dominate politics –
The Democratic Party: socially progressive, favours government intervention to temper the market
economy. The Republican Party (also known as the Grand Old Party, GOP): socially conservative,
supports free-market capitalism and emphasizes national defense.

The USA is the second largest democracy in the world. The president is the head of the country and
is elected for a four-year term. Elections held in the USA are usually considered fair and
transparent. The country enjoys a stable political climate, even though there have been some
challenges recently. It also has an enormous influence over the political dynamics of many
countries around the world. However, the USA faces international criticism for some of its
interventionist policies in some parts of the world.

The USA advocates and promotes democracy around the world. With a stable political
environment, advanced infrastructure, and technology, the USA positions itself as a great
destination for foreign direct investment (FDI). Consequently, the country has been the first choice
for many multinational companies for foreign direct investment for a long time. However, countries
such as China, India, Brazil, Turkey, Nigeria, South Africa, and many others came forward as
contenders for foreign direct investment.

Trade with the US

Trade Agreements & Negotiations: U.S. free trade agreements, plus studies and data prepared by
the Office of Trade Policy and Analysis.

Trade Facts: Countries & Regions: The Office of the U.S Trade Representative offers Trade Facts:
data on exports, imports, the trade balance and investment.

U.S. Bilateral Relations Fact Sheets: U.S. State Department assessments of the current state of U.S.
diplomatic relations with foreign countries.

37
Governments sets U.S. trade negotiating objectives, enacts trade laws, programs, and agreements,
and oversees executive trade functions conducted by a range of federal agencies. By statute, the
U.S. Trade Representative (USTR) is the lead U.S. trade negotiator.

Trade Policy Components Affected by Political Environment

 Trade rules-setting, liberalization, and enforcement: Negotiation of trade
agreements to open markets and set rules on trade and investment; enforcement of
commitments via dispute settlement and U.S. trade laws.
 Export promotion and controls: U.S. support for export financing, market research,
advocacy, and trade missions; licensing and control of strategic exports.
 Customs, trade remedies, trade adjustment: Regulation of borders; laws to
address adverse effects of imports on U.S. industries, national security threats, balance of
payments, and “unfair” barriers to U.S. exports; assistance for dislocated workers and firms.
 Trade preferences: Duty-free access to U.S. markets for eligible developing countries
and products, intended to encourage trade and spur their economic growth.
 Investment: Protection and promotion (through investment treaties and trade
agreements); examination of inbound FDI for national security implications
 Taxation: Taxes, in particular, can have a massive effect on overhead and profit margins.
In most democratic states, changes in government often bring significant regulatory changes
related to taxation, with these changes often hinging on the political ideologies of the party
in power. For example, the Republican Party in the US is a clear illustration of parties who
favour tax cuts as a route to helping businesses grow. (Shayerah, Ian, & Brock, 2020)18

18
Retrieved from U.S. Trade Policy: Background and Current Issues.

38
Political Risk
 President Donald J. Trump‟s first term in office is approaching its end, with presidential
elections scheduled for November 2020. The country‟s pandemic response and economy are
currently the most prominent election issues. Other key issues include healthcare, the
environment, gun control, immigration, and racial inequality.
 The two bodies of the US legislature are currently split, with Republicans in control of the
Senate and the Democrats in control of the House of Representatives.
 The US legal system is clear, business friendly, and broadly transparent. The judiciary is
regarded as independent.
 Domestically, demonstrations are relatively common. Given the high level of
unemployment and the disproportionate impact of the pandemic on more disadvantaged
communities, however, protests are likely to increase. (AM Best, 2020)19

19
Retrieved from Best's Country Risk Report.

39
 International Relations
Significance of India-U.S. Trade and Economic Relations
India and United States are the two largest democracies in the world, representing a fifth of the
world population and account for more than a quarter of the world's economy has a lot to contribute
in bringing economic stability in Asia and the world at large. The significance of India-U.S. trade
and economic relations can be traced from the following points.

a. U.S. constitutes about 30 per cent of the world exports, while China constitutes only just 5 per
cent of the world exports.

b. Since the liberalization of the economic reforms in India in 1991, United States have emerged as
the single largest trading partner of India that accounts for 18 per cent of India's exports. This is
followed by UK, China / Hong Kong.

c. The bilateral trade volume between India and United States is about 21-22 billion dollars,
followed by 13 billion dollars or so between India and China.

d. United States is the single largest foreign investor in India that account for about 20 per cent of
FDI in India.

India - U.S. Trade and Economic Relations by the Turn of the Twenty
First Century
Economic factor has played a key role in bringing the two countries closer and in transforming the
relations. Since the initiation of the economic reforms, Indian economy has witnessed a dramatic
improvement and no way of stopping. Such an improvement has attracted the attention of the
American Businesses that there has been an increase in the number of American firms presence in
India. American firms are well aware of the presence of a large pool of skilled brains power and the
advantage that it could gain out of it. The liberalization process has opened the excellent
opportunity for the American firms to access Indian market and changed its mindset about the
Indian economy from a poor, underdeveloped economy to an emerging market.

Today U.S. has emerged as the single largest trading partner and the largest investor to India. This
is viewed in terms of the significant improvement in India's exports to U.S. and the improving

40
investment towards India. From 1999 to 2018, trade in goods and services between the two
countries surged from $16 billion to $142 billion. India is now the United States‟ eighth -
largest trading partner in goods and services and is among the world‟s largest economies.
Trade Relation Tension But as trade between Washington and New Delhi has increased, so too have
tensions. U.S. and Indian officials have disagreed for years on tariffs and foreign investment
limitations, but also on other complicated issues, particularly within agricultural trade. Concern for
intellectual property rights has preoccupied the United States for thirty years, while issues
concerning medical devices and the fast-growing digital economy have more recently emerged. On
top of this, the Donald J. Trump administration has exacerbated tensions by creating new dilemmas,
including a focus on bilateral trade deficits and the application of fresh tariffs, prompting retaliation
from PM Narendra Modi‟s government.

Challenges in Trade Relations

Generalized System of Preferences (GSP)
Following a public review process, the Trump administration removed India from the GSP
program, a special trade treatment for developing countries. One qualification of the program is
“equitable and reasonable” access to that country‟s markets for U.S. goods and services, and the
administration noted still-significant trade barriers in India. Shortly after the Trump administration
pulled India from the GSP, India pulled the trigger on its retaliatory tariffs, after which the United
States filed a dispute at the WTO. These retaliatory tariffs remain in place.

Bilateral Trade Deficits

Previously not a top U.S. trade concern, these became a major focus when Trump issued an
executive order in 2017 requiring a study of the United States‟ most significant trade deficits. India
has slightly narrowed the trade deficit in goods with the United States, which went from $24.3
billion in 2016, the tenth-largest that year, to $23.3 billion in 2019, the eleventh-largest. Indian
negotiators have proposed reducing the deficit via major purchases of products including liquefied
natural gas and aircraft.

Intellectual Property Rights

Intellectual property rights in India have been a chief U.S. concern since at least 1989, the year of
the first “Special 301 report” mandated by Congress to identify intellectual property issues in trade.
Concerns include piracy of software, film, and music and weak patent protections, among others. In

41
that first report, India was one of eight countries placed on a priority watch list. India has remained
on the watch list, despite some progress. To comply with its obligations as part of the WTO‟s
Agreement on Trade-Related Aspects of Intellectual Property Rights, India amended its patent act
to recognize product rather than process patents, meaning that replicating a product using a different
process would qualify as an infringement. This came into force in 2005. However, the United States
has sought further improvements. By 2018, Washington still cited insufficient patent protections,
restrictive standards for patents, and threats of compulsory licensing. Other U.S. concerns include
India‟s copyright regime and whether current approaches can deliver “pro-innovation and -
creativity growth policies.”

Visas in Services Trade

Most of the above flash points center on U.S. concerns about the Indian economy, mostly because
the U.S. economy presents fewer barriers. Yet, the Indian government has continued to highlight
services trade and the “movement of natural persons,” or procedures typically involving a visa
regime by which a citizen of one country can perform services work in another country. For India,
this falls squarely in the world of trade, but for the United States, these are immigration matters that
cannot be negotiated in trade deliberations. In the United States, H1B and L1 visas permit highly
skilled workers from other countries to be employed, with an annual limit of sixty-five thousand
regular applications and another twenty thousand for those who have earned an advanced degree in
the United States. Due to its large pool of highly skilled workers, India is extremely competitive in
services, and its professionals work around the world. Of the top ten companies with H1B-approved
petitions in 2018, four are Indian firms, three of which are at the very top. Over the past fifteen
years, the proportion of approved H1B petitions from India went from just under 40 percent to more
than 70 percent. India‟s negotiating posture has long prioritized further opening other countries‟
visa regimes for services workers; this was an unmet ambition, for example, of India‟s in talks on
the Regional Comprehensive Economic Partnership, a trade pact of fifteen countries, including
China, which India opted out of after years of negotiations. (Ayres, 2020)20

20
Retrieved from https://www.cfr.org/article/field-guide-us-india-trade-tensions

42
India-US relations with China
The desire to counter China‟s role in the Indo-Pacific is an area of increasing strategic convergence
for the US and India. With India‟s increasing concern over China‟s growing presence in South Asia
and the Indian Ocean, and the US also seeking to counter China‟s growing global influence, India
and the US have reached an increasing level of strategic convergence on the need to counter
China‟s role in the Indo-Pacific region. However, India and the US do differ over aspects of the
China challenge, with a key difference being that for India, China is its immediate neighbours only
separated by the Himalayas, where tensions continue over their disputed land border. India has
therefore sought to engage China through a mix of cooperation and competition in their shared
neighborhood. The US and India signaled that they would enhance their reliance on each other to
counter China regionally and globally, even at the risk of giving too central a place to this single
factor. (Solanki & Levesques, 2020)21

21
Retrieved from https://www.iiss.org/blogs/analysis/2020/03/sasia---us-india-relations-trump-and-modi

43
 Competition
Diamond Imports into the United States (Direct Competition)
Below are the top 15 suppliers from which the United States imported the highest dollar value
worth of diamonds during 2019. Within parenthesis is the percentage change in value for each
supplying country since 2015.

India: US$8.1 billion (up 8.1% from 2015)

Israel: $6.8 billion (down -20.1%)

Belgium: $1.9 billion (down -49%)

South Africa: $939.4 million (up 44.4%)

Hong Kong: $389.6 million (down -66.4%)

Russia: $362.2 million (up 230.3%)

Botswana: $277.7 million (up 32.5%)

Switzerland: $221.5 million (down -59.7%)

China: $158 million (down -24.2%)

United Arab Emirates: $118.6 million (up 16.3%)

United Kingdom: $108.6 million (down -56%)

Namibia: $96.8 million (up 133.9%)

Mauritius: $94.2 million (down -8.8%)

Canada: $91.9 million (down -39.4%)

Australia: $87.9 million (up 41.7%)

The listed 15 countries shipped 98.2% of diamonds imported by the United States of America in
2019.

44
Among the above countries, the fastest-growing suppliers of diamonds to United States since 2015
were: Russia (up 230.3%), Namibia (up 133.9%), South Africa (up 44.4%) and Australia (up
41.7%).Countries that experienced declines in the value of their diamonds supplied to American
importers included: Hong Kong (down -66.4%), Switzerland (down -59.7%), United Kingdom
(down -56%) and Belgium (down -49%).

Overall, the value of US imported diamonds fell by an average -15.7% from all supplying countries
since 2015 when diamonds purchased cost $23.9 billion. (Workman, Diamond Imports by Country
(USA), 2020)22

We can conclude that that in short term; Israel, Belgium and South Africa are the biggest
competitors. In long term, we should expect strong competition from Russia and Namibia.

US Diamond Production (Indirect Competition)

Two locations in the United States have been worked as commercial diamond mines. The first was
a mine near Murfreesboro, Arkansas. It was worked as a commercial diamond mine by a succession
of operators in the early 1900s but closed because the deposit was sub economic. Today it is known
as the "Crater of Diamonds" and is operated by the State of Arkansas as a tourist "pay-to-dig mine"
where anyone can pay a fee, look for diamonds, and keep any that they find. Up to a few hundred
carats of diamonds are found there each year. The second was the Kelsey Lake Diamond Mine near
Fort Collins, Colorado. It produced small amounts of diamonds between 1996 and 2002, when the
mine was closed due to legal problems. (King)23

As of now there is only one active mine; that does not produce much so the indirect completion is not a big
threat. Although as mentioned earlier, synthetic diamonds are somewhat of a threat to the exports of natural
industrial diamonds. But that is being tackled by the production of industrial diamond in India as well.

22
Retrieved from http://www.worldstopexports.com/diamond-imports-by-country/
23
Retrieved from https://geology.com/gemstones/united-states-diamond-production

45
 Limitations on Market Access
Trade Act of 2002

When importing Into the United States you need to be familiar with the information in the Trade
Act of 2002 which includes the Customs Modernization Act, put into effect on December 8,
199. The guideline requirements have essentially changed the affiliation among importers and
Customs Border Protection by changing to the importer the lawful task for declaring the worth,
categorization, and fee for duty appropriate to the entered precious gems.

Customs Bonds

Requirements are established for dealers in the Patriot Act when importing precious gems and
metals.

An important facet of the Mod Act is the association between the Customs Border Protection
Agency and importers that is characterized by informed acquiescence. A critical part of informed
acquiescence is the collective accountability between the Customs Border Protection and the import
community. A license is not a requisite to import the precious gems for business purposes; but, a
Form 301 from the Customs Bond Customs Border Patrol is required for all recognized entries. A
bond may be obtained from a surety company. During this time you may want to consider
employing a Customs Broker to implement your entries on your behalf.

When importing precious gems and metals, requirements are established for dealers in the Patriot
Act. The agency responsible for developing the regulations regarding the compliance and

46
registration programs is the Financial Center. Individual imports of precious gems are typically
cleared easily and do not need a Customs bond. But, if purchased while you were out of the
country, make certain you declare the precious gems when clearing Customs and Border Protection
(CBP) on the CBP Form 6059B.

Are Precious Gems Duty-Free?

Imports of precious gems such as rubies, emeralds, diamonds, pearls, and sapphires from countries
with regular trade relation conditions are duty-free as long as they are not permanently set, mounted
or strung. Added duty rates for the precious gems can be found in the Harmonized Tariff Schedule
(HTS). When these

When these precious gems are mounted, set and strung with a precious metal, the classification
changes to jewelry and is subject to duty.

precious gems are mounted, set and strung with a precious metal, the classification changes to
jewelry and is subject to duty.

The precious gem diamonds need a Kimberley Certificate.

Kimberley Process

The Kimberley Process is an organization that regulates trade in rough diamonds and holds an
international certification. Its objective is to stop the importation of conflict diamonds in hopes
that it will help to guard lawful trade in rough diamonds. The rules that govern the trade in rough

47
diamonds are derived from the Kimberley Process Certification Scheme. The Kimberley Process
Certification Scheme has developed a set of minimum requirements that each participant must
meet.

Importers may also wish to obtain guidance from knowledgeable experts who specialize in
importing, for example, licensed customs brokers, attorneys or consultants. With so many laws and
regulations when importing precious gems the penalties can be costly.

Trade Agreements
India reports that it has 18 bilateral or regional trade agreements in force, including the Asia Pacific
Free Trade Agreement (APTA); India-Australia Comprehensive Economic Cooperation
Agreement; India-Singapore Comprehensive Economic Cooperation Agreement; and, the India-
Indonesia Comprehensive Economic Cooperation Agreement. In June, as part of their commitments
under APTA, India lowered import duties on over 3,000 products to APTA signatories, including
China and Korea, with whom it has large trade deficits.India is engaged in negotiations or formal
discussions on: (1) the proposed Regional Comprehensive Economic Partnership (RCEP) Free
Trade Agreement that includes the ten Association of South East Asian Nations (ASEAN) member
countries as well as Australia, China, Japan, Korea, and New Zealand; (2) the India-Canada
Comprehensive Economic Cooperation Agreement; (3) the India-European Union Broad Based
Trade and Investment Agreement; (4) the India-Israel Free Trade Agreement; and, (5) the India-
Gulf Cooperation Council (GCC) Free Trade Agreement. The Indian Ministry of Commerce
projected that 60 percent of India‟s future trade would be covered by free trade agreements,
including agreements with countries such as Argentina, Brazil, China, Pakistan, and Paraguay.

Import Policies
The United States has actively sought bilateral and multilateral opportunities to increase access to
India‟s market, and the government of India has pursued ongoing economic reform efforts.
Nevertheless, U.S. exporters continue to encounter significant tariff and nontariff barriers that
impede imports of U.S. products into India.Tariffs and TaxesTariffs India‟s average Most Favored
Nation (MFN) applied tariff rate of 13.8 percent remains the highest of any major world economy.
Since 2014, the Modi government has promoted the Make in India campaign, a drive to build the

48
country‟s manufacturing capacity in part by cutting barriers to foreign investment and introducing
regulatory reforms. As part of the campaign, the government has raised duties on two broad groups
of products to encourage domestic production: (1) an assortment of labor-intensive products; and
(2) electronics and communications devices, including mobile phones, televisions, and associated
parts and components.

On June 20, 2018, India announced an intention to adopt tariffs ranging from 10 to 50 percent on
various products imported from the United States, in retaliation against the President‟s decision to
adjust U.S. imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of
1962, as amended. The new tariffs would apply to a range of agricultural and manufactured
products, including products of steel. On February 26, 2019, India announced that it would further
delay the implementation of these tariffs until April 1, 2019. The United States has urged India to
work to address the common problem of excess capacity in the global steel and aluminum sectors,
rather than engage in unjustified retaliation designed to punish American workers and companies.
The United States will take all necessary action to protect U.S. interests in the face of such
retaliation.

India maintains very high tariffs on a number of goods, including flowers (60 percent), natural
rubber (70 percent), automobiles (60 percent), motorcycles (50 percent), raisins and coffee (100
percent), and alcoholic beverages (150 percent). India also operates a number of complicated duty
drawback, duty exemption, and duty remission schemes for imports. In addition, India maintains
very high basic customs duties, in some cases exceeding 20 percent, on drug formulations,
including life-saving drugs and finished medicines listed on the World Health Organization‟s list of
essential medicines. India‟s tariff regime is also characterized by pronounced disparities between
WTO bound rates and the MFN applied rates. India‟s WTO bound tariff rate averaged 48.5 percent,
while its applied MFN tariff for 2017 (latest data available) averaged 13.8 percent. Many of India‟s
bound tariff rates on agricultural products are among the highest in the world, averaging 113.5
percent and ranging as high as 300 percent. Applied agricultural tariff rates are also high and
average 32.8 percent. While certain Indian agricultural applied tariff rates are lower, they still
present a significant barrier to trade in agricultural goods and processed foods (e.g., potatoes, citrus,
almonds, apples, grapes, canned peaches, chocolate, cookies, and frozen French fries and other
prepared foods used in quick-service restaurants). In addition, while India has bound all agricultural

49
tariff lines in the WTO, nearly 30 percent of India‟s non-agricultural tariffs remain unbound.Given
this large disparity between WTO bound and applied rates, India has considerable flexibility to
change tariff rates at any time, creating tremendous uncertainty for U.S. exporters. For example,
from November 2017 through March 2018, India raised import duties from zero percent to 60
percent on chickpeas, 50 percent on peas, 40 percent on large chickpeas, and 30 percent on lentils,
severely impacting U.S. pulse exports to India. The government of India took advantage of this
tariff flexibility in the 2018 budget when it increased tariffs on 52 separate line items, including key
U.S. exports in the agricultural, information and communications technology, and automobile parts
sectors, with no warning or public consultation process. The increased tariffs also included
agricultural products such as certain fruit juices (from 30 percent to 35 percent), certain edible
vegetable oils (from 20 percent to 35 percent), and several other agricultural and non-agricultural
items. India also further raised duties on several information and communications technology
products, including cell phones, from 15 percent to 20 percent. Prior to the tariff increases, these
products were imported duty-free. Duties on automotive components such as engine and
transmission parts, brakes, suspensions, gear boxes, and airbags increased to 15 percent from 7.5
percent in the case of some products and from 10 percent in the case of others. In addition, a new 10
percent tariff on imports, labeled the “social welfare surcharge,” was instituted without public
notice or consultation. The “social welfare surcharge” is applied to the aggregate of duties, taxes
and cesses assessed on imports.

In September 2018, India increased import duties again on 19 items in an attempt to narrow a
widening current account deficit and relieve downward pressure on the rupee against other world
currencies. Tariffs were increased on jet fuel and 18 other items deemed non-essential, including
air-conditioners, refrigerators, and small washing machines as well as products such as footwear,
tableware, suitcases, gold and silver jewelry, and semi-processed diamonds.

Taxes
Prior to the introduction of the Good and Services Tax (GST) system in July 2017, India maintained
a complex and opaque system of taxes, excise duties, and other charges. Imports were subject to
state-level value-added or sales taxes and the Central Sales Tax as well as various local taxes and
charges. The new GST simplified the regime by unifying India into a single market and improving
the ease of doing business. The new GST is made up of three main taxes: Central GST (CGST) is a

50
fee collected by the central government for sales in all states; State GST (SGST) is a fee collected
by each state for sales within a state; and Integrated GST (IGST) is a fee collected by the central
government for sales between states.Under the new system, goods and services are taxed under four
basic rates: 5 percent, 12 percent, 18 percent, and 28 percent. Some items such as bread, fresh fruits
and vegetables, and certain dairy products have been exempted from GST, but are subject to certain
preexisting taxes. While implementation challenges remain, India‟s GST council meets regularly to
adjust GST rates and provide clarifications and revisions to GST policy.

Increased competitiveness due to third party tariff rates

The opportunity came India‟s way after the US levied a 10 per cent import duty on import of gems
and jewellery from China, taking the tariff to 20.5 per cent. A year the US imposed a 5.5 per cent
tariff on import of jewellery from India which still leaves the country with a 15 per cent advantage
over China.

China exports around $2 billion worth of gems and jewellery to the US. But, in the absence of
policy support from the government, industry has failed to grab the export market share while
competing countries like india benefit.

Kimberly Process Certificate (KP certificate) to import rough diamonds.

The KPC, Kimberly Process Certificate is issued mainly to prevent conflict diamonds by ensuring
the purchase of diamonds were not financing violence by rebel movements and their allies seeking
to undermine legitimate governments. Thus, the illicit international trade in rough diamonds and
armed conflict are controlled, thereby maintaining security, peace and sustainable development in
affected countries. As a part of several key commitments, Kimberly Process Certificate Scheme
(KPCS) includes a requirement that all imported and exported rough diamonds be certified. In
India, GJEPC (Gem and Jeweler Export Promotion Council) is the government agency to issue
Kimberly Process Certificate.

51
Import of rough diamonds as per Reserve Bank regulations.

Import of most of the items under diamonds is directly regulated by reserve bank. So, necessary
requirements insisted by Reserve Bank has to be followed before importing most of the items under
rough diamonds. The importer of rough diamonds may collect accurate information from necessary
authorities before import.

Conditions as per Hazardous Wastes management, handling and Trans

boundary movement rules.

Each country has their own foreign trade policy to import Pearls, Stones, Precious Metals, Imitation
Jewelry and Coins in to their country. However, most of the countries have Hazardous wastes
management, handling and tans boundary movement rules or similar authority that regulates
imports and consumption of Pearls, Stones, Precious Metals, Imitation Jewelry and Coins in their
country. Any importer who would like to import Pearls, Stones, Precious Metals, Imitation Jewelry
and Coins should follow the terms and conditions of such hazardous wastes management, handling
and Trans boundary movement rules before actual import of Pearls, Stones, Precious Metals,
Imitation Jewelry and Coins takes place. The movement of goods under hazardous wastes
management,handling and tans boundary has to be along with form 9.

Permission from Environment department to import Precious metals,

Imitation Jewelry, stones, and coins

Almost all countries have environment department to regulate importation, consumption and usage
of materials effecting environment. Permission from such environment department of importing
country is essential to import some of the items under Pearls, Stones, Precious Metals, Imitation
Jewelry and Coins. In India, Ministry of Environment and Forest (MOEF) is the authorized
government agency to regulate such materials including importation.

Test report of analysis from Laboratory to import Precious metals,

Imitation Jewelry, stones, and coins

For the purpose of importing Pearls, Stones, Precious Metals, Imitation Jewelry and Coins, the
importer must obtain a test report from accredited laboratory authorized or governed by importing
country is required. Necessary sample of imported Pearls, Stones, Precious Metals, Imitation
52
Jewelry and Coinsis drawn as per the procedures and rules of importing country and submits with
such authorized laboratory and obtains analysis report. Normally three sets of samples of importing
Pearls, Stones, Precious Metals, Imitation Jewelry and Coinsare drawn and forwarded to laboratory
notified by environment and forest department. Test report retains for minimum two years to
confirm on obligation fulfillment by importer on importation of Pearls, Stones, Precious Metals,
Imitation Jewelry and Coins. Such certificate is submitted with customs location of importing
country to process importation of Pearls, Stones, Precious Metals, Imitation Jewelry and Coins. If
non fulfillment of obligation by importation of Pearls, Stones, Precious Metals, Imitation Jewelry
and Coins, the importer should re-export the hazardous waste within 90 days from the date of
arrival in to importing country as per hazardous waste management, handling and trans boundary
rules.

Penalization by re-exporting Precious metals, Imitation Jewelry, stones,

and coins

If any of the imported Pearls, Stones, Precious Metals, Imitation Jewelry and Coins are not
followed the necessary norms of importing country, such imported Pearls, Stones, Precious Metals,
Imitation Jewelry and Coins have to be destroyed or to be removed out of importing country. Such
non compliant imported Pearls, Stones, Precious Metals, Imitation Jewelry and Coins may be also
fined by imposing penal charges, apart from destruction or return to origin country.

Certificate from Pollution control board to import rough diamonds

Necessary certificate from pollution board has to be attached along with other documents, as a part
of documentation methods to import dough diamonds.

Pre shipment inspection Certificate to import Precious metals, Imitation

Jewelry, stones, and coins

Necessary pre shipment inspection certificate issued by the inspection agency certified by the
exporting country or approved by other government agency of exporting country has to be arranged
for importation of items under diamond materials.

53
Infrastructure Facilities, Incentives (Tax)
The USA has great infrastructure facilities with excellent road transport and air transport. U.S.
affirms to below one of the best place to serve for business, with excellent and speedy transport
system. Also U.S. is known for the state-of-the-art technologies which serve well to the business
needs. The Government of India provides some incentives on diamonds as: Diamond Dollar
Account (DDA)24. Under the scheme of Government of India, firms and companies dealing in
purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari
and / or studded with / without diamond and / or other stones, with a track record of at least 2 years
in import / export of diamonds / colored gemstones / diamond and colored gemstones studded
jewellery / plain gold jewellery and having an average annual turnover of Rs. 3 crores or above
during the preceding three licensing years (licensing year is from April to March) are permitted to
transact their business through Diamond Dollar Accounts. They may be allowed to open not more
than five Diamond Dollar Accounts with the banks. Also the Government of U.S. provides certain
incentives like some tax incentives, financial incentives to attract the business in U.S.

24
https://www.indiafilings.com/learn/diamond-dollar-account-scheme/

54
 General Factors
Hub: Ability to serve as a Hub
India has a great center for polishing diamonds. The most famous cities for diamond polishing are
Mumbai, Surat. So, India plays an important role in the diamond business. India has cutting edge
technology for the diamond business in India. So, India is a great center for exporting diamonds.
When we see the United States, the United States is the largest importer of diamonds. So, the
United States serves as a center for the diamond business. The country is cutting edge. It has
excellent infrastructure capabilities for the business.

Infrastructure Facilities, Incentives (Tax)

The USA has great infrastructure facilities with excellent road transport and air transport. U.S.
affirms to below one of the best place to serve for business, with excellent and speedy transport
system. Also U.S. is known for the state-of-the-art technologies which serve well to the business
needs. The Government of India provides some incentives on diamonds as: Diamond Dollar
Account (DDA)25. Under the scheme of Government of India, firms and companies dealing in
purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari
and / or studded with / without diamond and / or other stones, with a track record of at least 2 years
in import / export of diamonds / coloured gemstones / diamond and coloured gemstones studded
jewellery / plain gold jewellery and having an average annual turnover of Rs. 3 crores or above
during the preceding three licensing years (licensing year is from April to March) are permitted to
transact their business through Diamond Dollar Accounts. They may be allowed to open not more
than five Diamond Dollar Accounts with the banks. Also the Government of U.S. provides certain
incentives like some tax incentives, financial incentives to attract the business in U.S.

25 st
Accessed from https://www.indiafilings.com/l earn/diamond-dollar-account-scheme/ as on 21 October, 2020.

55
 Government Policy and Regulations

 US Implementation of the Kimberley Process - The US Kimberley Process Authority was set
up and run by officials from US trade associations, including the Diamond Dealers Club and
the Jewelers Vigilance Committee. It is responsible for facilitating the issuance of the
Kimberley Process certificates for exports of rough diamonds and reporting this to the US
government. All exporters of rough diamonds are required to file export information through
the US Census Bureau‟s Automated Export System, which is then validated by the government
through the issuance of an Internal Transaction Number.
The US Customs and Border Protection is the government agency responsible for enforcing the
import provisions of the Clean Diamond Trade Act. Importers of rough diamonds are required
to file electronically, including by providing information about the Kimberley Process
certificate, which is then reviewed by the US Customs and Border Protection. Physical
inspection of imports and exports has been very limited, mainly relying on risk analysis.
 Anti-Money Laundering Rules - Anti-money laundering requirements are another requirement
the US diamond industry must comply with. Under the Patriot Act, dealers and traders in
precious metals, stones and jewels are now considered reporting entities in the US and must
have put anti-money laundering measures in place by January 1st 2006.With some exceptions,
the rules set by the US Treasury relate to any dealer or trader who buys or sells more than
US$50,000 worth of goods which derive more than 50% of their value from precious metals,
stones and jewels. Dealers and traders are required to: perform an assessment of the company‟s
risk to money laundering, appoint a compliance officer for anti-money laundering, design and
implement an anti-money laundering program, train employees and test the money laundering
program periodically. 26

26
https://www.everycrsreport.com/reports/RL30751.html#_1_56
https://www.grandviewresearch.com/industry-analysis/diamond-market
http://s3.amazonaws.com/3b59dcdf1c4552f8d85a16a4808a3b38-default/TheUSDiamondSector.pdf

56
 Ethnic Factors
The gemstone and jewellery sector have been one of the fastest growing sectors in India in recent
years. The sector has gained worldwide popularity due to its talented craftsmen, its excellent cutting
and polishing of fine diamonds and precious stones and its profitability. The sector was also crucial
for the Indian economy. This sector in India is responsible for the acquisition, manufacture and
processing of precious stones and metals such as diamonds, other precious stones, gold, silver and
platinum.

India is also one of the world's largest diamond processors and its artisans have special skills in
processing small diamonds (less than one carat). In fact, Indian artisans have achieved excellence in
cutting and polishing small diamonds. However, the true uniqueness of Indian artisans lies in the
fact that they perform most of the cutting and polishing manually, which distinguishes India from
its competitors. India (especially Surat and Mumbai) is one of the four largest diamond centres in
the world; the other three are Belgium (Antwerp), the United States (New York) and Israel (Ramat
Gan). Currently, diamonds processed in India represent 85% of the volume, 92% of the pieces and
60% of the value of the entire world diamond market. The gems and jewellery sector in India is
strongly export-oriented, requires a lot of labour and contributes significantly to foreign exchange
earnings. Therefore, the Indian government has made the sector the focus of export promotion. 27

Infrastructure
The USA has great infrastructure facilities with excellent road transport and air transport. U.S.
affirms to below one of the best places to serve for business, with excellent and speedy transport
system. Also U.S. is known for the state-of-the-art technologies which serve well to the business
needs. The Government of India provides some incentives on diamonds as: Diamond Dollar
Account (DDA)28. Under the scheme of Government of India, firms and companies dealing in
purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari
and / or studded with / without diamond and / or other stones, with a track record of at least 2 years
27
https://qz.com/india/459422/how-indian-families-took-over-the-antwerp-diamond-trade-from-orthodox-jews/
https://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/will-indias-diamond-
cutting-operations-shift-to-israel-belgium/articleshow/63036936.cms?from=mdr
28
https://www.indiafilings.com/learn/diamond-dollar-account-scheme/

57
in import / export of diamonds / coloured gemstones / diamond and coloured gemstones studded
jewellery / plain gold jewellery and having an average annual turnover of Rs. 3 crores or above
during the preceding three licensing years (licensing year is from April to March) are permitted to
transact their business through Diamond Dollar Accounts. They may be allowed to open not more
than five Diamond Dollar Accounts with the banks. Also, the Government of U.S. provides certain
incentives like some tax incentives, financial incentives to attract the business in U.S.

Labour Cost and Productivity

As the sector is highly labour-intensive, its dependency on craftsmanship is very high. For
instance, the cutting and polishing of diamonds and coloured gems, which are soft stones, requires
immense care on the part of the labourer29. Although some activities in the cutting and polishing of
gems are mechanised, the sector still requires skilled craftsmen to achieve precision in diamond
cutting. Labour intensive mining methods are less productive and hence are high unit cost
operations as they fail to benefit from economies of scale

29

https://www.abnamro.com/en/images/Documents/040_Sustainable_banking/Publications/Report_The_True_Price_o
f_Diamonds.pdf

58
As we can see that cost for producing diamond is highest in USA and lowest in India because of
low labour cost. India continually tries to optimise it‟s costs and thus volume of cutting and
polishing segment increases rapidly. Thus, exporting diamonds from India to USA can be
beneficial as a high margin of profit can be set.

59
 Works Cited
Will India’s diamond cutting operations shift to Israel, Belgium? (2018, February 23).

(2019). Diamond Market Size, Share & Trends Analysis Report By Product (Natural, Synthetic), By
Application (Jewelry & Ornaments, Industrial), By Region, And Segment Forecasts, 2019 - 2030.

Kimberly Process Certificate. (2019, January 5). Retrieved October 25, 2020, from
https://howtoexportimport.com/Kimberly-Process-Certificate-KP-certificate-to-exp-1400.aspx

AM Best. (2020). Best's Country Risk Report.

Ceres Company. (2002, December). Market Survey 2002. Retrieved October 23, 2020, from
http://docplayer.net/55435395-Precious-and-semi-precious-stones.html

Export Import Data Bank. (n.d.). Retrieved October 25, 2020, from Ministry of Commerce and Industry,
Department of Commerce: https://commerce-app.gov.in/eidb/ecomcntq.asp

Export-Import Procedure of the Gem and Jewellery. (n.d.). Retrieved October 25, 2020, from GJEPC:
https://gjepc.org/admin/PolicyHandbook/4310_Export%20Import%20Procedure%20for%20Gems%
20&%20Jewellery.pdf

(January 16, 2001 – July 16, 2003). Diamonds and Conflict: Background, Policy, and Legislation.

Kanungo, B. P. (2016, January 12). RESERVE BANK OF INDIA-Foreign Exchange Management (Export of
Goods & Services) Regulations, 2015. Retrieved October 2020, 25, from RBI:
https://www.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=10256

King, H. M. (n.d.). Diamond Mines in the United States. Retrieved October 23, 2020, from Geology.com:
https://geology.com/gemstones/united-states-diamond-
production.shtml#:~:text=The%20only%20active%20diamond%20mine,found%20at%20Crater%20
of%20Diamonds.

US Diamond sector. (November 2006).

RAO, Y. (2003, July 1). FOREIGN EXCHANGE MANAGEMENT ACT NOTIFICATION, Master Circulars - Customer
Service. Retrieved October 25, 2020, from RBI:
https://www.rbi.org.in/SCRIPTs/BS_FemaNotifications.aspx?Id=1488

Shayerah, A., Ian, F., & Brock, W. (2020). U.S. Trade Policy: Background and Current Issues. Congressional
Research Service.

Solanki, V., & Levesques, A. (2020, March 27). India–US relations in the age of Modi and Trump. Retrieved
October 24, 2020, from International Institute for Strategic Studies Website:
https://www.iiss.org/blogs/analysis/2020/03/sasia---us-india-relations-trump-and-modi

Workman, D. (2020, July 17). Diamond Imports by Country (USA). Retrieved October 24, 2020, from World's
Top Exports website: http://www.worldstopexports.com/diamond-imports-by-country/

60
61