I.
Introduction to Foreign Trade Policy (FTP)
• International trade is crucial for economic growth, allowing nations to specialize and consume more
than they could produce independently.
• The Foreign Trade Policy (FTP) is a set of guidelines by the Central Government for exports and
imports, aiming to stimulate economic activity and earn foreign exchange.
• The FTP was previously called the Export Import (EXIM) policy, but now covers more areas beyond just
exports and imports.
• The FTP is updated annually, with additional changes made throughout the year.
• The FTP aims to develop export potential, improve export performance, encourage foreign
trade, and create a favorable balance of payments.
II. Legislation and Administration
• The Ministry of Commerce and Industry governs foreign trade in India.
• The Foreign Trade (Development & Regulation) Act, 1992 [FT(D&R) Act] is the main legislation
concerning foreign trade.
• The Central Government formulates and amends the export and import policy, and appoints a Director
General of Foreign Trade (DGFT).
• The DGFT formulates, controls and supervises the FTP and issues import/export authorizations.
• The DGFT also grants Importer Exporter Code (IEC) numbers, which are required for import and
export, unless specifically exempted.
• The Central Board of Indirect Taxes and Customs (CBIC) facilitates FTP implementation, specifically
regarding customs and GST.
• The Reserve Bank of India (RBI) formulates policies related to foreign exchange management.
• A Policy Interpretation Committee (PIC) may be constituted to advise DGFT.
• DGFT can grant exemptions from FTP provisions in public interest.
• The Settlement Commission can settle matters of default in export obligations.
III. Salient Features of FTP
• Export-import of goods and services is generally free unless specifically regulated.
• Goods are categorized as Free, Restricted, or Prohibited for import and export.
• Some goods can be traded only through State Trading Enterprises (STE).
• Restrictions exist on exports and imports for strategic, health, defense, and environmental
reasons.
• Exports are promoted through various schemes, with indirect taxes on exports exempted or refunded.
• Capital goods can be imported at NIL duty for exports under the EPCG scheme.
• Special schemes like EOU/SEZ avoid taxes at every stage for units that export all their
production.
• Imports can receive duty exemptions for special purposes, with domestic supplies treated as
deemed exports to aid competition.
IV. WTO Provisions
• India is a member of the World Trade Organization (WTO).
• WTO guidelines include:
o Trade without discrimination
o Predictable and growing market access
o Promoting fair competition
o Encouraging development and economic reforms
• WTO promotes free trade by lowering tariffs and removing import restrictions.
• WTO discourages direct export incentives, but allows for tax exemptions on exported goods and
services.
V. Contents of the FTP
• The FTP 2023 has 11 chapters outlining basic policy.
• The Handbook of Procedures 2023 (HBP 2023) details procedural aspects of the policy.
• The Indian Trade Classification Code based on Harmonized System of Coding [ITC(HS)] classifies
export and import items.
o Schedule I (Import Policy) and Schedule II (Export Policy) of ITC(HS) describe the rules and
regulations related to imports and exports, respectively.
• The FTP is closely linked with Customs, GST laws, but FTP provisions do not override tax laws.
VI. Scope of FTP
• The FTP covers policies and regulations related to legal framework, imports/exports, export hubs, duty
exemptions, EPCG, EOU/EHTP/STP/BTP, deemed exports, trade disputes, digital economy, SCOMET, and
definitions.
• Provisions for Special Economic Zones (SEZ) are in a separate act but closely related to the FTP.
VII. Trade Facilitation and Ease of Doing Business
• India ratified the WTO’s Trade Facilitation Agreement (TFA), focusing on implementing trade
facilitation measures.
• The National Committee on Trade Facilitation (NCTF) facilitates coordination and implementation of
TFA provisions.
• Key measures include a reduction in transaction costs, a paperless regulatory environment and improved
infrastructure.
• DGFT implements the Niryat Bandhu Scheme for mentoring new exporters.
• The DGFT online customer portal provides information and online facilities for various processes.
• The Authorized Economic Operator (AEO) program provides benefits to businesses compliant with supply
chain security standards.
• Towns of Export Excellence (TEE) receive targeted support to maximize their export competitiveness.
• Status Holders, recognized for their contributions to foreign trade, receive privileges and are expected to
mentor new entrepreneurs.
VIII. Other Miscellaneous Provisions
• Districts as Export Hubs: focus on promoting products and services with export potential in each
district.
• Quality Complaints and Trade Disputes: a mechanism is in place to resolve disputes between foreign
buyers and Indian exporters/importers.
• SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies): export of dual-
use items is regulated under FTP.
IX. Provisions Regarding Imports and Exports
• It is important to check if a specific item is 'free,' 'restricted,' or 'prohibited' for import or export before a
transaction.
• Imported goods must comply with domestic laws, unless exempted.
• ITC(HS) specifies the import/export policies for all goods.
• State Trading Enterprises (STEs) handle certain goods for import/export.
• Importer-Exporter Code (IEC) is mandatory for import/export, unless specifically exempted.
• Mandatory documents for export include Bill of Lading, Commercial Invoice, and Shipping Bill.
• Mandatory documents for import include Bill of Lading, Commercial Invoice, and Bill of Entry.
• Penal action can be taken for violations.
• A firm can be placed on a Denied Entity List (DEL) for certain violations.
• "Actual User" condition may apply for import of certain goods.
• Import of samples is allowed without authorization, with certain exceptions.
• Import of gifts is generally prohibited, with exceptions such as "rakhi" and life-saving medicines.
• Certain goods may be imported as part of passenger baggage without authorization.
• Re-import of repaired goods is allowed without authorization.
• Second-hand goods have specific import policies.
• Inputs imported under Advance Authorisation/EOU/SEZ are enabled without compliance to mandatory
Quality Control Orders (QCO) under certain conditions.
• Merchanting trade, involving shipment of goods between foreign countries without touching Indian ports,
is permitted under RBI guidelines.
• Goods can be exported without restriction unless regulated by ITC(HS).
• Third party exports are allowed.
• Samples and gifts may be exported under specific conditions.
• Goods can be imported for export with certain requirements.
• Export contracts can be in Indian rupees or freely convertible currency, but proceeds should generally be
realized in freely convertible currency.
• Export Promotion Councils (EPCs) promote Indian exports.
• Self-certification of the origin of goods is enabled for 'approved exporters'.
X. Export Promotion Schemes
• Duty Exemption and Remission Schemes are most important, allowing duty-free import of inputs for
export production.
o Duty Exemption Schemes:
▪ Advance Authorisation Scheme: Enables duty-free import of inputs for export
production.
▪ Can be issued to manufacturer exporters or merchant exporters tied to supporting
manufacturers.
▪ Issued based on Standard Input Output Norms (SION) or self-declaration.
▪ Subject to pre-import condition.
▪ Minimum value addition of 15% required.
▪ Exempted from multiple duties.
▪ Subject to “Actual User” condition.
▪ Duty-Free Import Authorisation Scheme (DFIA): Allows duty-free import of inputs
and oil/catalyst for export production, based on notified SION.
▪ Exempted only from Basic Customs Duty.
▪ Minimum value addition of 20% required.
▪ Transferable.
o Duty Remission Schemes:
▪ Duty Drawback (DBK): Customs duty paid on inputs is given back to the exporter.
▪ Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP): Aims
to refund duties and taxes on exported products not refunded under other provisions.
▪ Rebate issued as transferable duty credit.
• Export Promotion Capital Goods (EPCG) Scheme: Allows import of capital goods at zero customs
duty, with export obligation.
o Subject to an export obligation of 6 times the duty saved.
• Export Oriented Units (EOU), Electronics Hardware Technology Parks (EHTP), Software
Technology Parks (STP) and Bio-Technology Parks (BTP): Units that export their entire production
can be set up under these schemes.
o May import and procure all types of goods for their activities, without payment of certain duties.
• Deemed Exports: Domestic supplies to certain projects/entities are treated as exports to provide a level
playing field.
o Includes supplies to domestic entities that can import duty free, projects involving international
competitive bidding, and infrastructure projects.
