Trade Policy Merged PDF

PGDM SEMESTER III
Subject Name: International Trade and Policy

Framework
Topic Name: International Trade Introduction
Prof. Dr Sandeep Surange
© Sasmira’s Business School (SBS)

What is International Trade?
International Trade refers to the exchange of capital ,goods

and services between the countries.

Concept of International Trade
• International trade refers to the exchange of goods and services beyond national
boundaries.
1) INTERNATIONAL TRADE field is concerned with the issues facing international

companies and governments in dealing with all types of cross border transactions.
2) INTERNATIONAL TRADE involves all business transactions that involve two or more
countries.
3) INTERNATIONAL TRADE consists of transactions that are devised and carried out across
borders to satisfy the objectives of individuals and organizations.
4) INTERNATIONAL TRADE consists of those activities of private and public enterprises that
involve the movement across national boundaries of goods and services, resources,
knowledge or skills and information.

Reasons for International Trade –
Benefits for the Nation and the Firm
• To the nations:
Through international trade nations gain by way of :
• Earning foreign exchange,
• more efficient use of domestic resources, greater
prospects of growth,
• and creation of employment opportunities.

Benefits to the Nation Contd..
• International trade obviously improve the
political relations among the nations which
gives rise to Cross-national cooperation and
agreements.
• Nations co-operate more on transactional
issues.

Benefits to the Firms
• To the firms: The advantages to the firms
carrying trade globally include
• prospects for higher profits,
• Greater utilization of production capacities,
• way out to intense competition in domestic
market
• Improved business vision.

Contd>>
• Profits in domestic trade are always lesser when
compared to the profits of the firms dealing
transactions globally.
• Market Fluctuations: Firms conducting trade
internationally can withstand these situations and
huge losses as their operations are wide spread.
Though they face losses in one area they may get
profits in other areas, this provides for stabilizing
during seasonal market fluctuations.

Trends of Goods traded in International Trade
© Sasmira’s Business School (SBS) 8

International Trade-Example of IKEA
• IKEA is the producer of household furnitures and

fixtures
• It purchases wood in Norway
• It than produces furniture parts and assemblies in
sweden,which may have been designed in Denmark.
• After Shipping to US it is put on display in the stores.

IKEA has 465 stores located across 63
markets
IKEA revenues stand at an astounding 42 billion euros as on 2022

Domestic Vs International trade
Criteria International Domestic

Trade Trade
Nature High Low
Complexity
Mobility of Low High
Factors of
Production
Customer High Low
Heterogenity

Contd…
Trade Trade
Political Different Unified
System
Currencies Multiple Single
Tariff Barriers Yes No

Contd..
Trade Trade
Level of Intense and Relatively
Competition Complex less Intense
and complex
Culture Different one
Law Varied One
Technology Significant No variation

Variation
Contd..
Trade Trade
Logistics Different One Systems
Systems
Trade Blocs Present Not Present
Business Varied Uniform

Practices

Reasons for International Trade
• Globalization
• Competition
• Exchange rate
• Global capital flows
• Comparative cost advantage
• Industrial development
• Economic development
• Technology

International
Business
Theories of International
Trade

List of
theories

Theory of
Mercantilism

Mercantilism
• Mercantilism (mid-16th century) suggests that

it is in a country’s best interest to maintain a
trade surplus -to export more than it imports
– advocates government intervention to achieve a
surplus in the balance of trade
• Mercantilism views trade as a zero-sum game
– one in which a gain by one country results in a loss
by another

• Adam Smith (1776) argued that a
country has an absolute advantage
in the production of a product
when it is more efficient than any
Theory of other country in producing it
Absolute – countries should specialize in the
Advantage production of goods for which they
have an absolute advantage and
then trade these goods for goods
produced by other countries

• The theory of comparative advantage (1817) -
countries should specialize in the production
of those goods they produce most efficiently
and buy goods that they produce less
efficiently from other countries
Theory of
– even if this means buying goods
Comparative from other countries that they
Advantage could produce more efficiently
at home
• Trade is a positive sum game

• Eli Heckscher (1919) and Bertil Ohlin (1933) -
comparative advantage arises from differences in
national factor endowments
– the more abundant a factor, the
lower its cost
Heckscher –ohlin• Heckscher and Ohlin predict that countries will
theory? – export goods that make intensive use
of locally abundant factors
– import goods that make intensive use
of factors that are locally scarce

Does The Heckscher-Ohlin
Theory Hold?
• Wassily Leontief (1953) theorized that since the U.S. was relatively
abundant in capital compared to other nations, the U.S. would be an
exporter of capital intensive goods and an importer of labor-intensive
goods.
– However, he found that U.S. exports were less
capital intensive than U.S. imports
• Since this result was at variance with the predictions of trade theory, it
became known as the Leontief Paradox

What Is The
Product Life Cycle Theory?
• The product life-cycle theory - as products mature both the location of

sales and the optimal production location will change affecting the flow
and direction of trade
– proposed by Ray Vernon in the mid-1960s
• Globalization and integration of the world economy has made this
theory less valid today
– the theory is ethnocentric
– production today is dispersed globally
– products today are introduced in multiple markets simultaneously

IPLC

What Is New Trade Theory?
• New trade theory suggests that the ability of firms to gain economies
of scale coupled with Network effects gained by them can have
important implications for international trade.
– new trade theory emerged in the 1980s

– Paul Krugman won the Nobel prize for his work in
2008

What Are The Implications Of
New Trade Theory For Nations?
• Nations may benefit from trade even when
they do not differ in resource endowments or
technology
– a country may dominate in the export of a good
simply because it was lucky enough to have one or
more firms among the first to produce that good

New trade theory
• Monopolistic competition is an important element of
New Trade Theory, it suggests that firms are often
competing on branding, quality and not just simple
price. It explains why countries can both export and
import designer clothes.
• This means that the most lucrative industries are often
dominated in capital-intensive countries, who were the
first to develop these industries. Therefore, being the
first firm to reach industrial maturity gives a very
strong competitive advantage. (some may say unfair
advantage)

• Examples of New Trade Theory
• Specialization of IT in Silicon Valley – the US. Hewlett and
Packard started their computer business. Success attracted
more IT firms to that area. Not because of any particular
intrinsic benefit but new firms start to get the network benefits
of being around other IT setups.’
• Globalization has led to increased variety for consumers. The
proliferation of brand clothing labels. Firms competing in the
model of monopolistic competition and heavy branding.
Neither UK or Italy has a particular comparative advantage in
producing clothes, but consumers are attracted to brand image
of Italian and British fashion labels.

• Michael Porter (1990) tried to
explain why a nation achieves
international success in a particular
industry
Theory of National
• Porter identified four attributes
that promote or impede the
Competitive creation of competitive advantage
Advantage 1. Factor endowments
2. Demand conditions
3. Relating and supporting industries
4. Firm strategy, structure, and rivalry

Diagrammatic Representation
Determinants of National Competitive Advantage: Porter’s Diamond

• What do the four factors mean?
• Firm Strategy and Rivalry is the competition in the home market that drives innovation and quality.
When there’s lots of competition and lots of rivalry, this keeps companies on their toes, and so they
try to out-compete each other by continually developing more innovative and quality products and
or services.
• Demand Conditions example a country with sophisticated homebuyers that have awareness and
demand for advanced, quality, and innovative products, which can create international
competitiveness.
• Related and Supporting Industries are the inputs for a country, which drives its success. For
example, the raw material from fabric suppliers in Italy helps to drive the success of the Milan
fashion industry.
• Factor Input Conditions(Endowments) are the factors of production that includes things like skilled
labour, education, capital, climate, and infrastructure.

Explaining porter’s theory
Example: Germany’s Luxury Car Manufacturing Industry

• An example where Porter’s Diamond can be used to explain
a regional advantage is in Germany’s luxury high power car
manufacturing industry, for brands such as Audi.
• The car manufacturing industry in German has a regional
advantage because it satisfies the four key factors in
Porter’s Diamond. With firm strategy and rivalry, we see
that there is strong rivalry amongst lots of car
manufacturers and so they compete intensely and keep
developing more innovative and quality products.

• There are certain demand conditions amongst the
homebuyers. In parts of Germany, there are no speed
limits, so the sophisticated homebuyers want more
powerful cars. Consequently, the industry aims to
cater for this particular need by developing innovative
engines.
• There are also related and supporting industries such
as the iron and steel industry which provide materials
for car manufacturers, high level of education and
training in the workforce, banks for capital,
component suppliers and IT infrastructure.

• There are also factor conditions, which include skilled
engineers from renowned German universities and the
government’s focus on scientific research, which helps to
push the car manufacturing industry.
• The government has played a major role in creating the
regional advantage as it supported and funded scientific
research and launched the construction of more roads and
canals in the 19th century. By, satisfying all these factors in
Porter’s Diamond it, therefore, helps to explain why
Germany’s luxury high power car manufacturing industry has
a regional advantage.

The Diamond
• Success occurs where these attributes exist.

– More/greater the attribute, the higher chance of
success.
© McGraw Hill Companies, Inc.,2000 4-32

Factor Endowments
• Basic factors:
– natural resources,
– climate,
– location.
• Advanced factors:
– communications,
– skilled labor,
– technology.

Advanced Factor Endowments
• More likely to lead to competitive advantage.

• Are the result of investment by people,
companies, government.

Relationship of Basic to Advanced
Factors
• Basic can provide an initial advantage.
• Must be supported by advanced factors to
maintain success.
• No basics, then must invest in advanced
factors.

Demand Conditions
• Demand creates the capabilities.

– impacts quality and innovation.

Related and Supporting Industries
• Creates clusters of supporting industries that

are internationally competitive.
© McGraw Hill Companies, Inc.,2000

4-37

Firm Strategy, Structure and Rivalry
• Presence of domestic rivalry improves a

company’s competitiveness.

What Are The Implications Of Trade
Theory For Managers?
1. Location implications - a firm should disperse its various productive

activities to those countries where they can be performed most
efficiently
2. First-mover implications - a first-mover advantage can help a firm
dominate global trade in that product
3. Policy implications - firms should work to encourage governmental
policies that support free trade

PGDM SEMESTER III

Framework
Topic Name: International Trade session 2

World Trade Statistics
World merchandise trade in volume terms recorded a slight decline of 0.1

per cent in 2019 after rising by 2.9 per cent in the previous year.
Merchandise trade is measured as the average of exports and imports. In
value terms, trade declined by 3.0 per cent compared with an 10.2 per
cent increase in 2018.
World trade in commercial services increased by 2.1 per cent in 2019,

slowing substantially from its 8.4 per cent rise in 2018. Transport exports
declined by 0.8 per cent as merchandise trade faltered. Other commercial
services recorded the highest export growth (3.3 per cent) among services
sectors in 2019, buoyed by slowing, but continued, growth in the
telecommunications, computer and information services sector.

World trade statistics
Merchandise trade of the European Union accounted for 30 per cent of world
trade in 2019, totaling US$ 5,670 billion.
World exports of commercial services exports remain very concentrated.
The top ten exporters accounted for 54.2 per cent of global exports in 2019.
Trade in manufactured goods represents 70 per cent of world merchandise

exports. Iron and steel exports experienced the largest decline among
manufactured goods in 2019, with a 12 per cent drop compared with 2018.

2019 figures (Source –World Trade Report 2020)
• World merchandise trade US$ 19.051 trillion, decrease (-
3.0% )
• World trade in commercial services US$ 5.898 trillion ,
increase (+2.1%)

World’s Leading Traders

Other business services (42 per cent) and telecommunications,
computer and information services (20 per cent) remained the
largest exporting subsectors of “other commercial services”
Computer services, which account for 81 per cent of

telecommunications, computer
and information services, grew 11 per cent in 2019, continuing
an uninterrupted expansion since the 2009 financial crisis.
Among the world’s top 50 traders, Viet Nam and the Philippines rose the
most in world rankings for merchandise trade over the past ten years. Their
active participation in global value chains, particularly in manufactured
goods, was the main driving force for this improvement

Qatar and the United Arab Emirates rose the most in
world rankings for services trade from 2009 to 2019.
Their central location hasmeant they are well-
positioned to export transportation services.
Furthermore, growing intra-regional
tourism has contributed to growth

World exports of iron and steel increased on average by 6 per cent per year from
2000 to 2019. The highest increase (+48 per cent) was recorded in 2004 during the
2000s commodities boom while the steepest decline was in 2009 in the aftermath of
the financial crisis (-45 per cent).
The 12 per cent decline in iron and steel exports in 2019 was the third steepest
decline since 2000

The European Union remained the largest exporter of iron and steel in
2019. The value of its exports was almost three times higher than the
second-largest exporter, China.
• All of the top ten exporters experienced a decline in exports in 2019,

with Russia suffering the most (-21 per cent), followed by Chinese Taipei (-
16 per cent), the United States (-14 per cent) and Turkey (-14 per cent).
• The ranking of the top ten exporters remained mostly unchanged.

However, India moved up from ninth to seventh position in 2019, while
Turkey went in the opposite direction

India’s exports of iron and steel declined the least among the top ten
exporters, falling by only 1 per cent in 2019. India saw a major decline in
exports to some of its main destinations, such as Nepal (-21 per cent), the
United States (-10 per cent) and the European Union (-9 per cent), but
exports increased significantly for other partners, such as Viet Nam (+240
per cent), China (+84 per cent), Canada (+22 per cent) and the United
Arab Emirates (+17 per cent)

China has been the world’s leading trader in fish and fish products since 2012, mostly due to increasing
exports. China’s import demand has risen steeply since 2018.
Sweden improved its world ranking from 11th to sixth position, with France, Germany and Italy falling in the
rankings.
India rose nine places between 2010 and 2019, rising to 15th position, while Ecuador moved up seven places
to 20th position. Both countries benefited from a significant increase in exports of fish and fish products to
China, especially in 2018 and 2019.
Negotiations on reducing fisheries subsidies are ongoing at the WTO. The goal of WTO members is to conclude
an agreement in 2020 on eliminating subsidies for illegal, unreported and unregulated fishing and on
prohibiting certain forms of fisheries subsidies that contribute to overcapacity and overfishing, with special
and differential treatment for developing countries

• A key target of the UN Sustainable Development Goals is to
substantially increase the share of renewable energy in
world energy use by 2030.
• World exports of solar-energy powered goods and related
products increased from US$ 82 billion in 2005 to US$ 300
billion in 2019. Their export value increased by an annual
average of 10 per cent

• World exports of electric and hybrid cars totalled US$ 84
billion in 2019 – an increase of almost 60 per cent compared
with 2018. Exports of electric cars more than doubled over
this period.
• Hybrid cars had an 8 per cent share in world exports of
passenger cars in 2019 (up from 6 per cent in 2018). Electric
cars had a 4 per cent share (up from 2 per cent).
• Trade for all passenger cars declined by 1 per cent in 2019

• The top exporters of hybrid cars in 2019 were Japan (32.7 per cent share
in world exports), the European Union (23.2 per cent) and the Republic of
Korea (6 per cent). For electric cars, the leading exporters were the
European Union (52.2 per cent share), the United States (30.7 per cent)
and the Republic of Korea (9.2 per cent).
• The major importers of hybrid cars in 2019 were the European Union (44
per cent share in world imports) followed by the United States (23 per
cent) and China (9 per cent). Electric cars were mostly imported by the
European Union ( 51 per cent share), Norway (12 per cent) and China (10
per cent)

PGDM SEMESTER III

Framework

Do you know?
80% of the global goods trade is transported over sea. This is possible due to
the presence of big container shipping companies who are ranked by two
metrics-the number of ships they own and their total shipping capacity.
Largest container shipping companies:
COMPANY COUNTRY
MSC Switzerland
Maersk Denmark
CMA CGM France
COSCO China
Hapag Lloyd Germany

India and World Trade
Trade Data India 2020-21
Item Exports Overall Imports Overall

Merchandise 49.66% growth 68.91%
(Apr-Dec-20 over 21) (Apr-Dec 20 over
21

Top Export Product Categories
from India(2021)
ITEM Export in Billion Dollars
Mineral Fuels including oil 56.4
Gems and Precious Stones 38.2
Machinery including computers 24.2
Iron and Steel 21.2
Organic Chemicals 21.2
Pharma 19.5
Vehicles 18.9
Electrical Machinery ,Equipment 18.8
Cereals 12.4
Cotton 10

Share of India’s exports in Global
Exports
Year Merchandise Trade Commercial Services
2019 1.71% 3.52%
2018 1.67% 3.43%
2017 1.69% 3.39%
2016 1.65% 3.21%
2015 1.62% 3.16%

Statistics
India Ranks 17 by value in exports in the world Trade
Ranking Top Five is as follows:
1.China
2.USA
3.Germany
4.Netherlands
5.Japan

The Foreign Trade Policy of India
The Foreign Trade Policy, 2015-20, (as updated) w.e.f.
05.12.2017 is notified by Central Government, in exercise of
powers conferred under Section 5 of the Foreign Trade
(Development & Regulation) Act, 1992 (No. 22 of 1992) [FT
(D&R) Act], as amended

FTP POLICY
Director General of Foreign Trade (DGFT) may, by means of a
Public Notice, notify Hand Book of Procedures, including
Appendices and Aayat Niryat Forms or amendment thereto, if
any, laying down the procedure to be followed by an exporter
or importer or by any Licensing/Regional Authority or by any
other authority for purposes of implementing provisions of FT
(D&R) Act, the Rules and the Orders made there under and
provisions of FTP.

FTP POLICY
DGFT has a commitment to function as a facilitator of exports
and imports. Focus is on good governance, which depends on
efficient, transparent and accountable
delivery systems. In order to facilitate international trade, DGFT
consults various Export Promotion Councils as well as Trade and
Industry bodies from time to time.

FTP POLICY
Niryat Bandhu - Hand Holding Scheme for new export/ import
entrepreneurs.
(a) DGFT is implementing the Niryat Bandhu Scheme for
mentoring new and potential exporter on the intricacies of
foreign trade through counseling, training and outreach
programmes.
(b) Considering the strategic significance of small and medium
scale enterprises in the manufacturing sector and in
employment generation, ‘MSME clusters’ have been identified,
based on the export potential of the product and the density of
industries in the cluster, for focused interventions to boost
exports.

FTP POLICY
Issue of e-IEC (Electronic-Importer Exporter Code)
(a) Importer Exporter Code (IEC) is mandatory for export/import from/to India as
detailed in paragraph 2.05 of this Policy. DGFT issues Importer Exporter Code in
electronic form (e-IEC). For issuance of e-IEC an application can be made on DGFT
(http//:dgft.gov.in). Applicant can upload the documents and pay the requisite fee
through Net banking. Applicant shall, however, submit the application duly signed
digitally.
(b) Processing of such applications by Regional Authority (RAs) of DGFT would
be done online and a digitally signed e- IEC would normally be issued/ e-mailed to
the applicant within 2 working days.
(c) In case the application is incomplete or otherwise ineligible, the same shall be
rejected and a Rejection letter/email (with reasons for rejection) would be sent to
the applicant.
(d) Application for issue of e-IEC can also be made from eBiz platform

FTP POLICY
Reduction in mandatory documents required for Export and
Import
The number of mandatory documents required for exports and
imports of goods from/into India have been reduced to three
each, as prescribed under paragraph 2.06 of FTP.

FTP POLICY
24 X 7 Customs clearance
CBEC introduced the facility of 24 X 7 customs clearance in the
year 2012 for facilitated Bills of Entry and factory stuffed
container and goods exported under free Shipping Bills. At
present, this facility is available at 19 sea port and 17 air cargo
complexes. The 24 X 7 Customs clearance facility has now been
extended to all Bills of Entry (not only facilitated Bills of Entry) at
19 sea port and 17 Air Cargo Complexes. Further, no MOT
charges are required to be collected in respect of the services
provided by the Customs officers at 24 X 7 Customs Ports and
Airports.

FTP POLICY
Single Window in Customs
Indian Customs has introduced SWIFT (Single Window Interface for
Facilitating trade) w.e.f. 01.04.2016 for ensuring ease of doing business.
Under SWIFT, the Importers electronically lodge Integrated Declaration at a
single point only with Customs. The required permission, if any, from other
regulatory agencies (such as Animal quarantine, Plant quarantine, Drug
Controller, Textile Committee etc.) is obtained online without the
importer/exporter having to separately approach these agencies. Benefits of
Single Window Scheme include:
a. Reduced Cost of doing business;

b. Enhanced transparency;
c. Reduced duplicity and cost of compliance;
d. Optimal utilization of manpower.
1.27 Self-Assessment of Customs Duty

FTP POLICY
Export of perishable agricultural Products

To reduce transaction and handling costs, a single window
system to facilitate export of perishable agricultural produce
has been introduced. The system will involve creation of multi-
functional nodal agencies to be accredited by Agricultural and
Processed Food Products Export Development Authority
(APEDA), New Delhi. The detailed procedure has been notified
at Appendix 1C to Appendices &ANFs

FTP POLICY
Towns of Export Excellence (TEE)
(a) Objective: Development and growth of export production centres. A number of
towns have emerged as dynamic industrial clusters contributing handsomely to
India’s exports. It is necessary to grant recognition to these industrial clusters with a
view to maximize their potential and enable them to move up the value chain and
also to tap new markets.
(b) Selected towns producing goods of Rs. 750 Crore or more may be notified as TEE
based on potential for growth in exports. However, for TEE in Handloom, Handicraft,
Agriculture and Fisheries sector, threshold limit would be Rs.150 Crore. The following
facilities will be provided to such TEE’s:
(i) Recognized associations of units will be provided financial assistance under MAI
scheme, on priority basis, for export promotion projects for marketing, capacity
building and technological services.
(ii) Common Service Providers in these areas shall be entitled for Authorisation under
EPCG scheme.
(c) Notified Towns (TEEs) are listed in Appendix 1 B of Appendices &ANFs.

FTP POLICY
National Committee on Trade Facilitation (NCTF)
Consequent to India’s ratification of the WTO Agreement on Trade
Facilitation (TFA) in April 2016, the National Committee on Trade Facilitation
(NCTF) has been constituted. The establishment of the Committee is part of
mandatory, institutional arrangement of the TFA. This inter-ministerial body
on trade facilitation will be chaired by the Cabinet Secretary. Its Secretariat
will be housed within the Central Board of Excise and Customs (CBEC), in the
Directorate General of Export Promotion, New Delhi. The defined objective
behind setting up the NCTF is to have national level body that will facilitate
domestic co-ordination and implementation of TFA provisions. It will play
the lead role in developing the Pan-India road map for trade facilitation. It
will be instrumental in synergizing the various trade facilitation perspectives
across the country and will also. focus on an outreach programmes for
sensitization of all stakeholders about TFA

FTP POLICY
Indian Trade Classification (Harmonized System) [ITC (HS)] Of Exports and Imports.
(a) ITC (HS) is a compilation of codes for all merchandise / goods for export/
import. Goods are classified based on their group or sub-group at 2/4/6/8 digits.
(b) ITC (HS) is aligned at 6 digit level with international Harmonized System goods
nomenclature maintained by World Customs Organization
(http://www.wcoomd.org). However, India maintains national Harmonized System
of goods at 8 digit level which may be viewed by clicking on ‘Downloads’ at
http://dgft.gov.in
(c) The import/export policies for all goods are indicated against each item in ITC
(HS).Schedule 1 of ITC (HS) lays down the Import Policy regime while Schedule 2 of
ITC (HS) details the Export Policy regime.
(d) Except where it is clearly specified, Schedule 1 of ITC (HS), Import Policy is for new
goods and not for t he Second Hand goods. For Second Hand goods, the Import Policy
regime is given in Para 2.31 in this FTP.

FTP POLICY (IEC)
I) An IEC is a 10-character alpha-numeric number allotted to a person that is
mandatory for undertaking any export/import activities.
II) With a view to maintain the unique identity of an entity (firm/company/LLP

etc.), consequent upon introduction / implementation of GST, IEC will be
equal to PAN and will be separately issued by DGFT based on an application.
(a) No export or import shall be made by any person without obtaining an IEC
number unless specifically exempted. For services exports, IEC shall be necessary
as per the provisions in Chapter 3 only when teh service provider is taking
benefits under the Foreign Trade Policy.

FTP POLICY
Mandatory documents for export/import of goods from/into India:
(a) Mandatory documents required for export of goods from India:
1. Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt

2. Commercial Invoice cum Packing List*
3. Shipping Bill/Bill of Export/ Postal Bill of Export
(b) Mandatory documents required for import of goods into India
1. Bill of Lading/Airway Bill/Lorry Receipt/ Railway Receipt/Postal Receipt in form CN-22 or

CN 23 as the case may be.
2. Commercial Invoice cum Packing List*
3. Bill of Entry

FTP POLICY
Every Authorisation shall, inter alia, include either all or some of the following
terms and conditions (as applicable in terms of the para under which the
Authorisation has been issued), in addition to such other conditions as may be
specified:
(a) Description, quantity and value of goods;

(b) Actual User condition (as defined in Chapter 9);
(c) Export Obligation;
(d) Minimum Value addition to be achieved;
(e) Minimum export/import price;
(f) Bank guarantee/ Legal undertaking / Bond with Customs
Authority/RA (as in para 2. 35 of FTP).
(g) Validity period of import/export as specified in Handbook of
Procedures.

FTP POLICY
Prohibitions (Country, Organisations, Groups, Individuals etc. and Product
Specific):
• Prohibition on Import and Export of ‘Arms and related material’ from / to Iraq
Prohibition on Trade with the Islamic State in Iraq and the Levant [ISIL, also known as
Daesh], Al Nusrah Front [ANF] and other individuals, groups, undertakings and
entities associated with Al Qaida.
• Prohibition on direct or indirect import and export from/to DPRK
• Direct or Indirect Export/Import to/from Iran

Direct or indirect export to Iran or import from Iran of any item, material, equipment,
goods and technology mentioned in the following documents would be permitted
subject to the provisions contained in Annex-B to the United Nations Security Council
Resolution 2231 (2015):

FTP POLICY
State Trading Enterprises (STEs) are governmental and
nongovernmental enterprises, including marketing boards,
which deal with goods for export and /or import. Any good,
import or export of which is governed through exclusive or
special privilege granted to State Trading Enterprise (STE), may
be imported or exported by the concerned STE as per
conditions specified in ITC (HS). The list of STEs notified by
DGFT is in Appendix-2J.

FTP POLICY
Exports through a registered courier service/Foreign Post
Office is permitted as per Notification issued by DoR. However,
exportability of such items shall be regulated in accordance
with FTP/Export Policy in ITC(HS), 2018.
The value limit for exports through courier service shall be
Rs.5,00,000 per consignment

FTP POLICY
Export Credit Agencies (ECAs) are policy instrument for
Government to support exports. ECAs support exports by
insurance, guarantee and also direct lending. Export Credit
Agencies (ECAs) like Export Credit Guarantee Corporation of
India Ltd. (ECGC) provides credit insurance support to exports
and export credit lending. Covers issued by ECGC to exporters,
protect against losses arising out of payment failures due to
insolvency or default of the buyers or due to political risks.

FTP POLICY
Export Promotion Councils (EPCs) are organizations of exporters,
set up with the objective to promote and develop Indian
exports. Each Council is responsible for promotion of a particular
group of products/ projects/services as given in Appendix 2T of
AANF.

FTP -DEFINITIONS
Counter Trade" means any arrangement under which
exports/imports from /to India are balanced either by direct
imports/exports from importing/exporting country or through a
third country under a Trade Agreement or otherwise.

FTP
e- commerce means buying and selling of goods and services,
including digital products, conducted over digital and electronic
network. For the purposes of Merchandise Exports from India
Scheme (MEIS) e – commerce shall mean the export of goods
hosted on a website accessible through the internet to a
purchaser. While the dispatch of goods shall be made through
courier or postal mode, as specified under the MEIS, the
payment for goods purchased on e- commerce platform shall
be done through international credit/debit cards and as per the
Reserve Bank of India Circular

FTP
“Restricted” is a term indicating the import or export policy of
an item, which can be imported into the country or exported
outside, only after obtaining an Authorisation from the offices
of DGFT.

FTP
“SCOMET” is the nomenclature for dual use items of Special
Chemicals, Organisms, Materials, Equipment and Technologies
(SCOMET). Export of dual-use items and technologies under
India’s Foreign Trade Policy is regulated. It is either prohibited
or is permitted under an Authorisation.
"Services" include all tradable services covered under General

Agreement on Trade in Services (GATS) and earning free foreign
exchange.

FTP
"Service Provider" means a person providing:
(i) Supply of a ‘service’ from India to any other country; (Mode1-
Cross border trade)
(ii) Supply of a ‘service’ from India to service consumer(s)of any
other country in India; (Mode 2-Consumption abroad)
(iii)Supply of a ‘service’ from India through commercial presence

in any other country. (Mode 3 – Commercial Presence.)
(iv)Supply of a ‘service’ from India through the presence of

natural persons in any other country (Mode 4- Presence of
natural persons.)
PGDM SEMESTER III

Framework

Steps for Importing Goods in India
1. Obtain IEC
Prior to importing from India, every business must first obtain an Import
Export Code (IEC) number from the regional joint DGFT. The IEC is a pan-
based registration of traders with lifetime validity and is required for
clearing customs, sending shipments, as well as for sending or receiving
money in foreign currency.
The process to obtain the IEC registration takes about 10-15 days.

Steps
2. Ensure legal compliance under different trade laws
Once an IEC is allotted, businesses may import goods that are compliant with
Section 11 of the Customs Act (1962), Foreign Trade (Development &
Regulation) Act (1992), and the Foreign Trade Policy, 2015-20.
However, certain items – restricted, canalized, or prohibited, as declared and

notified by the government – require additional permission and licenses
from the DGFT and the federal government.

Steps
3. Procure import licenses
To determine whether a license is needed to import a particular commercial
product or service, an importer must first classify the item by identifying its
Indian Trading Clarification based on a Harmonized System of Coding or ITC
(HS) classification.

Steps
An import license may be either a general license or specific license. Under
a general license, goods can be imported from any country, whereas a
specific or individual license authorizes import only from specific
countries.
Import licenses are used in import clearance, renewable, and typically

valid for 24 months for capital goods or 18 months for raw materials
components, consumables, and spare parts.

Steps
4. File Bill of Entry and other documents to complete customs clearing
formalities
After obtaining import licenses, importers are required to furnish import
declaration in the prescribed Bill of Entry along with permanent account
number (PAN) based Business Identification Number (BIN), as per Section
46 of the Customs Act (1962).
A Bill of Entry gives information on the exact nature, precise quantity, and
value of goods that have landed or entered inwards in the country.
If the goods are cleared through the Electronic Data Interchange (EDI)
system, no formal Bill of Entry is filed as it is generated in the computer
system. However, the importer must file a cargo declaration after
prescribing particulars required for processing of the entry for customs
clearance.

steps
If the Bill of Entry is filed without using the EDI system, the importer is
required to submit supporting documents that include certificate of origin,
certificate of inspection, bill of exchange, commercial invoice cum packing
list, among others.
Once the goods are shipped, the customs officials examine and assess the
information furnished in the bill of entry and match it with the imported
items. If there are no irregularities, the officials issue a ‘pass out order’ that
allows the imported goods to be replaced from the customs.

steps
5. Determine import duty rate for clearance of goods
India levies basic customs duty on imported goods, as specified in the first
schedule of the Customs tariff Act, 1975, along with goods-specific duties
such as anti-dumping duty, safeguard duty, and social welfare surcharge.
In addition to these, the government levies an integrated goods and

services tax (IGST) under the new GST system. The IGST rates depend on
the classification of imported goods as specified in Schedules notified
under Section 5 of the IGST Act (2017).

Export Procedure
Besides fulfilling the basic requirements as in imports an exporter is also
required to register with the Indian Chamber of Commerce (ICC), which
issues the Non-Preferential Certificates of Origin certifying that the exported
goods are originated in India.

Export Procedure
The Foreign Trade Policy, 2015-2020 mandates the following commercial
documents for carrying out importing and exporting activities:
Bill of lading or airway bill;

Commercial invoice cum packing list;
Shipping bill or bill of export, or bill of entry (for imports).
Additional documents like certificate of origin and inspection certificate may
be required as per the case.
The important regulatory documents include:
GST return forms (GSTR 1 and GSTR 2);

GSTR refund form;
Exchange Control Declaration;
Bank Realization Certificate; and
Registration cum Membership Certificate (RCMC).
Detailed information on Export and
Import Documentation
https://cip.icegate.gov.in/CIP/#/home_imp

Procedure for Import by Post

Procedure for Export by Post

Compliance requirement for
importing goods through post
• The sender of the gift may not necessarily be residing in the country from
where the goods have been dispatched and any person abroad can send
the gifts to relatives, business associates, friends, companies and
acquaintances.
• The gifts should be for bonafide personal use only. The purpose of this
stipulation is that the person receives the gift genuinely free and the
payment is not made for it through some other means.
• The quantity and frequency of the gifts should not give rise to the belief
that it is used as a route to transfer money. The gifts can be received by
individuals, societies, institutions, like schools and colleges and even
corporate bodies.
• For calculating the value limit prescribed the Government of India in case
of imports of gifts, postal charges or the airfreight is not taken into
consideration. The value is taken as original value of the goods in the
country from where the goods have been dispatched.

Contd…
• If the value of the gifts received is more than the prescribed limit the receiver
has to pay Customs duty on the whole consignment, even if the goods were
received free, unsolicited.
• If the goods are restricted for import, the receiver has a liability for penalty for
such import, even if the goods have been sent unsolicited. The restricted goods
are also liable to confiscation and receiver has to pay redemption fine in lieu of
confiscation in addition to duty and penalty. Certain prohibited goods like
narcotic drugs, arms, ammunition, obscene films/printed material etc. are
liable to absolute confiscation and the receiver is liable for penal action, even if
the goods have been sent unsolicited.
• Customs duty is chargeable on gifts assessed over the prescribed limit by the
Customs. In case of post parcel, the customs department shall assesses the
duty payable and the postal department collects the assessed duty from the
receiver of the gift and subsequently deposits it with the customs.

Goods that can be imported
through posts
• Goods not prohibited for imports can be imported through posts.
• Goods against any import license or customs clearance permit can also
be imported through Post.
• All goods including alcohulic drinks imported through courier can also
be imported through posts excepting motor vehicles.
• Items intended for personal use, which are exempt from the
prohibitions under the FTP or the Customs Act, 1962, can be imported
by postal channel on payment of appropriate duties.
• Bonafide gifts up to a value limit as prescribed by the Government of
India (only those which are not prohibited for importation)

Contd..
• Importers having IEC code number can import commercial samples
through post without payment of duty upto a value of Rs.100,000/- or 15
units in number within a period of 12 months. The goods so imported
shall be clearly marked as "Samples".
• Bonafide commercial samples and prototypes imported by post are
exempted from Customs duty, subject to the value limit prescribed by the
Government provided that the samples are supplied free of cost (The
importer is required to furnish a declaration to the effect that the
samples are sulely for the purpose of being shown to the exporters for
securing or executing export orders. The importer is also required to
undertake that if declaration is found to be false, he will pay appropriate
duty on the goods imported as commercial samples).
• Customs duty payable if less than Rs.1000/- is exempt

Goods that can be exported
through post
• Goods which are not prohibited for export;
• Bonafide commercial samples and prototype of goods supplied free of
charge of a value not exceeding Rs.50,000/- which are not subject to any
prohibition or restriction for export and which do not invulve transfer of
foreign exchange;
• Bonafide gifts of articles for personal use of a value not exceeding
Rs.25,000/- which are not subject to any prohibition or restriction on their
export and which do not invulve transfer of foreign exchange;
• Export of purchases made by the foreign tourists subject to proof that the
payment has been made in foreign exchange.

Contd..
• Prohibitions/restrictions under the FTP and the Customs Act, 1962 apply
on the export of various articles by post. Some of these articles are viz.
arms and ammunitions, explosives, inflammable material, intoxicants,
obscene literature, certain crude and dangerous drugs, antiquities,
narcotic drugs etc.
• The rate of duty and tariff value, if any, applicable to any goods exported
by post shall be the rate and valuation in force on the date on which the
exporter delivers such goods to the Postal Authorities for exportation.
• Drawback can also be availed for export through post and also through
other export promotion schemes like Advance License, DFRC, EPCG etc.
Commercial samples, prototypes of goods and free gifts may also be
exported by the post.

WHAT ARE THE CATEGORIES OF GOODS NOT
ALLOWED FOR IMPORT THROUGH COURIER?
The following categories of goods are not allowed to be imported through the courier:
• Precious and semi precious cargo;
• Animals and plants;
• Perishables;
• Publications containing maps depicting incorrect boundaries of India;
• Precious and semi precious stones, gold or silver in any form;
• Goods under Export Promotion Schemes including EOUscheme;
• Goods exceeding weight limit of 70 kgs. (Individual packages) imported though
courier under manual mode. However, under the electronic mode, no such
restriction regarding weight has been provided. Clearance of goods under EOU
scheme is permitted under the electronic mode.
Export
The following categories of goods are not allowed to be exported through the
courier:
• Goods attracting any duty on exports;

• Goods exported under export promotion schemes, such as Drawback,
DEEC, EPCG, etc.
• Goods where the value of the consignment is above Rs.25,000/- and
transaction in foreign exchange is involved (the limit of Rs.25,000/- does
not apply where the G.R. waiver or specific permission has been obtained
from the RBI).
• The export of cargo through Courier mode under Merchandise Exports from
India Scheme (MEIS) upto FOB value upto Rs.5,00,000/ - per consignment
has been allowed for the goods listed in Appendix 3C of the Foreign Trade
Policy 2015-2020 .

Export
Import of gems and jewellery including samples thereof by EOUs or SEZ units
is allowed through courier. Likewise, export of cut and polished diamond,
gems and jewellery under any scheme of FTP from EOUs, SEZs or DTA is
allowed through courier subject to the condition that the value of each export
consignment under such export does not exceed Rs.20 lakh.

Types of Bill of Entry

DIFFERENT TYPES OF SHIPPING BILLS
FOR CLEARANCE OF EXPORT GOODS

Examination norms for Courier
Consignments

Import Procedure for clearance of
Courier Consignment

Import procedure for clearance
Imported goods which are not taken clearance within 30 days
of arrival, shall be detained by proper officer and shall be sold
or disposed of by the person having custody thereof, after
notice to the Authorized Courier and to the declared importer,
if any, and the charges payable for storage and holding of such
goods shall be payable by the Authorized Courier.

Export Procedure for clearance of
courier consignments

Re Import and Re Export
WHAT ARE THE SITUATIONS FOR RE-IMPORT/RE-EXPORT OF
GOODS?
There are often occasions where imported goods may have to
be re-exported such as when the import goods are found
defective after Customs clearance or are not found as per
specifications or requirements.
Various machinery items imported for use in certain projects
or otherwise are also often to be re-exported by the original
owner. Re-exports can be made by sea, air, baggage or post.

Re Import
WHAT ARE THE VARIOUS SITUATIONS FOR RE-IMPORT OF GOODS?
Indigenously manufactured goods, when exported, are returned back for
various reasons including cancellation of export order or after
exhibition/display etc., or after use in particular project/contract and
completion of the contract etc. (such as machinery).
Imported goods on which duties paid at the time of original importation have
also to be often sent out for repair, reconditioning etc.
Private, personal imported property may also have to be sent abroad for
repair within the warranty period and returned.
There are also goods that may have to be sent for special processes like
electroplating, polishing or coating and re-imported. Thus, specific legal
provisions permit the facility of re-import and re-export of goods.

Re Import/Re Export
WHAT ARE THE CONDITIONS FOR CLAIMING REFUND OF DUTY
ON RE-EXPORT OF GOODS?
Refund of import duty is allowed if the imported goods are
found defective or otherwise not in conformity with the
specifications agreed upon between the importer and the
supplier of goods.
The goods should not have been worked, repaired or used after
the importation except where such use was indispensable to
discover the defects or non- conformity with the specifications.
No refund shall be available in respect of perishable goods and
goods which have exceeded their shelf life or their
recommended storage-before-use period.

Re Import/Re Export
WHAT ARE THE CONDITIONS FOR DUTY FREE RE-IMPORTATION
OF GOODS?
If the goods were exported on payment of GST, without claiming
any rebate, and without claiming any export incentives such as
Drawback or benefits of the duty exemption schemes, EPCG
schemes, and where the indigenously manufactured goods are
being returned then no Customs duties are leviable.

Re Import and Re Export
Goods manufactured in India or parts thereof that are re-imported for repairs
or reconditioning or reprocessing/refining/remaking etc. are exempt from duty
subject to the condition that the re-importation takes place within a specified
period; the goods are re-exported within six months of re-importation; the
Assistant/Deputy Commissioner of Customs is satisfied as regards the identity
of the goods; and certain other conditions ensuring re-export including
execution of bonds are fulfilled.
Re-imported private personal property, which was imported earlier but
exported out for any alteration, renovation, repair free of charge etc. is exempt
from duty subject to the condition that the goods are repaired on free of charge
basis in accordance with the terms of warranty given by the manufacturers and
in accordance with the established trade practice and Drawback or other
incentives have not been availed. However, certain Custom duties equivalent to
the cost of alterations/renovations/additions/repairs, if any, are payable.

Payment of Duty
The duty can be paid in the designated banks through TR-6

Challan. Facility of e- payment of duty through multiple
banks is also available since 2007 at all major Customs
locations.
With effect from 17-9-2012, e-payment of Customs duty is

mandatory for importers registered under Accredited Clients
Programme/Authorised Economic Operator scheme and
importers paying duty of Rs. 1 lakh or more per Bill of Entry.

Prior Entry for Bill of Entry
For faster clearance of the goods, Section 46 of the Customs Act, 1962 allows
filing of Bill of Entry prior to arrival of goods. This Bill of Entry is valid if
vessel/aircraft carrying the goods arrives within 30 days from the date of
presentation of Bill of Entry.
Often, goods coming by container ships are transferred at intermediate ports
(like Colombo) from mother vessel to smaller vessels called feeder vessels. At
the time of filing of advance Bill of Entry, the importer does not know which
vessel will finally bring the goods to Indian port.
In such cases, the name of mother vessel may be filled in on the basis of the Bill
of Lading. On arrival of the feeder vessel, the Bill of Entry may be amended to
mention names of both mother vessel and feeder vessel.
The Bill of Entry is required to be filed before the end of next day following the
day (excluding holidays) on which the aircraft or vessel or vehicle carrying the
goods arrives at a customs station at which such goods are to be cleared for
home consumption or warehousing.

Bill of Entry
Wherein the Bill of Entry is not filed within the time

specified in Para 8.3 above and the proper officer of customs
is satisfied that there is no sufficient cause for such delay,
the importer shall be liable to pay charges for the late
presentation of Bill of Entry at the rate of rupees five
thousand per day for initial three days of the default and at
the rate of rupees ten thousand per day for each day of
default thereafter.

Export Procedure
Export procedure - Shipping Bill:
For clearance of export goods, the exporter has to obtain an
Importer- Export Code (IEC) number from the DGFT prior to filing
of Shipping Bill. Under the EDI System, IEC number is received
online by the Customs System from the DGFT. The exporter is
also required to register authorized foreign exchange dealer code
(through which export proceeds are expected to be realized) and
open a current account in the designated bank for credit of
Drawback incentive, if any.
All the exporters intending to export under the export promotion

scheme need to get their licenses etc. registered at the Customs
Station. For such registration, original documents are required.
Classification of goods
Classification of imported/export goods is governed by the
Customs Tariff Act, 1975 which contains two Schedules. The First
Schedule specifies the nomenclature that is based on the
Harmonized Commodity Description and Coding System
generally referred to as “Harmonized System” or simply “HS”,
developed by the World Customs Organization (WCO) which is
applied uniformly by more than 137 countries the world over.
The Second Schedule contains description of goods chargeable
to export duty. As the nomenclature also specifies the Customs
duty rates (Tariff), it is called the “Indian Customs Tariff” or
“Tariff Schedule”

Classification of Goods
The Harmonized System (HS) provides commodity/product

codes and description up to 4-digit (Heading) and 6-digit (Sub-
heading) levels only and member countries of WCO are allowed
to extend the codes up to any level subject to the condition
that nothing changes at the 4-digit or 6-digit levels. India has
developed 8-digit level classification to indicate specific
statistical codes for indigenous products and also to monitor
the trade volumes.

Self Assessment
Section 17 of the Customs Act, 1962 provides that an importer
entering any imported goods under section 46 or an exporter
entering any export goods under section 50 shall self-assess the
duty. Thus, under self-assessment, it is the importer or exporter
who will ensure that he declares the correct classification,
applicable rate of duty, value, benefit of exemption notifications
claimed, if any, etc. in respect of the imported / export goods
while presenting Bill of Entry or Shipping Bill.

Commercial Invoice
Information related to the transaction
• Invoice number
• Invoice date
• Order number
• Total sale amount
• Currency
• Payment instructions
Information related to the exporter and importer
• Exporter/seller information (name, address, phone number, etc.)
• Exporter/seller’s tax identification number (eg. VAT, EORI, etc.)
• Importer/buyer information (name, address, phone number,
etc.)
• Importer/buyer’s tax identification number (eg. VAT, EORI, etc.)
• Notify
© Sasmira’s party’s
Business School (SBS) information 41
Information related to the shipping of the merchandise
• Bill of Lading number
• Forwarding agent
• HS code
• Clear description of goods (no. of packages, units, weight,
etc.)
• Incoterm under which the merchandise has been sold
• Origin of merchandise
• Insurance
• Date of exportation, means of transport, and final destination
• Shipper’s signature

Bill of lading

Packing List

PGDM SEMESTER III

Framework
Topic Name: Trade in services and Incoterms

Trade in Services
Trade in services records the value of services exchanged

between residents and non-residents of an economy, including
services provided through foreign affiliates established abroad.
This indicator is measured in million USD and percentage of GDP
for exports, imports and net trade.

Services include transport (both freight and passengers), travel,
communications services (postal, telephone, satellite, etc.),
construction services, insurance and financial services,
computer and information services, royalties and license fees,
other business services (merchanting, operational leasing,
technical and professional services, etc.), cultural and
recreational services, and government services not included in
the list above. Trade in services drives the exchange of ideas,
know-how and technology, although it is often restricted by
barriers such as domestic regulations. All OECD countries
compile their data according to the 2008 System of National
Accounts (SNA).

Export of Services as per Memorandum of Instructions on
Project and Service Exports (PEM)
General C.1
(1) Contracts for export of consultancy, technical and other
services by Indian companies/firms generally fall in the following
categories: (a) Preparation of project/feasibility reports,
drawings, designs, etc.
(2) Supply of technical know-how/engineering services in
different fields.
(3) Operation, maintenance and supervision of manufacturing
plants, buildings and structures, etc.
(4) Management contracts for commercial concerns.

Conditions governing Export of services
Indian exporters of services have normally to undertake overseas

contracts on “cash” terms. Overseas service contracts
undertaken on “cash” terms do not require prior clearance of
Reserve Bank or the Working Group if no facilities are required.
Resident individuals, firms and companies may, therefore, freely

provide consultancy/technical/management services to overseas
clients subject to the condition that the income earned abroad
minus expenses will be promptly repatriated to India through
normal banking channels.

Individuals/firms/companies executing service contract in
computer software should, however, repatriate to India income
equivalent to atleast 30% of contract value and the balance
income upto 70% of contract value could be retained for
meeting contract-related expenses abroad.
Indian companies/firms executing service contracts abroad,

requiring facilities like opening of foreign currency bank
accounts and site offices abroad, etc. will need approval from
Authorised Dealer/Exim Bank/Working Group at the post-award
stage.

In terms of the GST law ,services qualify as ‘export’ where:
1. Supplier of service is located in India;
2. Recipient of service is located outside India;
3. Place of Supply (‘POS’) of service is outside India;
4. Payment for such service has been received by the
supplier of service in convertible foreign exchange; and
5. Supplier of service and the recipient of service are not
merely establishments of a distinct person

For cross-border transactions, unless specifically mentioned the default POS for services is
the location of the recipient of service i.e. outside India.
For specified services, POS is as follows: For services in relation to immovable property (eg.
renting, construction, designing etc.) – POS is the location of such immovable property;
For performance based services (eg. training programs, repair maintenance of goods or
tour and travel) – POS is the place where such services are performed;
For events – POS is where the event is conducted
It is relevant to note that in case of points a, b and c above in case the POS is in India, GST
would be attracted even if the recipient of service is located outside India.

A service exporter should ensure documentation and compliance with
respect to the following:
❖ Furnish a LUT or Bond in case exports are intended to be made

without payment of taxes
❖ Ensure that a robust Agreement/ Purchase Order is entered into with
the recipient of services for export of services;
❖ Issue a tax invoice typically containing the following details:
• Endorsement stating “supply meant for export on payment of
integrated tax” or “supply meant for export without payment of
integrated tax”; Name, address and GSTIN of the supplier Invoice No.
and date;
• Name and address of the recipient;
• HSN code of the services along with description
• Total value of services
• Signature of the supplier of the authorised signatory.

It must be ensured that the payments are received in convertible
foreign exchange within the prescribed time period (typically
one year from the date of export), else GST would be payable on
the transaction. Further, robust documentation to prove the
receipt of such payment (such as Foreign Inward Remittance
Certificate, Bank Realization Certificate etc.) should be
maintained.

PLACE OF SUPPLY RELATING TO GOODS (Section 13(3)(a) IGST) –
According to this section location of the place of supply shall be the location where the
goods are available for service.
Example 1B – A UK national company place an order to the company of Delhi to service

air-condition plant working in office of Bangalore. Payment is also received from UK
company in foreign currency.
Answer – The goods (AC plant) is situated in Bangalore which is to be serviced. Place of
supply of service is location of the goods where it is situated i.e. Bangalore. Place of
supply is Bangalore, therefore, this transaction is not export of service.
Example 2B – In the above example number 1B the supplier services the AC plant
working in office situated in UK. Payment was received to the Supplier in Indian Rupees
from Recipient’s office in Bangalore.
Answer – Condition stated in 2(6)(iv) of the IGST i.e. payment to be received in
convertible foreign exchange is not fulfilled, therefore, this transaction shall not be
export of service even though the place of supply is outside India.

SECTION 13(8) IGST ACT RELATING TO THREE SERVICES WHOSE PLACE OF
SUPPLY SHALL BE LOCATON OF THE SUPPLIER OF SERVICES.
(a) services supplied by a banking company, or a financial institution, or a

non-banking financial company, to account holders;
(b) intermediary services;
(c) services consisting of hiring of means of transport, including yachts but

excluding aircrafts and vessels, up to a period of one month

H. SECTION 13(12) IGST ACT RELATING TO ONLINE SERVICES. The place of supply of
online information and database access or retrieval services shall be the location of
the recipient of services. Explanation. —For the purposes of this sub-section,
person receiving such services shall be deemed to be located in the taxable
territory, if any two of the following non-contradictory conditions are satisfied,
namely: —
(a) the location of address presented by the recipient of services through internet
is in the taxable territory;
(b) the credit card or debit card or store value card or charge card or smart card or
any other card by which the recipient of services settles payment has been issued
in the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is
in the taxable territory;
(e) the bank of the recipient of services in which the account
used for payment is maintained is in the taxable territory;
(f) the country code of the subscriber identity module card used
by the recipient of services is of taxable territory;
(g)(g) the location of the fixed land line through which the
service is received by the recipient is in the taxable territory.

INCOTERMS
Incoterms® are the selling terms that the buyer and seller of
goods both agree to during international transactions. These
rules are accepted by governments and legal authorities around
the world. Understanding Incoterms® is a vital part of
International Trade because they clearly state which tasks, costs
and risks are associated with the buyer and the seller.

INCOTERMS
Incoterms were first published in 1936 and are continually updated over time
to reflect the changing global business environment to be continually used in
2022 and beyond.
The International Chamber of Commerce ICC published the latest version of

Incoterms® 2020. These changes came into effect on the 1st of January 2020
and are being being used in 2022 and beyond, until the next changes are
published sometime in future.
The ICC originally published Incoterms® in 1936 and have continually made
updates to reflect the changes to the global trade environment. It’s important
that all parties involved in trade clearly understand the changes and how they
apply to global supply chains.

The seven Incoterms® 2020 rules for any mode(s) of transport are:
EXW - Ex Works
FCA - Free Carrier
CPT - Carriage Paid to
CIP - Carriage and Insurance Paid To
DAP - Delivered at Place
DPU - Delivered at Place Unloaded
DDP - Delivered Duty Paid

The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:
FAS - Free Alongside Ship
FOB - Free on Board
CFR - Cost and Freight
CIF - Cost Insurance and Freight

INCOTERMS

What Incoterms Do Not Cover
As noted above, Incoterms are generally incorporated in the contract of sale, however,
they do not:
• address all the conditions of a sale;

• identify the goods being sold nor list the contract price;
• reference the method nor timing of payment negotiated between the seller or
buyer;
• when title, or ownership of the goods, passes from the seller to the buyer;
• specify which documents must be provided by the seller to the buyer to facilitate
the customs clearance process at the buyer’s country; and
• address liability for the failure to provide the goods in conformity with the contract
of sale, delayed delivery, nor dispute resolution mechanisms.

PGDM SEMESTER III

Framework
Topic Name: Shipping and Logistics-Module 4

Logistics Flow

Logistics Management

Modes of Transport

Modes of Transport

Container Ships
Container ships are the cargo ships that

carry most seagoing non-bulk cargoes.
In today’s world, container vessels carry
around 90% of the world’s non-bulk
cargoes. One of the main ways of
carrying ready goods worldwide is
through Container Vessels. These
containers are of a standardised size so
that they can be easily transferred to
various modes of transport. Anything
can be carried on a Containership.

Container Shipping Companies

World Shipping Industry
Italian-Swiss international shipping line Mediterranean Shg Co, has placed a
record number of orders in 2021-2022, surpassed Maersk in January 2022,
becoming the top container shipping company, and is set to keep its position,
with a 4.5 M TEU existing capacity and 1.6 M TEU additional capacity on the
order book. ZIM upgraded its fleet as well, from 0.4 M TEU in 2021 to the
current capacity of 0.5 M TEU in July 2022. With the new orders placed, the
Israel-based shipping line is aiming for a significant increase in TEU, which
might move it to 9th place in the top 10 container shipping lines ranking.
The top 10 shipping companies have increased their fleet by 1.1 million TEU.
The overall TEU capacity on the three major routes Trans-Atlantic, Trans-
Pacific, and Feast-Europe has increased by 8% from June 2021 until today,
with a 16% capacity increase on the Trans-Pacific route.

Market share of shipping
companies

Sea Trade world

Major Shipping Routes

World shipping

Choke Points in World Shipping

Outline the major shipping routes and
choke points

Shipping Industry
Some 11 billion tons of goods are transported by ship each year.
This represents an impressive 1.5 tons per person based on the
current global population. Shipping’s capacity to transfer goods
and materials from where they are produced to where they will
be ultimately consumed underpins modern life.
For an economic region such as the European Union, shipping
accounts for 80% of total exports and imports by volume, and
some 50% by value.
As of 2019, the total value of the annual world shipping trade
had reached more than 14 trillion US Dollars.

Shipping Industry-the most
economical
• Each year, the shipping industry transports nearly 2 billion tons
of crude oil, 1 billion tons of iron ore (the raw material needed
to create steel), and 350 million tons of grain. These shipments
would not be possible by road, rail or air.
• Shipping also offers the cheapest mode of transport per ton:

sea transport contributes just 0.3p to the £2.50 cost of a cup of
coffee, 20p to the £5 cost of a bottle of wine, and $5 to the
$100 cost of a Nike trainer.
This underlines shipping’s ability to transport goods cheaply
and in large volumes, and with a minimal environmental
footprint.

Container Ships
LoLo Container Ships
Lift-on/Load-off vessels are the Geared container vessel, which can load
and discharge the cargo themselves using the ship’s own crane.
ROCON Container Ships

ROCONs are ro-ro vessels that also carry containers. The arrangements are
such that the containers may be loaded on the deck or there is a separate
hold specifically for loading containers.

RO RO
Ro-Ro is an acronym for Roll-on/roll-off. Roll- There are various types of ro-ro
on/roll-off ships are vessels that are used to vessels, such as ferries, cruise
carry wheeled cargo. ferries, cargo ships, and barges. The
The roll-on/roll-off ship was defined in the ro-ro vessels that are exclusively
November 1995 amendments to Chapter II-1 of used for transporting cars and
the International Convention for the Safety of trucks across oceans are known as
Life at Sea (SOLAS), 1974 as being “a passenger Pure Car Carriers (PCC) and Pure
ship with ro-ro cargo spaces or special category Truck & Car Carriers (PCTC)
spaces” respectively.

RORO and CONRO
The ConRo vessel is a hybrid between a
ro-ro and a container ship. This type of
vessel uses the area below the decks for
vehicle storage while stacking
containerized freight on the top of the
decks.
CONRO

Ships
RoLo
RoLo is an acronym for roll-on lift-off vessel. It is also a hybrid vessel type
with ramps serving vehicle decks but the other cargo decks are accessible
only by crane.
These vessels are capable of carrying both Vehicles and general cargo or
heavy metals. Since the weight of general cargo items or the Heavy metal
pieces may exceed the payload of the ramp, ship/shore cranes can be used
to load and discharge the cargo directly into the hold.

Reefer
The factors to be considered while leasing or considering foodstuff shipment
are- short lifespan, high chance of spoilage, and the probability of mid-journey
shifting.
The solution to most of these issues is by using refrigerated ships known as
reefer vessels. They have specially built temperature controlling units that
ensure that the temperature is regulated throughout the entire cargo storage
holds of the ship.
The temperature may vary depending on the type of the foodstuff being
shipped, but it is generally maintained at temperatures below 0⁰C. This helps
to extend the lifespan of the goods. It also ensures that moist conditions that
usually enable bacteria and other agents of spoilage to grow are not present
due to the low temperatures.

Dry Bulk Cargo
Dry bulk cargo refers to any
cargo or good shipped in a loose
quantity, that is stored within
the cargo holds without
packaging. Common examples of
such goods include foodstuff
and machinery parts (both have
been discussed). Also, goods
transported through dry bulk
carriers include ores and
minerals. These are generally
shipped in a loose condition in
the holds.
Major Sea Ports

Major Sea Ports

Major Ports

Ports in India

What is Dry Port
A dry port, also called sometimes an inland port or multimodal logistics
centre, is an inland terminal connected to a seaport by rail or road. It serves
as a transhipment point in the transport of export/import goods.
A dry port is called so because it is very similar to a seaport in the services it

offers, except that it is not near a sea. A dry port is also employed to relieve
a major seaport of some work load and congestion.
It consists of facilities like container yards, warehouses, railway sidings,

cargo-handling equipment, and administrative services for export and
import clearances.

Dry Port

CONCOR
Container Corporation of India Ltd. (CONCOR), was incorporated in March 1988
under the Companies Act, and commenced operation from November 1989
taking over the existing network of 7 ICDs from the Indian Railways.
From its humble beginning, it is now an undisputed market leader having the
largest network of 61 ICDs/CFSs in India (59 terminals and 2 strategic tie-ups). In
addition to providing inland transport by rail for containers, it has also expanded
to cover management of Ports, air cargo complexes and establishing cold-chain.
It has and will continue to play the role of promoting containerization in India by
virtue of its modern rail wagon fleet, customer friendly commercial practices and
extensively used Information Technology. The company developed multimodal
logistics support for India's International and Domestic containerization and
trade. Though rail is the main stay of our transportation plan, road services and
also provided to cater to the need of door-to-door services, whether in the
International or Domestic business.

CONCOR
CONCOR is committed to providing responsive, cost effective, efficient and reliable
logistics solution to its customers. It strives to be the first choice for its customers.
CONCOR is a customer focused, performance driven, result oriented organization,
focused on providing value for money to its customers.

Core Business of CONCOR
CONCOR's core business is characterized by three distinct activities, that of a carrier, a
terminal operator, and a warehouse operator.
Carrier
Rail is the mainstay of CONCOR's transportation plans & strategy. Majority of
CONCOR terminals are rail-linked, with rail as the main carrier for haulage. Facilities
are, however, provided for first and last mile transportation by road also. As rail is
price-competitive over long distances, the price advantage can be passed on to
clients, thus allowing for flexible and competitive pricing. The rail link also plays a
major role in decongesting our ports and the road corridors that lead to these ports.
Though rail is the mainstay of CONCOR's transportation plan, some CONCOR

terminals are exclusively road-fed as well. Road services are mostly in the form of
supplementary services to provide the door to door linkages having carried the bulk
of long lead by rail. However, where ever it is operationally or economically a
superior option, road is used as an alternative to rail as well.

Core Business
Terminal and CFS Operator
CONCOR started operations in November 1989 with 7 Inland Container
Depots (ICDs). We have since extended the network to a total of 61
terminals, of which 8 are export-import container depots, 3 strategic tieups
and 17 exclusive domestic container depots and as many as 33 terminals
perform the combined role of domestic as well as international terminals.
(terminal map)
CONCOR's customs bonded Inland Container depots are dry ports in the
hinterland, and serve the purpose of bringing all port facilities including
Customs clearance to the customer's doorstep. The terminals are almost
always linked by rail to the Indian Railway network, unless their size or
location dictates that they be linked by road. The rail links enable us to
facilitate the moving of large volumes over long distances in the most cost
effective manner.

Core Business
CONCOR's terminals provide a spectrum of facilities in terms of
warehousing, container parking, repair facilities, and even office complexes.
As CFS operator, CONCOR adds value to the logistics chain by offering value
added services such as
• Transit warehousing for import and export cargo

• Bonded warehousing, enabling importers to store cargo and take partial
deliveries, thereby deferring duty payment
• Less than Container Load (LCL) consolidation, and reworking of LCL cargo
at nominated hubs
• Air cargo clearance using bonded trucking

Core Business
CONCOR Last Mile Logistics Limited
CONCOR Last Mile Logistics Limited a wholly owned subsidiary of Container
Corporation of India Limited has been incorporated on 06.01.2020 with the
objective of strengthening the first and last mile connectivity through a multi
vendor arrangement at the most competitive rates through the process of
reverse auction among the empanelled vendors at the terminals under
FMLM arrangement . The digital app based FMLM will pave the way for
building up of a robust ,reliable efficient and cost effective platform for the
esteemed customers. The intention will be to generate confidence among
the customers with the main focus on reduction in the overall logistics cost
and a determined beginning towards developing a single window solution for
the customer serving their requirements to their utmost satisfaction

Refree services
CONCOR is already providing basic rail based reefer services between
Dadri/Kanpur/Dhappar and various Ports, it could get into providing cold
chain solutions by making a few arrangements that would expand its market
presence. These would mainly include:
Tie up with an international major, preferably with developing country
experience with both technology and equity commitment for bringing in the
basic equipment.
Organize terminal to factory transport, refrigerated warehouses-where
needed, and delivery, while maintaining both temperature controlled
environments, as well as transit commitments.
Identify viable corridors for specific products. This will require tying up with
producers and consumers independently or tie up with a food processing
major to distribute its products. Return trips wherever possible make cold
chain operations more profitable, and sometimes represent the difference
between break even and loss.

PGDM SEMESTER III

Framework
Topic Name: Shipping and Logistics-Module 4

Logistics
What is Logistics?
The term "logistics" describes the total process of controlling the
acquisition, storage, and delivery of resources to their intended
location.
It entails locating potential distributors and suppliers and

evaluating the viability and accessibility of such parties.

National Logistics Policy-
the background
PM launched the National Logistics Policy to boost the speed and effectiveness of
Logistics in India
According to the PM, India has to bring down the logistics cost of 13-14% of GDP to
single digits.
“NLP will work as a double engine of working along PM Gati Shakti. With its
implementation, cost will reduce, international trade will expand and startups will see
new avenues,” said Commerce & Industry Minister Piyush Goyal at the launch.
Modi added that turnaround of container vessels at ports has been reduced from 44
hours to 26 hours. New eco-friendly waterways are being setup, 40 air cargo terminals
have been setup to facilitate exports, 30 airports have cold storage facilities, and 35
multi modal logistics facilities are being setup.
(Source-ET)

The Background
According to the (latest available) World Bank Logistics Index of 2018, India is ranked
44th in logistics costs, lagging countries like China and Vietnam, which are at the 26th
and 39th positions, respectively. The logistics cost in India is estimated at 13-14% of
GDP, compared to 7-8% in developed economies.
As per an Arthur D. Little-CII report, higher logistics cost is leading to a

competitiveness gap of $180 billion for India, and this gap is likely to go up to $500
billion by 2030. Experts highlight the high logistics costs can be attributed to an
unfavorable policy regime, and an under leveraged multimodal transport system
heavily skewed in favour of road transport.

Need for A NLP
• Employment Generation: More than 22 million people in India depend on the
logistics industry for their livelihood and has potential to increase in employment,
according to the Economic Survey 2017–18.
• Growth Potential: Indian Logistics market will be worth USD 215 Billion after 2
years from the present USD 160 Billion
• Organizing and Formalizing the sector: The logistics industry in India has to be
organized and consolidated because it is highly unorganized and fragmented.
• Reducing the cost of logistics: Logistics costs in the country are as high as 14–15%
of GDP, compared to 7-8% in industrialized countries like Singapore and the US,
who use logistics to increase exports. In the next five years, the NLP wants to
reduce India's logistics costs to 8%.

Need for NLP
• Improving Cold Chain Efficiency and reducing perishable loss: Avoiding the wasting of
perishables According to some estimates, 16% of Indian agricultural produce is lost at
various points throughout the supply chain.
• Development of warehousing and Storage capacity: Additionally, the cost of a

transaction rises as a result of variables like capacity restrictions and a lack of available
warehouses.
• Integration of Multimodal Transportation: The new policy will focus on simplification,

technology, and a multimodal strategy that combines train, sea, and air - all means of
transportation.
• Export promotion: Enhancing this industry will enable a 10% reduction in indirect
logistics costs, which will result in growth of 5 to 8% in exports.
• Climate change commitment:

Logistical Bottlenecks

Objectives
• One of its key objectives would be to make Indian logistics competitive in terms
of global standards. Some key thrusts include, IDS — Integration of Digital
System, ULIP — Unified Logistics interface Platform, ELOG — Ease of Logistics,
and SIG — System Improvement Group. An e-Handbook has also been launched
for the standardization of the warehousing sector.
• Creating a national logistics e market place which will be a one stop market
place.
• Creating a Logistics Centre of excellence by encouraging Industry, academia and

government to come together.
• Improving India’s ranking in Logistics Performance index.
• Doubling employment in the logistics sector by creating additional 10-15 million

jobs.
• Encouraging adoption of Green logistics.

Objectives
• Reducing losses due to Agri wastage to less than 5% through effective agri logistics
• Providing cross regional trade on e-commerce platforms
• Creating a data and analytics centre to drive transparency and continuous monitoring
of key logistics metrics

Elements
• One of the key elements of this policy will be IDS under which 30 systems of
seven departments will be integrated. These departments will include those
belonging to ministries of road transport, railways, customs, aviation, foreign
trade and commerce. All these departments have their own digital data which
will be integrated under IDS. This will help smooth cargo movement.
• Another important element for smooth cargo movement will be ULIP under
which all available transport modes will be visible.

ULIP-Unified Logistics Interface
Platform
Development of ULIP is one of the eight interventions proposed under the
comprehensive logistics action plan, through the policy will be implemented.
"This platform will be utilized by various government and private agencies, service
providers, shippers, consignees etc. to enable information exchange on a real/near
real time basis amongst all stakeholders in a confidential manner," according to an
e-book of the department for promotion of industry and internal trade (DPIIT).

Other Interventions
The other interventions proposed include
• Standardisation of physical assets and benchmarking service quality standards;
• Logistics Human Resources Development and Capacity Building;
• state engagement;
• export-import logistics;
• Service Improvement framework;
• Sectoral Plan for Efficient Logistics;
• Facilitation of Development of Logistics Parks.
NICDC's (National Industrial Corridor Development Corporation) Logistics Data Bank

Project has been leveraged to develop ULIP.
What are the Government Initiatives taken for
the Logistics Sector?
• Implementation of GST: Due to the elimination of checkpoints, it is predicted that the

GST system will hasten the formalization of informal logistical arrangements and the
movement of freight over state lines.
• A national committee under the direction of the Cabinet Secretary is developing a pan-
Indian plan to facilitate trade.
• New Division: The Department of Commerce has established a new Logistics Division
to manage integrated sector development via policy modifications, enhanced current
procedures, detection of bottlenecks and gaps, and application of technology-based
solutions.
• Integrated Logistic Portal: In order to create a transactional e-marketplace, the Ministry
of Commerce and Industry (MoCI) has build an integrated logistics portal that will link
customers, logistics service providers, and pertinent governmental organizations like
customs, port community systems, port terminals, shipping lines, and railways.

Initiatives
• LEADS Index: A new Logistics Ease Across States Index, which assesses states
according to how supportive they are of enhancing the logistics infrastructure
within their borders, was also recently introduced by the Ministry.
• Infrastructure Status: The Infrastructure Sub Sector Harmonized Master List now
includes the logistics industry. This inclusion has benefited the logistics sector
because it would provide it access to more affordable, longer-term loans.
• Multi Modal Logistic Park project: The Multi Modal Logistic Park project is the
development of state-of-the-art large scale warehousing facilities for different
types of commodities transported by Rail, road and Inland waterways. It is also
aimed to become a one stop solution for services related to cargo movement like
warehousing, custom clearance, parking, maintenance of trucks etc.

LPI

LPI

Evolution of Transportation modes

World Leaders in Logistics

WORLD LOGISTICS

Indian Logistics

Transportation by Rail

Contd..

Contd..
(Source:
https://www.fois.indianrail.gov.in/RailSAHAY/Home.jsp
Indian Railways is the backbone of the country's logistics

sector. We carry more than 1.4 Billon tonnes of freight traffic
every year over a network of 68000 kms.
With our network touching almost every nook and corner of the
country, we play a crucial role in facilitating a balanced and
inclusive socio economic development of the country. We carry
almost all commodities including bulk commodities like Coal,
Iron ore, Iron & Steel, Food grains, Cement, Petroleum products,
Fertilizer and other commodities carried in containers. We are
proud to serve more than 9,000 customers. We are the most
environment friendly mode of land transportation. Our
commitment is competitive rates and timely delivery of cargo.

FOCUS ON ENVIRONMENT
Rail Green Point (RGP)
To make freight customers aware about how much carbon
emission they have saved by opting to transport by Railways in
comparison with road, Indian Railways have decided to credit
Rail Green Points (RGPs) to the customers.
The carbon saving is estimated in terms of TonnesCO2 and
credited to the customer as Rail Green Points (RGPs).
A RGP account is maintained for every freight customer on his

dashboard. Once Railway Receipt (RR) is generated, the RGPs
earned are credited to the RGP account of the customer. The
cumulative RGPs of a customer are shown in his RGP account on
Freight Business Development portal.
Booking Process –Brief by railways
Customer is required to furnish a filled forwarding note
containing details of commodity, Originating and Destination
points(Railway Locations) etc. to the goods clerk/ chief goods
supervisor at the Loading Location over Indian Railways. Now
customer can register their demand electronically from the place
of their convenience through Indian Railway's Freight Operations
Information System (FOIS) e-Demand Service

Detailed Booking Process of Goods
transportation- Railways
DEMAND REGISTRATION
Register your demand for empty goods train, manually at your nearest freight
terminal or electronically through E-Demand.
WAGON REGISTRATION FEE (WRF)

Please Pay the Wagon Registration Fee (WRF).
ALLOTMENT OF EMPTY TRAIN (RAKE)

Railways shall allot an empty rake(train) and customer is informed about the same.
RAKE SUPPLY
The Rake(Train) is supplied for Loading by Railways and Customer is informed.
RAKE LOADING
The customer loads the Rake (Train) and hands over the loaded wagons/train to
Railways.
Booking Process
WEIGHMENT
The Rake is weighed by Railways on nearest weighbridge location
PAYMENT OF FREIGHT
The Customer is required to Pay the Freight Charges through e-Payment
service or through manual modes of Payment as applicable.
GENERATION OF RR/eT-RR
Railways generates a Railway Receipt and same is handed over to the
Customer in Physical Form. Registered Customers can opt for Railway
Receipt in Electronic Format (eT-RR) which is shared electronically with
customer on Registered E-Mail ID.

Wagon Registration Fees
Wagon Registration Fee (WRF) is a booking amount collected at

the time of placing indent. At present, the WRF is Rs.50000/- per
rake (full train). This amount may be adjusted in Freight.

Road Transport in India

Market Size –Logistics Industry

Road Transport
Road Transport has emerged as the dominant segment in
India's transportation sector with a share of 4.5% in India's
GDP in 2005-06. The Road Transport Sector accounts for about
87% of passenger traffic and 60% of freight traffic movement
in the country.

Road Transport Performance
Drivers and the world rankings

India and the world-
(Road Transport)-Source World Economic Forum

India and the world
With a mean speed of 58 km/h, India is ranked 127th
out of 162 countries. The US (107 km/h) is the fastest
country in the world and Bhutan (38 km/h) the slowest.
India is not very different from its neighbours with the
exception of Pakistan, where the travel time from
Karachi to Faisalabad, Gujranwala, Lahore, and
Rawalpindi gives the country a mean speed of 86 km/h,
the 44th fastest in the world.

Shipping Logistics
There are 12 major ports and 200 non-major ports (minor
ports) in the country. While the Major Ports are under the
administrative control of Ministry of Shipping, the non-major
ports are under the jurisdiction of respective State Maritime
Boards/ State Government. All the 12 Major ports are
functional. Out of the 200 non-major ports, around 65 ports
are handling cargo and the others are “Port Limits” where no
cargo is handled and these are used by fishing vessels and by
small ferries to carry passengers across the creeks etc

Shipping Logistics
Water Transport India
Around 95% of India’s trading by volume and 70% by value is done through
maritime transport.
India has 12 major and 205 notified minor and intermediate ports. Under the
National Perspective Plan for Sagarmala, six new mega ports will be developed in
the country.
Foreign Direct Investment (FDI) of up to 100% under the automatic route for port
and harbour construction and maintenance projects. It has also facilitated a 10-
year tax holiday to enterprises that develop, maintain and operate ports, inland
waterways and inland ports.
India’s key ports had a capacity of 1,534.91 million tonnes per annum (MTPA) in
FY20. In FY21, all key ports in India handled 672.60 million tonnes (MT) of cargo
traffic.
Vision of Sagarmala
Vision of the Sagarmala Programme is to reduce logistics cost
for EXIM and domestic trade with minimal infrastructure
investment. This includes:
Reducing cost of transporting domestic cargo through

optimizing modal mix
Lowering logistics cost of bulk commodities by locating future
industrial capacities near the coast
Improving export competitiveness by developing port
proximate discrete manufacturing clusters
Optimizing time/cost of EXIM container movement

Components of Sagarmala
Programme are:
Port Modernization & New Port Development: De-bottlenecking and capacity
expansion of existing ports and development of new greenfield ports
Port Connectivity Enhancement: Enhancing the connectivity of the ports to the

hinterland, optimizing cost and time of cargo movement through multi-modal
logistics solutions including domestic waterways (inland water transport and
coastal shipping)
Port-linked Industrialization: Developing port-proximate industrial clusters and

Coastal Economic Zones to reduce logistics cost and time of EXIM and domestic
cargo
Coastal Community Development Promoting sustainable development of coastal
communities through skill development & livelihood generation activities, fisheries
development, coastal tourism etc.
Coastal Shipping & Inland Waterways Transport Impetus to move cargo through the
sustainable and environment-friendly coastal and inland waterways mode.
NSTC

Chabahar Port in Iran operated by
India

Location of Chabahar

Suez Canal

About Suez Canal
Location: The Suez Canal is a sea-level waterway in Egypt, connecting the

Mediterranean Sea to the Red Sea through the Isthmus of Suez. It extends from
the northern terminus of Port Said to the southern terminus of Port Tewfik at the
city of Suez.
Authority Over Canal: The canal is owned and maintained by the Suez Canal
Authority (SCA) of Egypt.
Convention of Constantinople: Under Convention it may be used “in time of war

as in time of peace, by every vessel of commerce or of war, without distinction of
flag”.
Importance of Canal: The canal offers watercraft a more direct route between the
North Atlantic and northern Indian oceans via the Mediterranean and Red seas,
thus avoiding the South Atlantic and southern Indian oceans.

Suez Canal
• Canal Constructed by the Suez Canal Company between 1859

and 1869
• Canal officially opened on 17 November 1869.
• The UK and France owned the canal until July 1956.

Importance of Suez Canal
The Suez Canal, one of the world’s most popular trade routes, is also
the fastest and the most direct trade link between Asia and Europe,
with energy, commodities, componentry, and consumer goods being
the chief transportation items.
In 2020, about 19,000 ships travelled on this 193 km route,

representing 12% of global trade and 30% of global container
traffic.
The Suez Canal is also a key regional shipping hub for oil and
hydrocarbons from Asia and the Middle East to Europe, responsible
for transporting about 7-8% of the world’s oil and 8% of liquified
natural gas.

Panama Canal

Significance of Panama Canal

Sea Transport
Measured in value, in
2021, sea transport
accounted for 50 % of
goods traded
between the EU and
the rest of the world,
measured in volume
the share was 83 %.

Importance of trade routes-
Ancient times

Trade routes -shipping

Trade routes
1. The English Channel (between the UK and France)
The busiest sea route in the world, it connects the North Sea and
the Atlantic Ocean. More than 500 ships pass through this
channel daily. It also has the world’s busiest shipping lane: The
Dover’s Strait.
2. The Strait of Malacca (near Indonesia, Malaysia, Singapore)
The shortest route between the Pacific and the Indian ocean. It
links major Asian trade hubs like India, Malaysia, Singapore,
China, etc. More than 83,000 vessels use this route annually.
Almost 40% of the world traffic passes through this strait.

Trade routes
3. The Panama Canal (in the US)
An artificial seaway, this was designed to reduce transit time between the Pacific
and Atlantic ocean. It shortens the voyage by ~8,000 miles and cuts the 67-day
transit time to just 10 hours. Close to 14,000 vessels use the route every year.
4. The Suez Canal (near Egypt)

The shortest sea route between the Atlantic and Indian ocean via the Red Sea.
This canal cuts the 24-day transit time to just 16 hours. It is one of the most
heavily used ocean lanes, with more than 100 ship passes daily. The canal is so
narrow that it cannot regulate two-way traffic, and the wait-time of vessels can
be up to a week.
5. The Danish Straits (Denmark, Germany & Sweden)

They link the North Sea and Baltic Sea and comprises 3 channels: the Øresund,
the Great Belt, and the Little Belt. These are important points of transit for trade
in Russia and Europe.
Strait of Hormuz Wider view

Closer View

Trade through Hormuz

India and China –Trade Comparison

Transport Mode distribution

How the cargo is distributed?

Transportation costs –Basic
concept

Components of transportation cost
Terminal costs.-Costs that are related to loading, transshipment,

and unloading.
Two major terminal costs can be considered; loading and unloading

at the origin and destination, which are unavoidable, and
intermediate (transshipment) costs that can be avoided.
For complex transport terminals, such as ports and airports, terminal

costs can involve various components, including docking/gate fees,
handling charges, and pilotage/traffic control fees.

Components…..
Linehaul costs.
Costs that are a function of the distance over which a unit of
freight or passenger is carried. Weight is also a cost function when
freight is involved. They include labor and fuel and commonly
exclude transshipment costs.
Capital costs.
Costs applying to the physical assets of transportation, mainly
infrastructures, terminals, and vehicles. They include the purchase
or major enhancement of fixed assets, which can often be a one-
time event that can be amortized over several decades. Since
physical assets tend to depreciate over time, capital investments
are required on a regular basis for maintenance.
India Russia Trade route
Copyright: https://www.silkroadbriefing.com/news/2017/09/14/chennai-
vladivostok-india-russia-maritime-overland-routes-develop/

India Europe Maritime trade route
by SCI
Himalaya Express Service
The UK-C Cellular Container Service commenced in 1994 with SCI as a

single operator operating three vessels with 1,800 TEU capacities, which
was later upgraded to a fixed day weekly service operating with seven
vessels of similar capacity. The service, from May 2009, was operated in
consortia comprising of two partners viz. SCI and MSC, with currently nine
vessels out of which one vessel contributed by SCI. The service is operated
on round voyage duration of 63 days. HIMALAYA service caters to and from
the Indian Sub-Continent, Mundra / JNPT / Colombo to UK / European base
ports & multiple other ports including Scandinavia via the base ports.
Port Rotation : Colombo – NhavaSheva – Mundra – Felixstowe – Rotterdam

– Hamburg – Antwerp – Rotterdam – Colombo

Major Transhipments and
gateways

New Rail Route

Trade through Rail

Transit Time benefits

Transit Time
• China – Lyon (France): 14 ~ 17 days

• China – Brussels (Belgium): 12 ~ 14 days
• China – London (UK): 18-20 days

Characteristics of railway freight
• Routes from China – Europe, China – Russia, as well as Germany –

Japan and Germany – South Korea via Zhengzhou are operated in
both direction
• So the cost of rail transportation is 50% lower than air freight and
the transit time is 50% shorter than ocean freight
• The shipping cost for EXW to DDU China – Germany (Europe) and
small LCL (1-4cbm) are more or less the same as sea freight
• Customs clearance is available 24/7!

• Door to door service & distribution network in Europe and China

Trade by Air
Air transportation’s share of world trade in goods is less than
1% measured by weight but more than 35% by value. Typically,
air transportation is most important for time-sensitive,
valuable, or perishable freight carried over long distances. Air
cargo has been central in “just-in-time” production and
distribution strategies with low inventory levels, such as for
Apple iPhones.

Top three(2019)
• Memphis
• Hong Kong
• Shanghai

PGDM SEMESTER III
Framework
Topic Name: India’s trade relationships with major
trade blocs in the world-Module 5

Trade Blocs

Levels of economic intergration

Selected regional trade agreements by economic size
(Share of global GDP)

Trade agreements

FTA

MERCOSUR
MERCOSUR stands for Mercado Comun
del Cono Sur which means Southern
Common Market and it was established
on 26th March 1991. It is tariff union of
South American countries covering the
market of Brazil, Argentina, Venezuela,
Paraguay and Uruguay. Its associate
members include Bolivia, Chile, Colombia,
Ecuador and Peru. Its main goals are to
accelerate sustained economic
development.
MERCOSUR is one of the fastest growing trading blocks in the world. Spanish
and Portuguese are the major languages spoken in this region. MERCOSUR
global exports worth USD 292 billion and imports worth USD 237 billion
during the year 2017.
BRICS

BRICS
BRICS is an association of five national economies such as
Brazil, Russia, India, China and South Africa. However, South
Africa has joined this group in the year 2010 and earlier it was
known as BRIC. The total exports of BRICS amounted to USD
2902 billion and imports amounted to USD 2339 billion during
2017. China is the largest trading country in terms of both
imports and exports among these countries and recorded 70%
of BRICS exports and 65% of BRICS imports.

EU
European Union is the most integrated trade block in the world and formed in the
year 1951. It has built a single Europe-wide market and also launched Euro as a single
currency for regional trading. European Union goods exports to the global market
worth USD 5887 billion and imports worth USD 5785 billion during the year 2017.
EU consists of 28 member countries which are Austria, Belgium, Bulgaria, Denmark,

Finland, Germany, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal,
Romania, Spain, Sweden, United Kingdom, Cyprus, Croatia, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. European Union
comprises five EU institutions namely European Parliament, Council of the EU,
European Commission, Court of Justice and Court of Auditors.

India and EU

India and EU

India and EU
The Netherlands holds just 3.3 percent of the EU’s total population, yet it
accounts for over 20 percent of Indian exports to the EU. This can be
explained by the “gateway to Europe” relationship that Netherlands
maintains with India and also its strategic proximity to other European
countries.
The Netherlands is a logical geographic choice for redistribution throughout

Europe with nearly 160 million people staying within a 300-mile radius of
the Netherlands (roughly 60 percent of the EU’s population). As a result,
many of the goods imported to the Netherlands are not always consumed
there and are actually re-exported throughout the EU.

NAFTA
NAFTA was established on 1st January 1994
and comprises three giant member
countries which are Canada, United States
and Mexico. USA and Canada provide
highly industrialized environment for
manufacturing & services growth while
Mexico provides cheaper resources. NAFTA
is responsible to eliminate trade barriers
among its member countries, promote a
free trade environment and to increase
investment opportunities.

US AND MEXICO

USA and Canada

SAARC
SAARC provides a platform for the people of
South Asian countries to work together in a
spirit of trust and understanding. It was
founded on 8th December 1985 and its
member states include Afghanistan,
Bangladesh, Bhutan, India, Nepal, Maldives,
Pakistan and Sri Lanka. SAARC exports of
goods to the world worth USD 330 billion
and imports worth USD 481 billion in the
year 2016. India is the biggest trading
country in both imports and exports among
SAARC members. SAARC organize summits
annually and the country hosting the
summit holds the chair of the association.

SAARC
https://www.thedailystar.net/business/export/news/exports-saarc-countries-reach-new-
heights-3099516
COMESA – Common Market for
Eastern and Southern Africa

New Trade Bloc(RCEP)
A new Asia-Pacific free trade agreement set to enter into force on 1 January 2022 will
create the world’s largest trading bloc by economic size, according to an UNCTAD
study published on 15 December.
The Regional Comprehensive Economic Partnership (RCEP) includes 15 East Asian and
Pacific nations of different economic sizes and stages of development.
They are Australia, Brunei Darussalam, Cambodia, China, Indonesia, Japan, the
Republic of Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines,
Singapore, Thailand and Viet Nam.
The RCEP will become the largest trade agreement in the world as measured by the
GDP of its members – almost of one third of the world’s GDP.

India’s Trade

India’s Bilateral Trade

Export from India

Imports from India

India’s trade

OPEC
• In accordance with its Statute, the mission of the Organization of the
Petroleum Exporting Countries (OPEC) is to coordinate and unify the
petroleum policies of its Member Countries and ensure the stabilization
of oil markets in order to secure an efficient, economic and regular
supply of petroleum to consumers, a steady income to producers and a
fair return on capital for those investing in the petroleum industry.
• The Organization of the Petroleum Exporting Countries (OPEC) is a

permanent, intergovernmental Organization, created at the Baghdad
Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi
Arabia and Venezuela.
• OPEC had its headquarters in Geneva, Switzerland, in the first five years
of its existence. This was moved to Vienna, Austria, on September 1,
1965.

OPEC
• Currently, the Organization has a total of 13 Member Countries.
• The OPEC Statute distinguishes between the Founder Members and Full Members -
those countries whose applications for membership have been accepted by the
Conference.
• The Statute stipulates that “any country with a substantial net export of crude
petroleum, which has fundamentally similar interests to those of Member
Countries, may become a Full Member of the Organization, if accepted by a
majority of three-fourths of Full Members, including the concurring votes of all
Founder Members.”
• The Statute further provides for Associate Members which are those countries that
do not qualify for full membership, but are nevertheless admitted under such
special conditions as may be prescribed by the Conference.

OPEC MEMBERS

OPEC
• The OPEC Secretariat is the executive organ of the Organization of the Petroleum
Exporting Countries (OPEC). Located in Vienna, it also functions as the
Headquarters of the Organization, in accordance with the provisions of the OPEC
Statute.
• The Secretary General is the legally authorized representative of the Organization

and Chief Executive of the Secretariat. In this capacity, he administers the affairs of
the Organization in accordance with the directions of the Board of Governors.
• The Conference appoints the Secretary General for a period of three years, which
may be renewed once for the same period. This appointment takes place upon
nomination by Member Countries.
• HE Haitham Al Ghais is the current Secretary General of OPEC.

OPEC and the World

OPEC

India and OPEC
OPEC sees world oil demand growth increasingly shifting to India.
We anticipate, in fact, that by 2040, India’s oil demand will increase by more than
150% to 10.1 mb/d from around 4 mb/d currently.
The country’s total share of global oil demand is also seen rising to over 9% by 2040
from 4% now.
OPEC's share of India's oil imports for the FY22 financial year remained almost flat
year-on-year, arresting sharp declines over the past six years, as refiners snapped up
short-haul crude from West Asia to counter rising global prices.
Total crude imports by the world's third-biggest oil importer and consumer rose by an
annual 7.2% to 4.26 million barrels per day (bpd) in the year to March 31, ship-
tracking data from industry sources showed.

India and OPEC
• Share was 71.6% in FY22, compared with 71.9% in FY21; OPEC oil accounted for
88% of India’s crude imports in FY08
• OPEC's share of India's oil imports for the FY22 financial year remained almost flat
year-on-year, arresting sharp declines over the the past six years, as refiners
snapped up short-haul crude from West Asia to counter rising global prices.
• Total crude imports by the world's third-biggest oil importer and consumer rose by
an annual 7.2% to 4.26 million barrels per day (bpd) in the year to March 31, ship-
tracking data from industry sources showed.

India and OPEC
India is the world's third-largest oil importer and consumer after the United States
and China.
The OPEC joined other major oil producers on Wednesday to announce that it will
slash oil production by 2 million barrels per day, the biggest cut since the start of the
Covid-19 pandemic. The cut would increase oil prices across the world at a time
when countries such as the United Kingdom (UK) are already suffering from a cost of
living crisis and India too is dealing with high inflation.
"In December of 2016, OPEC formed an alliance with other oil-exporting nations that
were not a part of the organization, creating an entity that is commonly referred to
as OPEC+, or OPEC Plus. Prominent members of OPEC+ include Russia, Mexico, and
Kazakhstan," notes Investopedia.

India and OPEC
• The OPEC+ cut, which enters into force in November, “will hurt large importers like
India, who spent around $120 billion last year on the import of petroleum
products,” the minister added.
• India has recently imported large volumes of Russian oil due to the cheap supply
with hefty discounts on the Russian grades compared to benchmarks. But those
discounts have narrowed in recent weeks, Puri said.
• India is also looking to lock in term purchase contracts with crude producers,
expecting a redirection of trade flows and a tighter market when the EU embargo
on imports of Russian crude enters into force in early December. Major state-held
refiners in India, including the biggest refiner Indian Oil Corporation, and Bharat
Petroleum, are looking to sign term deals with major producers, expecting more
Middle Eastern crude to flow to Europe once the EU bans Russian imports, officials
at the refiners told Reuters earlier this month.

OPEC and India

How Retail Oil price is calculated?

Diesel price calculation 2017

Price Breakup Nov. 22

Petroleum reserves India

ASEAN
ASEAN was established on 8th August
1967 in Bangkok, Thailand. There are 10
member countries of ASEAN including
Brunei, Malaysia, Singapore, Vietnam,
Indonesia, Laos, Cambodia, Thailand,
Philippines and Myanmar.
The main goals of ASEAN are to increase
economic growth, social progress and
promote regional space and stability. It
aims to transform ASEAN into a single
entity. Singapore is the biggest trading
market of ASEAN countries. As per the
trade map, ASEAN exports of goods to the
global market worth USD 890 billion and
imports worth USD 846 billion in the year
2017.
India and ASEAN

India has a losing pact with ASEAN

(India and Africa)
India is a major trading partner with Africa

India and Africa
India and Southern African Customs Union (SACU) Preferential Trade Agreement (PTA)
The Southern African Custom Union (SACU) is the oldest Customs Union in the world
established in 1910 consisting of a group 5 countries namely Botswana, Lesotho,
Namibia, Eswatini (Swaziland) and South Africa.
Five rounds of negotiations have been held so far between 2007 – 2010. A virtual
Senior Official Meeting was held on 15th July 2020. Both sides agreed for early
resumption of the negotiations on PTA between India and SACU. Both sides also
agreed on the time lines for exchange of trade and tariff data, and submission of
revised modalities for PTA negotiations. Further action is in progress accordingly.

India and Africa
India and Mauritius signed the Comprehensive Economic Cooperation and Partnership
Agreement (CECPA)
India and Mauritius signed the Comprehensive Economic Cooperation and Partnership
Agreement (CECPA) on 22nd February, 2021, which entered into force on 01 April 2021.
The CECPA is the first trade Agreement signed by India with a country in Africa. The
Agreement is a limited agreement, which will cover Trade in Goods, Rules of Origin, Trade
in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures,
Dispute Settlement, Movement of Natural Persons, Telecom, Financial services, Customs
Procedures and Cooperation in other Areas.
The India-Mauritius CECPA provides for an institutional mechanism to encourage and

improve trade between the two countries. The CECPA between India and Mauritius covers
310 export items for India.

India and APEC

APEC
APEC also referred to member economies
and accounting approximately 60% of the
world’s GDP. It is responsible for
facilitating economic growth, cooperation,
trade and investment in this region. APEC
consists of 21 member countries including
Brunei Darussalam, Canada, Chile, China,
Hong Kong, Indonesia, Japan, Korea,
Malaysia, Mexico, New Zealand, Papua
New Guinea, Peru, Philippines, Russia,
Singapore, Taipei, Thailand, United States
and Vietnam. APEC exports of goods stood
at USD 8021 billion and imports stood at
USD 7997 billion during the year 2016.
China and United States are the biggest
trading countries.
SAARC
SAARC has established new institutions such as SAARC Arbitration Council
(SARCO), South Asian University (SAU), SAARC Development Fund (SDF)
Secretariat and SAARC Regional Standards Organization (SARSO) which have
mandates and structures different from the Regional Centers.

Specialized Bodies of SAARC
SOUTH ASIAN UNIVERSITY

The Agreement for the Establishment of South Asian University was signed by the
Ministers of Foreign/External Affairs of the MSs of SAARC during the Fourteenth SAARC
Summit (New Delhi, 4 April 2007).
As per Article 7 of the Agreement of the SAU, it is necessary for the MS to recognize the
Degrees and Certificates awarded by the SAU at par with the respective Degrees and
Certificates awarded by the National Universities / Institutions.
SOUTH ASIAN REGIONAL STANDARDS ORGANIZATION
The fifteenth SAARC Summit paved the way for establishing SARSO in order to harmonize
standards and promote cooperation in the fields of metrology, accreditation and
conformity assessment for enhancing the capacity of the respective national institutions
in carrying out their technical tasks. The agreement on SARSO came into effect on 25th
August 2011.

SAARC Specialized Bodies
SAARC ARBITRATION COUNCIL
The agreement on SARCO was signed during the Thirteenth Summit and came into
effect on 2 July 2007. SARCO was established with a view to resolve cost-effective
settlement of disputes via arbitration within the region.
SAARC DEVELOPMENT FUND

• The 13th SAARC Summit (Dhaka, 12-13 November 2005) decided to establish SAARC
Development Fund (SDF) as a comprehensive funding mechanism with the
provision of three Windows (Social, Economic and Infrastructure).
• SDF is governed by a Board consisting of representatives from the Ministry of

Finance of the Member States. The Governing Council of SDF (Finance Ministers of
MSs) oversees the functioning of the Board.

India’s Trade with SAARC
Countries
Nepal and Bangladesh are the largest trading partners of India among the SAARC countries
India's trade with Pakistan is declining since 2015

India’s trade with EU,EFTA and
Other European countries
• There is a decline in India’s trade with EU in 2020-21 over 2019-20
• There has been a growth in imports to India from EFTA
• European Free Trade Association : (4 countries) Iceland, Liechtenstein, Norway

and Switzerland
• Other European Countries : (7 countries) Albania, Bosnia-Herzegovina,

Macedonia, Montenegro, Serbia, Turkey and UK
• India’s trade with other European countries has seen a decline in last few years

India’s trade with NAFTA
• NAFTA is a major trading partner of India.
• India has a trade % of 14% with NAFTA and overall exports of around 20%

India’s trade with CIS
CIS countries which consist of Russia, Ukraine, Uzbekistan, Kazakhstan, Kyrgyzstan,
Turkmenistan, Tajikistan, Azerbaijan, Armenia, Georgia, Moldova, and Belarus is a
major trade focus on India

India’s trade with WANA
WANA region comprises 19 countries. These countries are Bahrain, Kuwait, Oman,
Qatar, Iraq, UAE, Saudi Arabia, Egypt, Sudan, Algeria, Morocco, Tunisia, Syria, Jordan,
Israel, Lebanon, Yemen, Libya and South Sudan.
Bilateral trade between India and WANA was USD 215.83 billion in 2021-22, registering
a growth of 80.17 % as compared to 2020-21. India’s exports to WANA were at USD
60.45 billion in 2020-21, registering a growth of 56.92% compared to 2020-21. India’s
imports from WANA were USD 155.38 billion, registering a growth of 91.19% as
compared to 2020-21.
A trade deficit of USD 94.93 billion was registered in 2021-22.
UAE (72.88 B USD –Total; trade in 21-22),Saudi Arabia and IRAQ are the top three
trading partners respectively.

India’s trade with North East Asia
North East Asia constituting of China, Japan, Korea RP, Hong Kong, Taiwan etc.
accounted for trade of USD 124.95 billion in 2015-16 which was 19.42% of India’s
total trade.
Exports to NEA countries were USD 30.84 billion (11.76% of India’s exports) and
imports from NEA countries were USD 94.11 billion (24.7% of India’s imports). India’s
trade deficit with NEA countries in 2015-16 stood at USD 63.28 billion which is 53.3%
of India’s total trade deficit (USD 118.72 billion).
China accounts for 56.6% of NEA’s total trade, while Hong Kong, Japan and Korea
contribute 14.5%, 11.6 % and 13.3 % respectively. Taiwan, Mongolia, Macau & DPR
Korea make up the balance 4%. While China constitutes 10.99 % of India’s total trade,
it accounts for over 44.38 % of our trade deficit.

Contd..
Apart from trade, the NEA countries together are amongst the most dominant
economic players in the world at present with total exports of USD 4233 billion &
imports of USD 3548.7 billion and USD 7781.6 billion of total trade. China, Korea,
Taiwan and Hong Kong are leading economies with high growth rate; they could be
significant investment partners for India.

India’s trade with Oceania
The FT(Oceania) Division deals with India’s bilateral trade relations with Australia,
New Zealand, Timor-Liste and Pacific Islands countries (Fiji, Kiribati, Papua New
Guinea, Nauru, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu etc.)

Potential for export-India
Fruits and Vegetables
India's diverse climate ensures the availability of all varieties of fresh fruits &
vegetables. It ranks second in fruits and vegetable production in the world, after
China. As per National Horticulture Database (Second Advance Estimates) published
by National Horticulture Board, during 2020-21, India produced 102.48 million metric
tonnes of fruits and 200.45 million metric tonnes of vegetables. The area under
cultivation of fruits stood at 9.6 million hectares while vegetables were cultivated at
10.86 million hectares.
Major destinations for the Indian fresh fruits and vegetables are Bangladesh, UAE,
Nepal, Netherland, Malaysia, Sri Lanka, the UK, Oman and Qatar.
Major destinations for the Indian processed fruits and vegetables are USA, UAE,
China, Netherland, UK and Saudi Arab.

Contd..
Rice

Contd..
India is popular for its rice cultivation all
over the world. India is the largest rice
exporter with its market share of 28.9%
from world’s output (In 2016). It has
generated the export value of 5315.535
Million USD in 2016. In the list of rice
exporting countries, India is followed by
Thailand which stood second in the list.
India is exporting rice in more than 150
countries across the world. Rice export by
India in three categories which are Basmati,
Non-Basmati and others. India has
registered sales of 226.61 Million USD from
Basmati rice export under HS code
10063020 during March 2017 while the
exported value of non-basmati rice is 93.52
Million USD.
Basmati Exports on decline
despite the potential

India’s trade details
https://niryat.gov.in/#?start_date=202204&end_date=202209
&sort_table=export_achieved-sort-desc

PGDM SEMESTER III
Framework
Topic Name: Module 6-Role of Indian Govt. in Foreign
Trade,DGFT,SEZ,EOU,Export Promotion Policies

Role of Indian Govt.
Directorate General of Foreign Trade (DGFT) Organization is an attached office of the
Ministry of Commerce and Industry and is headed by Director General of Foreign
Trade. Right from its inception till 1991, when liberalization in the economic policies
of the Government took place, this organization has been essentially involved in the
regulation and promotion of foreign trade through regulation. Keeping in line with
liberalization and globalization and the overall objective of increasing of exports,
DGFT has since been assigned the role of “facilitator”. The shift was from prohibition
and control of imports/exports to promotion and facilitation of exports/imports,
keeping in view the interests of the country.

Contd..
This Directorate, with headquarters at New Delhi, is headed by the Director General
of Foreign Trade. It is responsible for implementing the Foreign Trade Policy with the
main objective of promoting India’s exports. The DGFT also issues licenses to
exporters and monitors their corresponding obligations through a network of 25
Regional Offices and an extension counter at Indore.

Contd..
The Agricultural and Processed Food Products Export Development Authority (APEDA)
was established by the Government of India under the Agricultural and Processed Food
Products Export Development Authority Act passed by the Parliament in December,
1985. The Authority, with its headquarters at New Delhi, is headed by a Chairperson.
APEDA has been serving the agri-export community for 27 years.
APEDA has been actively engaged in the development of markets besides upgradation of
infrastructure and quality to promote the export of agro products. In its endeavour to
promote agro exports, APEDA, under its Plan Scheme titled ‘Agriculture Export
Promotion Scheme of APEDA’ provides financial assistance to the registered exporters
under sub-components of the Scheme – Market Development, Infrastructure
Development, Quality Development and Transport Assistance.
Address:
3rd Floor, NCUI Building, 3 Siri Institutional Area, August Kranti Marg, Hauz Khas, NEW
DELHI-110016.
(91)11- 26513204, 26514572, 26513219, (91)11- 26534870 (F)
headq@apeda.gov.in
http://apeda.gov.in/
Export Inspection Council
The Export Inspection Council (EIC) is the official export –certification body of India
which ensures quality and safety of products exported from India. EIC was set up by
the Government of India under Section 3 of the Export (Quality Control and Inspection)
Act, 1963 to ensure sound development of export trade of India through quality
control and inspection and matters connected therewith. The role of EIC is to ensure
that products notified under the Export (Quality Control and Inspection) Act 1963 are
meeting the requirements of the importing countries in respect of their quality and
safety.
The Export Inspection Council is located at Delhi and is headed by a Chairman. The
Executive Head of the Council is the Director of Inspection & Quality Control who is
responsible for day to day functioning of the Council. The assurance to quality and
safety is provided through either a consignment wise inspection or a quality assurance
/ food safety management based certification through its field organization. The Export
Inspection Agencies (EIAs) located at Mumbai, Kolkata, Kochi, Delhi and Chennai with a
network of 30 sub offices backed by the state of art, NABL accredited laboratories at
various places.

Contd..
EIC provides mandatory certification for various Food items namely fish & fishery
products, dairy product, honey, egg products, meat and meat products, poultry meat
products, animal casing, Gelatine, Ossein and crushed bones and feed additive and
pre-mixtures while other food and non-food products are certified on voluntary basis.
With more than four decade experience in the field of inspection, testing and
certification of food items as per importing country’s requirements, EIC is the only
organization in India having global acceptance.
2nd Floor, B- Plate, Block-I Commercial Complex, East Kidwai Nagar, New Delhi –
110023
011- 20815386/87/88
eic@eicindia.gov.in
http://eicindia.gov.in/

Contd..
The Marine Products Export Development Authority(MPEDA) was set up under
Section (4) of MPEDA Act, 1972 and became functional from 20th April, 1972. It is a
statutory body functioning under the Department of Commerce. The MPEDA, a
statutory body, is responsible for development of the marine products industry with
special reference to exports. It is headed by a Chairman. It has its headquarters at
Kochi and has a number of Regional and Sub- Regional Offices.
• Frozen Shrimp emerged as a principle item of export in the seafood basket both in
quantity and foreign earnings with a share of 73.14% in US dollar earnings and
39.73 in Quantity terms followed by Frozen Fish, Frozen Cuttle fish, others and
Frozen Squid etc., Export of Fr. Shrimp has showed tremendous growth.
• The export has increased by 19.98%, 31.48%, and 32.52 % in terms of Quantity,
rupee value and USD terms respectively.
• Export of Fr. Fish, Fr. Squid and dried items showed negative growth. Export of Fr.
Fish has declined by 6.34%, 11.16%, and 11.07% in terms of quantity, rupee value
and USD earnings respectively.

RoDTEP
Rebate of Duties & Taxes on Export Products (RoDTEP Scheme)
• The new RoDTEP Scheme will replace the old MEIS Scheme in a phased manner
from December 2020.
• The new scheme was necessary as the old MEIS Scheme was not WTO-compliant.
It was against the International Trade rules.
• The RoDTEP scheme aims to refund all those hidden taxes and levies, which were
earlier not refunded under any export incentive scheme, For example: Central &
state taxes on the fuel (Petrol, Diesel, CNG, PNG, and coal cess, etc.) used for
transportation of export products.
• The duty levied by the state on electricity used for manufacturing.
• Mandi tax levied by APMCs.
• Toll tax & stamp duty on the import-export documentation. Etc.
• The entire application process will more or less remain the same as the MEIS
Scheme, however, some changes in the rate of incentives are expected.
• The List of eligible products & the rate of benefit under the new RoDTEP Scheme is
still not finalized.

SEIS Scheme
Service Export from India Scheme (SEIS Scheme)
• The objective of Service Exports from India Scheme (SEIS) is to encourage and
maximize export of notified Services from India.
• Service Exports also provides valuable foreign exchange to the country, therefore
there is a need to motivate service exporters as well.
• Under the SEIS Scheme, an incentive of 3% to 7% of Net foreign exchange earnings
is provided to services exporters of notified services in India.
• It requires the service providers to have an active Import-Export Code (IEC Code)
with minimum net foreign exchange earnings of 15,000 USD to be eligible to claim
under the scheme.
• For Individual service providers and sole proprietorship, such minimum net free
foreign exchange earnings criteria would be US$10,000 in preceding financial year.
• Services listed in Appendix 3D are only eligible to claim the rewards.
• Similar to the MEIS scheme, rewards under the SEIS Scheme are given in the form
of freely transferable duty credit scrips.
• An application under the SEIS scheme is to be filed electronically to the
jurisdictional DGFT office

Mode of Service Exports

Export Promotion schemes

AAS
Advance Authorisation Scheme (AAS)
Advance License scheme was introduced to allow duty-free import of raw materials
required for the production of export goods.
It means that one can import raw materials at 0% Import duty if those raw materials
are going to be used in the manufacture of the export products.
An Advance License can be issued for physical export (including supply to SEZ) &
Deemed Exports as well (For Ex. Supply to EOU units or supply to any AA/EPCG
holder)
Advance License comes with an obligation to maintain a minimum of 15% value
addition and to export the goods within 18 months from the License issue date.
The materials imported under the Advance Authorisation Scheme comes with “Actual
User condition”. i.e. It cannot be transferred or sold to any other entity.
This scheme is implemented by the DGFT office.

DFIA
In the Foreign Trade Policy, Duty exemption schemes were introduced to enable the
duty-free import of raw materials or inputs required for the manufacturing of export
products, which made life easier for the exporters.
DFIA scheme was introduced on 1st May 2006 in place of the Duty-Free
Replenishment (DFRC) scheme, and it is similar to the Advance Authorisation Scheme
with certain differences.
The license issued under the DFIA scheme allows duty-free import of – inputs or raw
materials, oil, fuel, catalyst, energy resources, all required to obtain the export
products.
DFIA shall be issued only for the products for which standard Input and Output Norms
(SION) have been notified; hence import entitlement must be limited to the quantity
given in SION.
DFIA License is transferable; license or inputs imported can be transferred or sold
under DFIA Scheme.

Contd..
Duties Exempted under DFIA Scheme
• Only the payment of basic customs duty (BCD) is exempted under the Duty-Free
Import Authorisation scheme.
• IGST and compensation Cess are not exempted under the DFIA scheme.
Eligibility under DFIA Scheme

• The DFIA license shall be issued on a post export basis for those products where
standard Input-Output Norms are already notified.
• Manufacturer exporter as well as Merchant exporter are eligible to apply for DFIA
License. Merchant exporter is required to mention the name and address of the
supporting manufacturer in all the export document like shipping bills, bill of
export/Tax invoice as specified under the GST rules.
• The applicant has to apply for an application to concerned DGFT RA before
starting to export under duty-free import authorization.
• Duty-free import authorization shall not be issued for an import that is subject to
pre-import condition. DFIA license shall also be not issued for an actual user
condition or products mentioned in Appendix- 4J like Spices, Tea, Coconut oil,
precious metals/Gold/Silver/Platinum, etc.
DFIA
Minimum Value Addition under Duty Free import Authorisation scheme
Value Addition shall be: value-addition
Where,
A = FOB value of export realized or the FOR value of supply received.

B = CIF value of inputs covered by the authorisation, plus the value of any other
input used on which benefit of DBK is claimed or intended to be claimed.
The minimum Value addition required to achieved is 20% under DFIA License.

EPCG
Export Promotion Capital Goods Scheme (EPCG Scheme)
The objective of the EPCG Scheme is to facilitate the import of capital
goods/machinery for producing quality goods and services and enhance India’s
manufacturing competitiveness.
Under the EPCG Scheme, Manufacturer exporter or a merchant exporter tied with a
supporting manufacturer can import capital goods/machinery required for pre-
production, production & post-production of export goods at 0% duty.
Application to get an EPCG License must be made to the jurisdictional DGFT office.
The Service exporters earning in foreign currencies are also eligible to apply for an
EPCG License. Various service exporters can take the benefit of the EPCG scheme to
reduce capital costs. Service Exporters like Hotels, Travel & Tour Operators, Taxi
Operators, Logistics Companies, Construction Companies can utilize the EPCG Scheme
by importing capital goods/equipment at 0% duty.
EPCG scheme comes with an export obligation. The obligation is to export
goods/services worth 6 times the duty saved value in a period of 6 years from the
License issue date.

Star Export Houses

CONTD..
Star export house holders / Status holders are eligible for certain privileges like faster
customs clearances, exemption from compulsory negotiation of documents through
banks, exemption from furnishing bank guarantee required for various export
promotion schemes, it also helps to get GR Waiver, preference in the payment of
Import duties., etc. among a lot of other benefits.
An application to get the star export house category for your company has to be
made to the jurisdictional DGFT office.

NIRVIK SCHEME
NIRVIK Scheme
The Export Credit Guarantee Corporation of India (ECGC) has introduced the NIRVIK
Scheme which provides higher insurance cover, reduced premium for small exporters,
and a simplified claim settlement process.
It is primarily an insurance cover guarantee scheme that provides a cover of up to
90% of principal and interest as against the current credit guarantee of only up to
60% loss. The cover will include both the pre and post-shipment export credit.
This scheme will ensure that the foreign and rupee credit interest rates will stay
below 4% & 8% respectively.
This scheme is implemented by the Export Credit Guarantee Corporation of India
(ECGC Ltd); which is wholly owned by the Ministry of Commerce and Industry.

IES
Interest Equalization scheme (IES)
IES which is also known as an Interest subvention scheme was introduced in April
2015, to provide pre and post-shipment export credit to exporters in rupees.
The Scheme provides 5% Interest support to all manufacturers in the MSME Sector
and 3% support to all exporters (including Merchant exporters and large-scale
industries) in respect of only the identified 416 tariff lines.
This scheme is implemented and governed by the RBI & respective Banks.
Banks pass on the benefit of reduced interest directly to the exporters and then claim
a reimbursement from the RBI.

MAI Scheme
Market Access Initiative (MAI Scheme)
The new Market Access Initiative (MAI Scheme) was launched on 16th February 2018.
The objective of this scheme is to play a catalytic role in promoting exports from India
by exploring new markets and supporting all the export promotion activities in the
new markets.
The scope of the scheme is to provide financial support to eligible agencies for
undertaking market access initiatives like direct/indirect marketing, market research,
promotion & branding in new markets, and taking care of statutory compliance costs
in the importing country.
The eligible agencies include all the Export Promotion Councils, Commodity boards,
registered trade promotion organizations, recognized associations, individual
exporters (only where specified), national institutions like IIT’s, IIM’s, etc.

Test on International Trade
1.For each of the following, specify whether the foreign direct investment is horizontal
or vertical; in addition, describe whether that investment represents an FDI inflow or
outflow from the countries that are mentioned. (2)
a. Vodafone (a U.K.-based company) plans to improve its network and services in

Romania after the results in this market lagged behind other countries.
b. General Electric (an American company) buys Alstom (another American company)
energy assets.
c. Exxon (an American company) plans the construction of a new, but delayed coker unit
in Belgium.
d. PetroChina (a Chinese company) plans to invest in global oil and natural gas
assets in a venture in Western Australia.

Contd..
2.What is a Trade Bloc? Discuss the different levels of trade blocs. 2
3.Discuss seven Incoterms used for any mode of transport. 2

Case Study (4 marks)

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PGDM SEMESTER III

Subject Name: International Trade and Policy

Prof. Dr Sandeep Surange

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International Trade refers to the exchange of capital ,goods

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1) INTERNATIONAL TRADE field is concerned with the issues facing international

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• IKEA is the producer of household furnitures and

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IKEA revenues stand at an astounding 42 billion euros as on 2022

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Criteria International Domestic

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Tariff Barriers Yes No

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Law Varied One

Technology Significant No variation

Business Varied Uniform

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• Mercantilism (mid-16th century) suggests that

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• The product life-cycle theory - as products mature both the location of

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– new trade theory emerged in the 1980s

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Example: Germany’s Luxury Car Manufacturing Industry

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• Success occurs where these attributes exist.

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• More likely to lead to competitive advantage.

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• Demand creates the capabilities.

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• Creates clusters of supporting industries that