FOREIGN TRADE POLICY

2. U
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E P
R O
S
T L
A I
N C
D
I Y
N
G

3. Understanding Policy
q Foreign Trade Policy :
§ Drafted by Director General of Foreign Trade under the Ministry
of Commerce. The governing Act is Foreign Trade Development
Regulation Act, 1992 and Rules framed there under.
§ Implemented with the help of various other Departments
mainly Customs, Excise and RBI.
§ In order to understand the co-relation, one must get familiar
with the various laws and functions of various departments.
§ As far as implementation is concerned, the co-relation of
Foreign Trade Policy with the following Acts, Laws and
Regulations must be taken into account :

4. Understanding Policy
§ Customs Act, 1962
§ Customs Tariff Act, 1975
§ Foreign Exchange Management Act, 1999
§ Central Excise Act, 1944
§ Central Excise Tariff Act, 1985
§ Industrial Policy Resolution, 1956.
§ Industries Development and Regulation Act, 1951
§ Laws of Weights and Measures
All the above Laws are primarily taken into account at the
time of actual implementation of export/import activities.
Physical movement of goods inward and outward is
monitored mainly by Customs and Excise Field Formations
which work under Department of Revenue [DoR], Ministry of
Finance [MoF].

5. Ministry of Finance
Dept. of Revenue
Customs Excise
Coverage Coverage
Validity of imports and exports Export
Assessment and valuation Under bond – clearance of
excisable goods for export under
bond
Determination of import / Rebate of excise duty post exports
export duty applicable where exports have been effected
after payment of excise duty
Collection of duty Monitoring factory stuffed
containers in certain cases
Inspection and supervision Import C
of cargo o
n
Examining co-relation Monitoring CENVAT t
and compliance with other laws d…

6. Continued from the previous slide
Governing Acts/Laws/Manual Governing Acts/Laws/Manual
1. Customs Act, 1962 1. Central Excise Act, 1944
2. Customs Tariff Act, 1975 2. Central Excise Tariff Act, 1985
3. Customs Law Manual 3. Central Excise Law Manual
Tools : i) Notifications Tools : i) Notifications
ii) Public Notices ii) Central Excise Circulars
iii) Customs Circular iii) General Exemption
iv) General Exemption Notifications
Notifications

7. Understanding Policy
q Export or import involves movement of goods as well as
receipt/remittance of foreign exchange.
q Though foreign exchange regulations are relaxed,
monitoring of forex operations is still being carried out
by Reserve Bank of India.

8. RBI
Coverage
Monitoring Foreign Exchange
Inflow – on account of exports of goods and services
Outflow – on account of imports of goods and services
Governing Acts/Laws/Manual
1) Foreign Exchange Management Act 1999
2) Foreign Exchange Manual
Tools:
Master Circulars
FEMA Notifications
A.P. (DIR. Srs.) Circulars

9. In order to understand full implications of
Foreign Trade Policy one must get oneself
familiarized with all the above mentioned
departments and their working

10. O
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11. DGFT
Addl. DGFT Export Commissioner
Zonal Jt. DGFT & Zonal Jt. DGFT & Zonal Jt. DGFT & Zonal Jt. DGFT &
Addl. Export Addl. Export Addl. Export Addl. Export
Commissioner, Commissioner, Commissioner, Commissioner,
Delhi Mumbai Chennai Kolkata
Jt. DGFT Jt. DGFT Jt. DGFT Jt. DGFT
(Pune) (Ahmedabad) (Vadodara) (Rajkot)
Dy. DG Dy. DG Dy. DG Dy. DG
Asst. DG Asst. DG Asst. DG Asst. DG
FTDO FTDO FTDO FTDO
Staff Staff Staff Staff

12. The Law

13. The Law
q FOREIGN TRADE (DEVELOPMENT & REGULATION)
ACT, 1992
§ Foreign Trade Policy is formulated under Foreign Trade
(Development & Regulation) Act, 1992.
§ This Act is to provide for the development and regulation of
foreign trade by
• facilitating imports
• augmenting exports
and
• for matters connected therewith or incidental thereto.

14. The Law
§ The Central Government can appoint any person to be the
Director General of Foreign Trade [DGFT]
§ DGFT shall advise the Central Government in the formulation
of the export and import policy
§ DGFT shall be responsible for carrying out the announced
policy.
§ This Act is more like a facilitating measure than a regulatory
one.

15. The Law
§ It encompasses provisions like
• Power of Central Government to make orders and
announce Export and Import Policy,
• Importer-Exporter code
• Cancellation and Suspension of IE code and Licences issued
by the Director General of Foreign Trade,
• Search, Seizure, Penalty and Confiscation,
• Appeal and Revision, etc.
The details of the Act are given in Appendix 38A of Handbook of
Procedures (Vol.I)

16. The Law
§ Subsequently Foreign Trade (Regulation) Rules, 1993 were
issued. The Rules contain the following provisions:
• Definitions of charitable purpose, licensing authority, etc.
• Grant of special licence
• Application for grant of licence
• Fee
• Conditions of licence
• Refusal of licence
• Amendment of licence
• Suspension of a licence
• Cancellation of a licence

17. The Law
• Declaration as to value and quality of imported goods
• Declaration as to Importer-exporter code number
• Utilization of imported goods
• Prohibition regarding making, signing of any declaration,
statement or documents
• Power to enter premises and inspect, search and seize
goods, documents, things and conveyances
• Settlement
• Confiscation and redemption
• Confiscation of conveyance
Full details are given in Appendix 38C of Handbook of
Procedures (Vol.I)

19. Structure of Foreign Trade Policy
q Foreign Trade policy consists of 5 books, which are as
under:
a. Foreign Trade Policy [FTP]
b. Handbook of Procedures Vol. I [HBPv1]
c. Handbook of Procedures Vol. II [HBPv2]
d. ITC (HS) Classification of Export and Import items
e. Schedule of DEPB rates
q FTP contains basic provisions, whereas HBPv1 contains
procedural details.
q HBPv2, ITC (HS) Classification and schedule of DEPB
rates are reference books

20. Structure of Foreign Trade Policy
q Foreign Trade Policy covers the basic provisions of import
and export of goods and services.
The policy consists of the following chapters :
1 – Preamble
1A- Legal Framework
1B- Special Focus Initiatives
1C- Board of Trade
2 – General Provisions regarding Imports and
Exports
3 – Promotional Measures

21. Structure of Foreign Trade Policy
4 – Duty Exemption / Remission Scheme
5 - Export Promotion Capital Goods Scheme
6 – Export Oriented Units (EOUs), Electronics Hardware Technology
Parks (EHTPs), Software Technology Parks (STPs) and Bio-
Technology Parks (BTPs)
7 – Special Economic Zones **
7A- Free Trade and Warehousing Zones **
8 – Deemed Exports
9 – Definitions
**[The policies relating to Special Economic Zones and Free Trade
and Warehousing Zones are governed by SEZ Act 2005, and the
Rules framed thereunder and hence they now stand deleted from
the Policy]

22. Structure of Foreign Trade Policy
q Handbook of Procedures Vol. I covers detailed
procedures with respect to import of items for domestic
markets and various export promotion schemes. It also
covers miscellaneous matters.
1 – Introduction
2 – General Provisions regarding Exports and Imports
3 – Promotional Measures
4 – Duty Exemption / Remission Scheme
5 – Export Promotion Capital Goods Scheme

23. Structure of Foreign Trade Policy
6 – Export Oriented Units (EOUs), Electronics Hardware
Technology Parks (EHTPs), Software Technology Parks
(STPs) and Bio-Technology Parks (BTPs)
7 – Special Economic Zones **
8 – Deemed Exports
9 – Miscellaneous Matters
**[The procedures relating to Special Economic Zones
are contained in Special Economic Zone Rules, 2006 and
hence now stand deleted from Handbook]

24. Structure of Foreign Trade Policy
q What is ITC (HS) Classification of Export and Import
items:
§ The Harmonized Commodity Description and Coding Systems
generally referred to as "Harmonized System" or simply "HS" is a
multipurpose international product nomenclature developed by
the World Customs Organization (WCO).
§ It comprises about 5,000 commodity groups; each identified by
a 6 digit code, arranged in a legal and logical structure and is
supported by well-defined rules to achieve uniform
classification.
§ The system is used by more than 200 countries and economies
as a basis for their Customs tariffs and for the collection of
international trade statistics. Over 98 % of the merchandise in
international trade is classified in terms of the HS.

25. Structure of Foreign Trade Policy
§ The HS is thus a universal economic language and
code for goods, and an indispensable tool for
international trade.
§ The Harmonized System is governed by "The
International Convention on the Harmonized
Commodity Description and Coding System".
q Classification System in India:
§ Indian product classification system is based on
World Customs Organization’s [WCO] Harmonized
System, and this system is known as ‘Indian Trade
Classification based on Harmonized System [ITC
(HS)].

26. Structure of Foreign Trade Policy
q ITC (HS) Classification of Export and Import items
§ 8 digit code
§ Total chapters – 1 to 98
§ Classification System
HS Code System provides classification for products of particular
class from primary forms to finished forms, i.e. from raw
materials to consumer goods.

27. Structure of Foreign Trade Policy
§ Importability and Exportability of products
HS code helps us to understand the importability/exportability
of the item. It is decided with the help of following four
categories:
• Prohibited – Not permitted to be imported or exported
• Restricted – Imports or exports subject to licensing or
stipulated conditions
• Items subject to State Trading Enterprises [STEs] –
imported/exported exclusively through specific agency]
• Freely permissible – without any restriction [earlier was
known as OGL]

28. Structure of Foreign Trade Policy
§ Examples for Importability
EXIM CODE ITEM DESCRIPTION POLICY
3902 Polymers of propylene or of other
olefins, in primary forms
3902 10 00 Polypropylene Free
3917 Tubes, pipes and hoses, and fittings
(for example, joints, elbows,
flanges), of plastics
3917 22 00 Of polymers of propylene Free
3923 Articles for the conveyance or packing
of goods of plastics-
Sacks and bags (including cones)
3923 21 00 Of polymers of ethylene Free

29. Structure of Foreign Trade Policy
§ In respect of exports following examples are
noteworthy.
§ Extract of Schedule II of ITC (HS) Classification,
Export Policy, Table – B.
Sl. Tariff Items Unit Item Export Name of
No. HS Code Description Policy restriction
37 0505 90 10 kg Peacock Tail Prohibited Not
Feathers permitted
to be
exported

30. Structure of Foreign Trade Policy
Extract of Schedule II of ITC (HS) Classification,
Export Policy, Table – B.
Sl. Tariff Items Unit Item Export Name of
No. HS Code Description Policy restriction
49 1001 90 10 Kg Wheat Seeds Restricted Exports
(wild variety) permitted
under
Licence
73 2601 11 00 Kg Iron ore other STE Export
than those through
specified MMTC
under Free Limited
Category

31. Structure of Foreign Trade Policy
§ Using the same code one can find Customs and
Excise Duties by referring to Customs Tariff and
Excise Tariff. For e.g.
Customs Tariff
EXIM ITEM BCD CVD SPL. CVD TOTAL
CODE DESCRIPTION [incl EC [incl EC
& SHEC] & SHEC]
3902 Polypropylene 7.5% 8.24% 4% 21.523%
10 00
EC- Education Cess @2%
SHEC – Secondary and Higher Education @1%

32. Structure of Foreign Trade Policy
Excise Tariff
EXIM CODE ITEM DESCRIPTION Rate of Duty
3902 10 00 Polypropylene 8%
{Add: EC- Education Cess @2% and SHEC – Secondary and
Higher Education @1%}
§ One should read General Notes, Section Notes,
Chapter Notes and Case Laws for further
information in case of doubt.

33. Structure of Foreign Trade Policy
q Handbook of Procedures Vol. II
and
q Schedule of DEPB rates
will be discussed later along with Chapter 4-Duty
Exemption/Remission Schemes

34. Government’s Objectives and
Strategies for FTP 2009-14

35. Objectives
q The short term objective
§ to arrest and reverse the declining trend of exports
§ to provide additional support especially to those sectors which
have been hit badly by recession in the developed world.
§ to set a policy objective of achieving an annual export growth
of 15% with an annual export target of US$ 200 billion by March
2011.
§ In the remaining three years of this FTP i.e. upto 2014, the
country should be able to come back on the high export growth
path of around 25% per annum.
§ By 2014, we expect to double India’s exports of goods and
services.
q The long term objective
§ to double India’s share in global trade by 2020.

36. Strategies
q The objectives are proposed to be met by adopting the
following strategies:
§ the Government would follow a mix of policy measures
including fiscal incentives, institutional changes, procedural
rationalization, enhanced market access across the world and
diversification of export markets.
§ Improvement in infrastructure related to exports; bringing
down transaction costs, and providing full refund of all indirect
taxes and levies, would be the three pillars, which will support
us to achieve this target.
§ Endeavour will be made to see that the Goods and Services Tax
rebates all indirect taxes and levies on exports.

37. Glossary commonly used
ANF Aayaat Niryaat Form EO Export Obligation
BG Bank Guarantee EOP Export Obligation Period
BRC Bank Realisation Certificate EPC Export Promotion Council
CCP Customs Clearance Permit EPCG Export Promotion Capital
CIF Cost, Insurance & Freight Goods
CVD Countervailing Duty FIEO Federation of Indian Export
Organisation
DGFT Director General of Foreign
Trade FIRC Foreign Exchange Inward
Remittance Certificate
DoC Department of Commerce
FOB Free On Board
DoR Department of Revenue
FT Act Foreign Trade
EDI Electronic Data Interchange (D&R) (Development & Regulation)
EFC Exim Facilitation Act, 1992 (No. 22 of 1992)
Committee
EFT Electronic Fund Transfer

38. Glossary commonly used
ITC (HS) Indian Trade Classification (Harmonised System) Classification
for Export & Import Items, 2004-2009
LUT Legal Under Taking
MAI Market Access Initiative
MDA Market Development Assistance
NC Norms Committee
RA Regional Authority
SEZ Special Economic Zone
SION Standard Input Output Norms
TEE Towns of Export Excellence

39. Important Provisions-
Chapter-wise

40. Chapter 1A-Legal
Framework

41. Chapter 1A – Legal Framework
q Para 1.2 - Duration
27th August, 2009 upto 31st March, 2014
q Para 1.3 – Amendments
Central Government reserves right in public interest to
make any amendments by notification to FTP in
exercise of powers conferred by Section 5 of FT(D&R)
Act.
q Para 1.4 – Transitional Arrangements

42. Chapter 1B- Special
Focus Initiatives

43. Chapter 1B – Special Focus
Initiatives
q Para 1B.1
With a view to continuously increase percentage share of global
trade and expanding employment opportunities, certain special
focus initiatives have been identified/continued for
§ Market Diversification,
§ Technological Upgradation,
§ Support to status holders,
§ Agriculture,
§ Handlooms,
§ Handicraft,
§ Gems & Jewellery,
§ Leather,
§ Marine,
§ Electronics and IT Hardware manufacturing Industries,
§ Green products,
§ Exports of products from North-East,
§ Sports Goods and
§ Toys sectors.

44. Chapter 1C-Board of
Trade

45. Chapter 1C – Board of Trade
q Board of Trade [BoT]
§ To advise the Government on Policy measures;
§ To review export performance of various sectors;
§ To examine the existing institutional framework for imports & exports
and suggest practical measures;
§ To review the policy instruments and procedures for imports &
exports;
§ To examine issues which are considered relevant for promotion of
India’s foreign trade, and to strengthen the international
competitiveness of Indian goods and services; and
§ To commission studies for furtherance of the above objectives.

46. Chapter 2 – General Provisions
regarding Imports and Exports of
Foreign Trade Policy

47. Chapter 2 – FTP
q Para 2.1 – Exports and Imports free unless regulated
q Para 2.2 – Compliance with Laws
Exporter and importer will have to comply with
§ FTDRA, the Rule and Orders made thereunder
§ Terms and Conditions of Licence/ Certificate/ Permission/
Authorisation granted
q Para 2.3 – Interpretation of Policy
§ Questions or doubts arise in respect of interpretation of policy
are to be referred to the DGFT whose decision will be final and
binding.
§ The request can be made as per Appendix 28 of HBPv1.

48. q Para 2.6 - Principles of Restriction
DGFT may, through a notification, adopt and enforce any measure
necessary for:-
i Protection of public morals.
ii Protection of human, animal or plant life or health.
iii Protection of patents, trademarks and copyrights and the prevention
of deceptive practices.
iv Prevention of use of prison labour.
v Protection of national treasures of artistic, historic or archaeological
value.
vi Conservation of exhaustible natural resources.
vii Protection of trade of fissionable material or material from which
they are derived; and
viii Prevention of traffic in arms, ammunition and implements of war.

49. q Para 2.8 - Terms and Conditions of a licence/
Certificate/Permission/Authorisation
Every Authorisation is valid for the period of validity
specified in the Licence/ certificate/ permission and
they contain specified terms and conditions by the
Regional authority which may include:
(a) The quantity, description and value of the goods
(b) Actual User condition;
(c) Export obligation;
(d) The value addition to be achieved; and
(e) Minimum export/import price.

50. q Para 2.9 – Authorisation/Licence/Permission not a
Right
q Para 2.11 – State Trading
§ Any goods, the import or export of which is governed through
exclusive or special privileges granted to State Trading
Enterprise(s), may be imported or exported by the State
Trading Enterprise(s) as specified in the ITC(HS) Book subject
to the conditions specified therein.
§ The State Trading Enterprise(s) can make purchases or sales
involving imports or exports solely in accordance with
commercial considerations, including price, quality,
availability, marketability, transportation and other conditions
of purchase or sale.

51. q Para 2.12 – Importer-Exporter Code Number [IEC]
No export or import can be carried out without Importer
Exporter Code Number unless specifically exempted.
q Para 2.15 – Trade with Russia under Debt-Repayment
Agreement
q Para 2.17A- Scrap/Waste in SEZ
SEZ Unit/ Developer/Co-developer are allowed to dispose off
waste/scrap/remnants [including metallic waste and scrap]
into DTA on payment of applicable duties.

52. q Para 2.18 – Import of Samples
§ As per the HBPv1 provisions
q Para 2.19 – Import of Gifts
Import of freely permissible items as ‘gift’ is
permitted. If the item is not freely permissible
importable item, CCP from DGFT has to be obtained for
importation of the same.

53. q Para 2.24 – Sale on High Seas
q Para 2.25 – Import under Lease Financing
No permission is required from Regional Authority [RA]
q Para 2.26 – Clearance of Goods from Customs
The goods already imported/shipped/arrived, in
advance, but not cleared from Customs may also be
cleared against an Authorisation issued subsequently.

54. q Para 2.27 – Execution of BG/LUT
In order to safeguard the revenue interest, bank
guarantee is insisted upon against the authorisation
§ by customs in case of direct import
or
§ by DGFT in case of local procurement
q Para 2.28 – Private / Public Bonded Warehouses for
Imports

55. q Para 2.34 – Third Party Exports
Allowed.
q Para 2.35 - Export of Imported Goods
Freely permissible imported goods can be exported in
same or substantially same form without Authorisation.
q Para 2.37 – Export of Replacement Goods
Exporter can replace exported goods or parts free of
charge, if found defective / damaged or otherwise
unfit for use, subsequently.

56. q Para 2.38 – Export of Repaired Goods
§ Exported goods or parts can be imported for repairs and re-
exported subsequently.
§ No authorisation for such activity is required.

57. q Para 2.40 – Denomination of Export Contracts
§ Export Contracts and Invoices to be denominated in Freely
Convertible Currency or INR. However, export proceed must
realised in freely convertible currency only.
§ Export proceeds can be realized in rupees provided it is
through a freely convertible Vostro account of a non resident
bank situated in any country other than a member country of
Asian Clearing Union (ACU) or Nepal or Bhutan.
§ Contracts for which payments are received through the Asian
Clearing Union (ACU) shall be denominated in ACU Dollar.
§ Export contracts and Invoices can be denominated in Indian
rupees against EXIM Bank/ Government of India line of credit.

58. q Para 2.43 – Export Promotion Councils
§ The basic objective of Export Promotion Councils is to promote
and develop Indian Exports.
§ Each Council is responsible for the promotion of a particular
group of products, projects and services as mentioned in
Appendix-2 of HBPv1.
q Para 2.44 – Registration-cum-Membership Certificate
[RCMC]
§ Exporters, applying for
(i) an Authorisation to import/ export, [except items listed as
restricted items in ITC(HS)]
or
(ii) any other benefit or concession under this policy
shall be required to furnish Registration-cum-Membership
Certificate (RCMC) granted by the respective Export Promotion
Councils unless specifically exempted under the policy .

59. q Para 2.46 – Regularization of EO default and
settlement of customs duty and interest through
Settlement Commission
Settlement Commission in the Central Board of Excise and Customs
has been empowered
§ To provide assistance to firms who have defaulted under the
Foreign Trade Policy for reasons beyond their control
and
§ To facilitate the merger, acquisition and rehabilitation of sick
units.

60. q Para 2.48.1 - Exemption / Remission of Service Tax in DTA
For all goods and services which are exported from units in
DTA and units in EOU / EHTP / STP / BTP, exemption /
remission of service tax levied and related to exports shall
be allowed
q Para 2.48.2 - Exemption from Service Tax in SEZ
Units in SEZ shall be exempted from service tax.
q Para 2.48.3 - Exemption from Service Tax on Services
received abroad
For all goods and services exported from India, services
received / rendered abroad, wherever possible, shall be
exempted from service tax.

61. q Para 2.49.2 – Grievance Redressal Mechanism
Grievance Redressal Committee was set up on
27.10.2004, for condoning
§ delays,
§ regularizing breaches by exporters in bonafide cases,
§ resolving disputes over entitlements,
§ granting extensions for utilization of Authorisations.

62. Chapter 2 – General Provisions
regarding Exports and Imports of
Handbook of Procedures Vol.I

63. Chapter 2 – HBP
q Para 2.9.3 – Duplicate copy of IEC
In case IEC is lost or misplaced application for duplicate
copy of IEC can be made to the issuing authority along
with an affidavit.
q Para 2.12 – Validity of Import Licence/Certificate/
Authorisation/Permissions/CCPs/Export Licence
The validity of import/export Authorisation from the
date of issue shall be as follows:
contd…….

64. (i) Advance Authorisation / DFIA 24 months
(including Advance Authorisation
for annual requirement, and
Replenishment Authorisation for
Gem & Jewellery as per
Chapter- 4 of FTP)
(ii) For Zero duty EPCG 9 months
a Authorisations (other than
spares)
(ii) For 3% EPCG Authorisations 36 months
b (other than spares)
(iii) EPCG Authorisation for Spares, Co-terminus with EOP of EPCG
refractories, catalyst and Authorisation.
consumables
(iv) Others including CCP and DEPB, 24 months
unless otherwise specified
Contd….

65. (v) Advance Authorisation / 24 months or Co-terminus with
DFIA for deemed export contracted duration of project
(including Advance execution, whichever is later.
Authorisation for annual
requirement)
(vi) Export Licence / 12 months (However, EFC may decide
Authorisation to issue Export Authorisation for a
longer duration in case of R&D studies
based on recommendation of technical
authority)
Where an Authorisation expires during the month, such
Authorisation shall be deemed to be valid until last day of
concerned month.

66. q PARA 2.13 – Revalidation of Import/Export Licence/
Certificate/ Authorisation/ Permissions
§ Import Authorisation can be revalidated on merits,
for a period of six months from date of expiry of
validity.
§ Export Licence may only be revalidated by RA
concerned on recommendation of DGFT for six
months at a time and maximum upto 12 months from
date of expiry of validity.
§ Revalidation of transferable Authorisation and stock
is not permitted.

67. q Para 2.14 – Duplicate Copies of Export-Import
Licence/ Certificate/ Authorisation/ Permissions/CCPs
Where an authorisation is lost or misplaced, an
application for grant of a duplicate copy thereof may
be made along with a copy of an affidavit, as given in
Appendix-24, to the Regional Authority which has
issued the original licence/ certificate/ Authorisation/
permission.
Subject to verification from Customs Authorities,
duplicate copy will be issued by RA.

68. q Para 2.16 – Identity Cards
§ Required for collection of Authorisation and other documents
from DGFT Head Quarters and Regional Authorities.
§ Issued to the Proprietors/Partners/Directors and the authorised
employees of the importers and exporter
§ Application to be made in Appendix-20A.

69. q Para 2.20 – Execution of Bank Guarantee/Legal
Undertaking for Advance Authorisation/DFIA and
EPCG Authorisation
§ Before clearance of goods through Customs,
• Authorisation holder shall execute a BG / LUT with Customs
Authorities, in case of direct import
and
• In case of indigenous sourcing, the BG/LUT is to be
executed with concerned Regional Authority.
§ BG/LUT norms are prescribed under Customs Circular No.
58/2004 dated 31.10.04

70. q Para 2.21 – Certificate of Origin [CoO]
§ Certificate of Origin is important if there are duty concessions
in the importing Country depending on Certificate of Origin.
§ Certificate of Origin is the instrument to establish evidence on
the origin of goods imported into any country.
§ There are two categories of Certificate of Origin viz.
(1) Preferential
and
(2) Non preferential.

71. q Para 2.21.1 – Preferential
§ The preferential arrangement/schemes under which India is
receiving tariff preferences for its exports are
• Generalised System of Preferences (GSP),
• Global System Of Trade Preferences (GSTP),
• SAARC Preferential Trading Agreement (SAPTA),
• Bangkok Agreement [now known as Asia-Pacific Trade
Agreement (APTA)],
• India–Sri Lanka Free Trade Agreement (ISLFTA) and
• Indo- Thailand Free Trade Agreement.
§ These arrangements/ agreements prescribe Rules of origin
which have to be fulfilled for the exports to be eligible for the
tariff preference.

72. q Para 2.21.1 – Preferential
§ Generalised System of Preferences (GSP)
GSP is a non contractual instrument by which industrialized
(developed) countries unilaterally and on the basis of non
reciprocity extend tariff concessions to developing countries.
§ Global System of Trade Preference (GSTP)
• Under the agreement establishing Global System of Trade
Preference (GSTP), tariff concessions are exchanged among
developing countries, who have signed the agreement.
• Presently, there are 46 member countries of GSTP and India
has exchanged tariff concessions with 12 countries on a
limited number of products.
• Export Inspection Council (EIC) is the sole agency authorised
to issue Certificate of Origin under GSTP.

73. q Para 2.21.1 – Preferential
§ SAARC Preferential Trading Agreement (SAPTA)
Cus. Ntfn No. 105/1995 Dtd. 10.08.1995
§ Asia-Pacific Trade Agreement [earlier Bangkok Agreement]
Cus. Ntfn No. 89/2006 Dtd. 01.09.2006
§ India-Sri Lanka Free Trade Agreement (ISLFTA)
Cus. Ntfn Nos. 26/2000 Dtd. 01.03.2000
§ India Afghanistan Preferential Trade Agreement
Cus. Ntfn Nos. 76/2003 Dtd. 13.05.2003
§ Indo – Thailand Framework Agreement for Free Trade Area
Cus. Ntfn Nos. 85/2004 Dtd. 31.08.2004

74. q Para 2.21.2 – Non-Preferential
§ The Government has also nominated certain authorised
agencies to issue Non Preferential Certificate of Origin in
accordance with Article II of International Convention Relating
to Simplification of Customs formalities, 1923.
§ These Certificates of Origin evidence the origin of goods and do
not bestow any right to preferential tariffs.
q Para 2.25.1 - Payment through ECGC cover
§ Payment through ECGC cover would count for benefits under
FTP.

75. q Para 2.25.2 - Payment through General/Private Insurance
§ Amount of Insurance Cover for transit loss by General Insurance
and Private Approved Insurance Companies in India would be
treated as payment realized for exports under various export
promotion schemes.
q PARA 2.25.4 - RBI write-off on export proceeds realization [added
in FTP 2009-14]
§ Realisation of export proceeds shall not be insisted under any of
the Export Promotion Schemes under this Foreign Trade Policy, if
the Reserve Bank of India (RBI) writes off the requirement of
realization of export proceeds on merits and the exporter
produces a certificate from the concerned Foreign Mission of
India about the fact of non-recovery of export proceeds from the
buyer. However, this would not be applicable in self-write off
cases.

76. q Para 2.27-Import/Export of Samples:
§ No authorisation is required for import of bonafide technical
and trade samples of restricted items
§ Duty free import of samples upto Rs. 1,00,000/- for all
exporters except G&J sector. For G&J sector limit is Rs.
300,000.
§ Exports of bonafide trade and technical samples of freely
exportable item are allowed without any limit

77. q Para 2.33-Import of Second Hand Capital Goods
Import of second hand capital goods including
refurbished/reconditioned spares, except those of personal
computers/laptops, shall be allowed freely, subject to specified
conditions.
q Para 2.43 – Transfer of Imported Goods
§ Freely importable goods can be transferred by sale or
otherwise by importer freely.
§ Transfer of imported goods, which are subject to Actual User
condition under the Policy and have become surplus to the
needs of the Actual User, shall be made only with the prior
permission of the Regional Authority concerned.

78. q Para 2.52.1 - Free of Cost Exports
Status holders are entitled to export freely exportable
items on free of cost basis for export promotion
subject to an annual limit of Rs.10 lakh or 2% of
average annual export realisation during preceding
three licensing years whichever is higher.

79. q Para 2.54 - Furnishing of Returns in respect of
Exports in non Physical form
§ All exports made in non physical form by using communication
links including high speed data communication links, internet,
telephone line or any other channel which do not involve
Customs authorities has to be compulsorily reported on
quarterly basis to concerned Export Promotion Council.
§ These provisions shall be applicable to all exporting units
located anywhere in country including those located in STP,
SEZ, EHTP and under 100% EOU scheme.

80. q Para 2.55 - Duty Free Import of R&D Equipment for
Pharmaceuticals and Bio-technology Sector
§ Duty free import of goods (as specified in the list 28 of Customs
notification No.21/2002 dated 1.3.2002, as amended from time
to time) upto 25% of the FOB value of exports during the
preceding licensing year, shall be allowed.
§ In respect of duty free import of R&D equipment, units not
registered with Central excise shall be allowed to give
Installation Certificate issued by an independent Chartered
Engineer.

81. Chapter 3 – Promotional
Measures

82. Promotional measures in the
Department of Commerce [DoC]
Assistance to States
for Infrastructure Market Access Market Development
Development of Initiative [MAI] Assistance [MDA]
Exports [ASIDE]
Financial assistance
Assistance to Financial assistance
for a range of
States for creating for export promotion
export promotion
infrastructure for activities on
activities implemented
development and focus country,
by Export Promotion
growth of exports focus product basis.
Councils [EPCs]

83. Promotional measures in the
Department of Commerce [DoC]
q Under all the above schemes, DoC provide funds to the
State Governments, Export Promotion Councils [EPCs]
and other institutions like India Trade Promotion
Organisation [ITPO] etc. for carrying out export
promotion related activities. As far as EPCs are
concerned, these activities include taking delegations
of exporters to various countries, participation in
international exhibitions and trade shows and
buyer/seller meets.
q Some assistance is also provided to individual exporters
known as MDA to help them market their products to
relatively untapped markets.

84. Recognition of Performance
Export and Trading Towns of Export
Houses [EH/TH] Excellence [TEE]
Towns achieving
prescribed threshold
Status Certificate with
limit of exports
Special Privileges
are accorded as
TEE

85. Export and Trading Houses [EH/TH]
q In order to reward performance by recognition, exporters are
awarded status certificate based on their performance. The
performance criterion is as under:
Status Category Export Performance FOB / FOR
Value
(Rupees in Crores)
Export House (EH) 20
Star Export House (SEH) 100
Trading House (TH) 500
Star Trading House (STH) 2500
Premier Trading House 7500
(PTH)
Performance to be taken cumulatively for preceding
three and current year for qualification

86. Export and Trading Houses
q Eligibility:
§ Merchant as well as Manufacturer Exporters,
§ Export Oriented Units (EOUs),
§ Units located in Special Economic Zones (SEZs),
§ Electronic Hardware Technology Parks (EHTPs),
§ Software Technology Parks (STPs) and
§ Bio Technology Parks (BTPs)

87. Privileges
q Authorization and Customs Clearances for both imports and exports
on self-declaration basis;
q Fixation of Input-Output norms on priority within 60 days;
q Exemption from compulsory negotiation of documents through
banks. Remittance / Receipts, however, would be received
through banking channels;
q 100% retention of foreign exchange in EEFC account;
q Exemption from furnishing of BG in Schemes under FTP;
q SEHs and above shall be permitted to establish Export Warehouses,
as per DoR guidelines.

88. Privileges
q Status Holders of specified sectors shall be eligible for
Status Holder Incentive Scrip.

89. New scheme for Status Holders
Status Holder Incentive Scrip
Duty credit scrip @ 1% of FOB value of exports made during 2009-10
and 2010-11.
Eligible Sectors: Leather, Textile & Jute, Handicrafts, Engineering
(excluding Iron & Steel, Nonferrous Metals in primary or intermediate
forms, Automobiles & two wheelers, nuclear reactors & parts and
Ships, Boats and Floating Structures), Plastics and Basic Chemicals
(Excluding Pharma products)
Import allowed: Capital Goods – subject to Actual User Condition
Exclusions: Status holders availing benefit of Technology Upgradation
Fund Scheme (TUFS)

90. Towns of Export Excellence [TEE]
q These are towns where export activities are
concentrated.
q Due to economic recession and global slowdown, the
threshold limit for recognition as Towns of Export
Excellence is reduced from Rs. 1000 Crores to Rs. 750
Crores and from Rs. 250 Crores to Rs. 150 Crores for
specified sectors (Handloom, Handicraft, Fisheries,
etc.).
q Government aims to provide infrastructure in these
TEEs.

91. Rewards/Incentive Schemes
administered by DGFT
Vishesh
Served Focus Focus
Krishi and
from India Market Product
Gram Udyog
Scheme Scheme Scheme
Yojana
[SFIS] [FMS] [FPS]
[VKGUY]
Duty Credit Duty Credit Duty Credit Duty Credit
Scrip of 10% Scrip of 5% Scrip of 3% Scrip of 2%

92. Rewards/Incentive Schemes
administered by DGFT
q These are all reward/incentive schemes which offer duty credit
scrips which can be utilised for payment of customs duties on
permissible imports.
q This category covers different kinds of exporters and the
incentives provided are also varying.
q Served from India Scheme [SFIS] is meant for service exporters
whereas Vishesh Krishi and Gram Udyog Yojana [VKGUY] is for
agriculture and value added products of agriculture plus goods
produced and exported by tiny industries.
q Focus Market Scheme [FMS] and Focus Product Scheme [FPS] are
related to market linked or product linked promotion strategies
and incentives offered are primarily to offset cost disadvantages.

93. Served from India Scheme [SFIS]
q Non-transferable
q Duty free import related to service sector business is allowed.
q Local Procurement is allowed
q Eligibility/Entitlement Criteria:
Category Eligibility Entitlement in form of
Duty Credit Scrip
equivalent to % of forex
earned during preceding
financial year.
All Indian Service Minimum Forex earning
providers of of Rs.10 lakhs in the
services listed in preceding financial
Appendix-10 of year/current financial
HBPv1 year. 10%
Individual service Minimum Forex earning
providers of Rs.5 lakhs in the
preceding financial year.

94. Vishesh Krishi and Gram Udyog Yojana
[VKGUY]
q Objective: To promote
§ Agricultural produce and value added products,
§ Minor Forest Produce and their value added variants,
§ Gram Udyog Products,
§ Forest Based Products,
q Eligible products are notified under Appendix 37A of
HBPv1
q Duty Credit Entitlement:

95. Category Duty credit entitlement as a %
of FOB value
Normal rate of duty credit under 5%
VKGYU
If benefits under Chapter 4 are availed 3%
[Adv.Authon/DFIA/DEPB/Drawback]
However, in case of DEPB claimed for 5%
packing material and Drawback Rate is
upto 1%
Flowers, Fruits, Vegetables and Other Normal duty credit entitlement
Products 5% + Addl. Duty credit
entitlement 2% = Total 7%
Agri. Infrastructure Incentive Scrip for 10% [provided that the total
Status Holders exporting agricultural benefits for all status holders
products covered under ITC HS put together does not exceed Rs
Chapters 1 to 24 100 Cr. ]

96. Focus Market Scheme [FMS]
q Export of all products to the notified countries.
q Entitlement – 3% of the FOB value of exports [w.e.f.
27.08.2009].
q List of Countries eligible for benefit under this scheme
is given in Appendix 37C of HBPv1.
q Validity of FMS Duty Credit Scrip is 24 months.
Revalidation is not allowed.
q In the New FTP 2009-14, 26 new countries have been
notified, which are listed hereunder:

97. List of 26 Countries
Table 2: NEW FOCUS MARKETS
Sl. Focus Market Country Country
No. Code Code
Countries in Latin American Block
1 L16 PR PUERTO RICO
2 L17 CR COSTA RICA
3 L18 PA PANAMA
4 L19 BS BAHAMAS
5 L20 NI NICARAGUA
6 L21 HT HAITI
7 L22 BB BARBADOS
8 L23 SR SURINAME
9 L24 BJ BELIZE
Contd…

98. 10 L25 AG ANTIGUA
11 L26 LC ST. LUCIA
12 L27 GY GUYANA
13 L28 GD GRENADA
14 L29 KN ST. KITTS AND NEVIS
15 L30 VC ST. VINCENT
16 L31 DM DOMINICA
17 AS2 FJ FIJI IS
18 AS3 KI KIRIBATI REP
19 AS4 NR NAURU RP
20 AS5 PG PAPUA NEW GUINEA
21 AS6 SB SOLOMON ISLAND
22 AS7 TO TONGA
23 AS8 TV TUVALU
24 AS9 VU VANUATU REP
25 AS10 WS SAMOA
26 AS11 LA LAOS (LAO PD REP)

99. Focus Product Scheme [FPS]
q Eligibility: Exports of notified products [listed in
Appendix 37D] to all countries (including SEZ units).
q Entitlement: as under
Category of exports made Entitlement
w.e.f. 27.08.2009
Toys and Sports Goods 5% of FOB value of exports
[Table 2 of New Appendix w.e.f. 27.08.2009
37D]
Contd…

100. High Value Added Products now 2% of FOB value of exports
reflected in Table 1 of New made w.e.f. 27.08.2009
Appendix 37D [Sr. Nos. 56 to 63]
Other Special product(s)/sector(s) 5% of FOB value of exports
covered by Table 2 [Handmade made w.e.f. 27.08.2009
Carpets and Handicraft Products]
and Table 5 [New Handicraft
products] of New Appendix 37D.
High-Tech Products Export 2% of FOB value of exports
Promotion Scheme given earlier in made w.e.f. 27.08.2009
Appendix 37E is now given in
Table 1 of New Appendix 37D [Sr.
Nos. 64 to 76]
Market Linked Focus Products 2% of FOB value of exports
[MLFPS] are now listed in Table 3 made w.e.f. 27.08.2009
[OLD MLFPS products] or Table 5
[New MLFPS products] of New
Appendix 37D

101. Common Provisions
q Cenvat/Drawback available if CVD/Excise duty paid in cash or through
debit under Duty Credit Scrip [DCS], except under SFIS.
q Govt. Reserves right to specify
§ Ineligible export products or services or exports to such countries
§ To change ceiling on DCS.
§ Goods which can not be imported under the DCS.
q Telegraphic Release Advice (TRA) facility is available
q Free/restricted items under ITC HS are allowed to be imported,
except items mentioned under Appendix 37B.
q Import under Lease financing is also allowed

102. Common Provisions
q Exclusivity of Entitlement: For a shipment, benefit under any one of
schemes covered in Chapter 3 can alone be claimed, at exporter’s
option.
q Transfer of Export Performance: not permitted.
q Single Port of Registration - After issue of DCS, but before
registration with Customs, the Applicant can change the port of
registration from RA concerned.
q Entitlement can be used for import from private / public bonded
warehouse.
q Duty credit scrips can be utilised for payment of Customs Duties in
case of EO defaults under Authorizations issued under Chapters 4 and
5 of this Policy. However, penalty / interest shall be required to be
paid in cash.

103. Common Provisions
q Re-export of imported defective / unfit goods is allowed:
§ On re-exportation, fresh Scrip can be issued by concerned RA to
extent of 98% of debited amount with same port of registration
and valid for a period equivalent to balance period available on
date of import
q Validity Period & Revalidation: Validity - 24 months. Revalidation
not allowed.
q Last date of filing of application for Duty Credit Scrips:
Applications for obtaining DCS shall be filed
§ within a period of twelve months from the date of export or
§ within six months from the date of realization or
§ three months from the date of printing / release of shipping bill,
whichever is later, in respect of shipments for which claim is being
filed.

104. Summary
q Export promotion schemes under Chapter 3 are
primarily additional benefits which can be used for cost
competitiveness.
q These benefits are in the form of duty credit.
q Duty credit is transferable and can be sold in open
market.
q Duty credit can be utilised for payment of Customs duty
on permissible imports.
q SFIS scheme however is subject to actual user condition
and hence can not be sold in open market.

105. Thought for the Day…
“You would achieve more, if you
don’t mind who gets the credit.”
@ Lois Mcmaster Bujold

107. Sudhakar Kasture
Exim Institute
[A Division of Helpline Impex Pvt. Ltd.]
Mumbai - Head Off. Pune - Branch Off.
A-203, Everest Chambers, EPI Centre, Opp. Indsearch,
Next to Star TV Office, Law College Road, Pune 411004.
Near Marol Naka, Andheri-Kurla Road, Tel: 020-65246159
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