Foreign Trade and India

Ancient maritime trading nation

Bay of Bengal was once known as
CHOLA LAKE
Exports touch $165 billion in 2008-09
India is among the top ten in services
exports
The export basket

Laws to note

The foreign trade ( development and

regulation ) Act
The Foreign Trade Policy 2004-09
The FEMA 2000
RBI Regulations
The Customs Act
The Central excise Act

Steps in Exporting

A business organization
Manufacturer exporter
Merchant exporter
Agent/ intermediary
Service provider
Product selection
Procurement of order

Essentials of export
contract

Product, standards & specification

Quantity
Inspection
Value
Terms of delivery
Taxes, duties and charges
Period of shipment

Export contract contd.

Packing, labeling,marking
Terms of payment- Amount.mode &
currency
Discounts and commissions
Licences and Permits
Insurance
Documentary requirements
Guarantee

Export contract contd

Force majeure
Remedies
Arbitration
The case of Dalmia & Arun Jain of
Polaris

Incoterms

EXW Ex works
FCA--- Free Carrier
FAS---- Free alongside ship
FOB---- Free on board
C&F----- Cost and freight
CIF----- cost ,insurance and freight
CPT Carriage paid to
CIP---- Carriage and insurance paid to

Incoterms contd-----

DAF delivered at frontier

DES--- delivered EX ship
DDU--- delivered duty unpaid
DDP---- delivered duty paid
DEQ delivered ex quay

Risks in International trade

Credit risk
Currency risk
Carriage risk
Country risk
Voyage risk

Export registration

IEC with DGFT

PAN
Bank account
Appointment of agents
Export licenses
Customs registration
Registration with export promotion
councils

Export inspection

IPQC In process quality control

ISI, AGMARK
Fumigation
ISO- 9000 & ISO 14000
EIA
SA- 8000
Global compact

Currency management

Understanding currency fluctuations

Invoicing currency
Forward contract
Hedging
Repatriation
EEFC

Reading FTP

The policy
The handbook of procedures
The ITC- HSN classification
Export licenses
Import licenses
OGL
State Trading

Customs procedureexport

Exporter
Person in charge of conveyance
Bill of lading
Export general manifest
Shipping bill, packing list,ARE etc
Stuffing/ examination/ sealing
Self- sealing/ self- certification

Customs procedure
contd---

Importance of ICD/CFS/
Customs bonded warehouse
Green channel for exporters
Assessment
New concept of Transaction value

Customs import procedure

Importer
Person in charge of conveyance
Bill of entry
Import general manifest
Assessment
EDI
RMS

Central excise export

procedure

Exports are free of duty

Bond clearances
Rebate clearances
ARE 1
ARE 2
UT1
Proof of export
Sealing of container

Export promotion schemes

Section 65 of customs Act

Advance authorization / DFIAS
Export promotion capital goods
DEPB
Drawback
EOU
SEZ

EOU

Minimum investment of INR 10 million

300 warehousing districts as location
Nearly 3000 units in existence
New or conversion from DTA
Manufacturing & services covered
Trading units are not permitted

EOU contd------

Widest definition of manufacture

Single B 17 Bond
Duty-free import of raw materials and
inputs and similar sourcing of inputs
and capital items from DTA
NFE= A B = 0 +
EO over 5 years

EOU contd----

Can subcontract part of production to DTA

Can sell upto 50% of production in DTA
Can sell to other EOU/ BTP/ EHTP/STP/SEZ
and count against EO
Exempt from state trading and SSI
reservation restrictions
100% EEFC retention

EOU contd----

Clubbing of exports with exports of

parent company for export house
status
CST exemption
PC and CT3 procedure
Self sealing
Green channel clearance on import

Drawback

Recouping of duties of customs and

central excise and service taxes
All industry rates
Brand rate
Special brand rate
Post export documentation

EPCG

Import of capital goods at concessional

customs duty
EO is 8 times the duty saved in 8 years
12 years for SSI holders and licenses for
INR1000million
Covers manufacturer exporters or
merchant exporters with supporting
manufacturers

EPCG contd----

Direct as well as third party exports

allowed
Shipments under Advance authorization
DFIAS , DEPB & draw back will count for
fulfillment of EO
Physical exports required but certain
deemed exports allowed
Clubbing of licenses allowed

Advance authorization

Duty free import of inputs

Fuel, oil and energy are also allowed to
be imported
SION norms
Ad hoc SION permitted
Positive value addition
Issued for annual requirement also

Advance authorization
contd-

Advance release order/ Invalidation

Supplies to SEZ counted
Actual user condition
Disposal of imported items after
meeting EO
License transferable after meeting
EO and with the permission of DGFT

DEPB

Duty free post export remission scheme

SION norms
Ad hoc SION norms permitted
Schedule of rates
Can be used to pay for import duties
Transferable scrip
Scheme valid upto March 2009

SEZ

Exclusive geography
Duty free enclave
Sales to DTA permitted
Special concessions for promoters
Positive EO is required
Customs duty, excise duty, service tax and
VAT & CST are exempt on supplies to SEZ
units

High Tech products promotion

scheme

Appendix 37E goods

Duty free scrip equal to 10%
incremental export growth
Ceiling of INR 150 million
Some exports not counted
Scrip freely transferable

Focus products scheme

Goods notified in appendix 37D

Some exports not counted
Duty credit scrip equal to 1.25% of
FOB value of exports for each year
Scrip transferable

Focus markets scheme

Notified as per Appendix 37C

Duty credit scrip of 2.5% on the FOB
value of exports achieved
Certain exports not allowed
Scrip transferable

Deemed Exports

The concept of deemed exports

Covers supply of goods against:
Advance authorization/ DFIAS
EOU/ STP/EHTP/BTP
EPCG
Projects under International
competitive bidding procedure

Deemed exports contd----

Projects approved by ministry of finance

Supplies of capital stock to fertilizer plants
Supplies of goods to Refineries and power
projects
Supplies of goods to UN- funded projects
Supplies of goods to Nuclear power
projects thro competitive bidding

Benefits to deemed
exports

Advance authorization / DFIAS

Deemed duty drawback
Exemption from terminal excise duty
if supplies are against International
competitive bidding
In other cases refund of terminal
excise duty paid will be given

Served from India scheme

To promote served from India image

Appendix 10
Minimum previous year exports of
INR1 million
10% duty credit scrip
Scrip transferable within corporate
group and not otherwise

Status Holders under the

FTP

Export House
Rs 20 crores
Star export House Rs 100 crores
Trading House
Rs 500 crores
Star Trading House Rs 2500 crores
Premier Trading House Rs 10000
crores
Benefits allowed to status holders

Excise export concessions

Export without payment of duty

Export under claim for duty
Procurement of excisable goods for
export production without payment
of duty
Drawback
Concessional notifications

Service tax concessions

Drawback
Its limitations
ASTR 1
ASTR 2
Clearances to SEZ exempt
Refund of service tax paid on export
related input services

WTO/ GATT

International Treaty
Governing Principles
MFN
Non discrimination
National treatment
Reduction of tariffs
Elimination of Non tariff barriers

Free Trade Agreements

NAFTA
EU
MECOSUR
ASEAN
SAFTA
Indian agreements with Sri Lanka,
Thailand and Singapore
Implications of FTAs

Importance of Ports in
International Trade

70% of international trade is over the seas

For India, it is 90%
Trade through Air is comparatively very
expensive and cannot become a common
preference, and is unsuited for heavy,
large cargo
Many coastal states possess a number of
ports

Ports in India

India has 12 major ports and more than

180 lesser ones
India has a coastline of nearly 6000 KMs
All ports of India together handled 519
million tons of cargo during the fiscal
year ended March 2008
Growth rate of 12%

Problems of Indian Ports

Limited land area

Industries located in hinterland
Low channel draft
Too many players
Inadequate deployment of skill and
technology
Lack of coordinated approach

Requirements of modern
World class port

Skill Intensive
Technology driven, minimal paper work
Port is the best when its an industrial
complex by itself
Quay cranes
Crane productivity
Fully automated terminals with good quay
length

Port stake holders in India

Customs
Port Trusts
Port Health Organization
Plant Quarantine
Immigration
Terminal operator
Vessel operating agent

continued

Steamer agent / Mainline operator

Container operating agent ( NVOCC,
VOCC )
Stevedore
CHA / Exporters / Importers
Transport operators
CFS / ICD
Security agencies / External players

A comparison

Factor

Terminals
3
Vessels per
terminal
9
Quay length 600 m
Total area
133 ha

JNPT

SINGAPORE PORT
4
41
11,754 m
425 ha

continued

Factor

Total no of quay
cranes
8
Crane moves
per hour
20 25
Crane rate per hour 60 -70

JNPT

SINGAPORE

131
25 -30
100

continued

All Indian ports in 2005 -06 together

handled cargo of 423.3 million tons
Singapore port in the same period handled
423 million tons of cargo
Transaction costs at Indian ports are 10 %
Transaction costs in leading ports are 6 %
The transaction costs at Indian ports are in
money terms - $ 12 billion per annum

Dwell time at Indian ports as

on 2005 - 06

Cargo type

As on 2005-06
export import

expected
exp
imp

Dry bulk
Break Bulk
Containers

3.57
6.6
3.78

1.7
3.3
1.5

3.23
5.62
1.88

1.6
1.5
1.00