Q1) Discuss the features of foreign trade policy 20015-20.       12

A1) A. SIMPLIFICATION & MERGER OF REWARD SCHEMES

Export from India Schemes:

1. Merchandise Exports from India Scheme (MEIS)

(a) Earlier there were 5 different schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kinds of duty scrips with varying conditions (sector specific or actual user only) attached to their use. Now all these schemes have been merged into a single scheme, namely Merchandise Export from India Scheme (MEIS) and there would be no conditionality attached to the scrips issued under the scheme. The main features of MEIS, including details of various groups of products supported under MEIS and the country groupings are at Annexure-1.

(b) Rewards for export of notified goods to notified markets under ‘Merchandise Exports from India Scheme (MEIS) shall be payable as percentage of realized FOB value (in free foreign exchange). The debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment as duty drawback. At present, only the additional duty of customs / excise duty / service tax is allowed adjustment as CENVAT credit or drawback, as per Department of Revenue rules.

2. Service Exports from India Scheme (SEIS)

(a) Served From India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Thus SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. The list of services and the rates of rewards under SEIS are at Annexure-2.

(b) The rate of reward under SEIS would be based on net foreign exchange earned. The reward issued as duty credit scrip, would no longer be with actual user condition and will no longer be restricted to usage for specified types of goods but be freely transferable and usable for all types of goods and service tax debits on procurement of services / goods. Debits would be eligible for CENVAT credit or drawback.

3. Chapter -3 Incentives (MEIS & SEIS) to be available for SEZs

It is now proposed to extend Chapter -3 Incentives (MEIS & SEIS) to units located in SEZs also.

4. Duty credit scrips to be freely transferable and usable for payment of custom duty, excise duty and service tax.

(a) All scrips issued under MEIS and SEIS and the goods imported against these scrips would be fully transferable.

(b) Scrips issued under Exports from India Schemes can be used for the following:- (i) Payment of customs duty for import of inputs / goods including capital goods, except items listed in Appendix 3A.

(ii) Payment of excise duty on domestic procurement of inputs or goods, including capital goods as per DoR notification.

(c) Basic Customs Duty paid in cash or through debit under Duty Credit Scrip can be taken back as Duty Drawback as per DoR Rules, if inputs so imported are used for exports.

5. Status Holders

(a) Business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade are proposed to be recognized as Status Holders and given special treatment and privileges to facilitate their trade transactions, in order to reduce their transaction costs and time.

(b) The nomenclature of Export House, Star Export House, Trading House, Star Trading House, Premier Trading House certificate has been changed to One, Two, Three, Four, Five Star Export House.

(c) The criteria for export performance for recognition of status holder have been changed from Rupees to US dollar earnings. The new criteria is as under:-

(d) Approved Exporter Scheme - Self certification by Status Holders Manufacturers who are also Status

Holders will be enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different Preferential Trading Agreements [PTAs], Free Trade Agreements [FTAs], Comprehensive Economic Cooperation Agreements [CECAs] and Comprehensive Economic Partnerships Agreements [CEPAs] which are in operation. They shall be permitted to self-certify the goods as manufactured as per their Industrial Entrepreneur Memorandum (IEM) / Industrial Licence (IL)/ Letter of Intent (LOI).

B. BOOST TO "MAKE IN INDIA"

6. Reduced Export Obligation (EO) for domestic procurement under EPCG scheme:

Specific Export Obligation under EPCG scheme, in case capital goods are procured from indigenous manufacturers, which is currently 90% of the normal export obligation (6 times at the duty saved amount) has been reduced to 75%, in order to promote domestic capital goods manufacturing industry.

7. Higher level of rewards under MEIS for export items with high domestic content and value addition. It is proposed to give higher level of rewards to products with high domestic content and value addition, as compared to products with high import content and less value addition.

C. TRADE FACILITATION & EASE OF DOING BUSINESS

8. Online filing of documents/ applications and Paperless trade in 24x7 environment:

(a) DGFT already provides facility of Online filing of various applications under FTP by the exporters/importers. However, certain documents like Certificates issued by Chartered Accountants/ Company Secretary / Cost Accountant etc. have to be filed in physical forms only. In order to move further towards paperless processing of reward schemes, it has been decided to develop an online procedure to upload digitally signed documents by Chartered Accountant / Company Secretary / Cost Accountant. In the new system, it will be possible to upload online documents like annexure attached to ANF 3B, ANF 3C and ANF 3D, which are at present signed by these signatories and submitted physically.

(b) Henceforth, hardcopies of applications and specified documents would not be required to be submitted to RA, saving paper as well as cost and time for the exporters. To start with, applications under Chapter 3 & 4 of FTP are being covered (which account for nearly 70% of total applications in DGFT). Applications under Chapter-5 would be taken up in the next phase.

(c) As a measure of ease of doing business, landing documents of export consignment as proofs for notified market can be digitally uploaded in the following manner:-

(i) Any exporter may upload the scanned copy of Bill of Entry under his digital signature.

(ii) Status holders falling in the category of Three Star, Four Star or Five Star Export House may upload scanned copies of documents.

9. Online inter-ministerial consultations: It is proposed to have Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import Authorisations, Export Authorisation, in a phased manner, with the objective to reduce time for approval. As a result, there would not be any need to submit hard copies of documents for these purposes by the exporters.

10. Simplification of procedures/processes, digitisation and e-governance

(a) Under EPCG scheme, obtaining and submitting a certificate from an independent Chartered Engineer, confirming the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorizations has been dispensed with.

(b) At present, the EPCG Authorisation holders are required to maintain records for 3 years after redemption of Authorisations. Now the EPCG Authorization Holders shall be required to maintain records for a period of two years only. Government’s endeavour is to gradually phase out this requirement as the relevant records such as Shipping Bills, e-BRC are likely to be available in electronic mode which can be archived and retrieved whenever required.

(c) Exporter Importer Profile: Facility has been created to upload documents in Exporter/Importer Profile. There will be no need to submit copies of permanent records/ documents (e.g. IEC, Manufacturing licence, RCMC, PAN etc.) repeatedly with each application, once uploaded.

(d) Communication with Exporters/Importers: Certain information, like mobile number, e-mail address etc. has been added as mandatory fields, in IEC data base. This information once provided by exporters, would help in better communication with exporters. SMS/ email would be sent to exporters to inform them about issuance of authorisations or status of their applications.

(e) Online message exchange with CBDT and MCA: It has been decided to have on line message exchange with CBDT for PAN data and with Ministry of Corporate Affairs for CIN and DIN data. This integration would obviate the need for seeking information from IEC holders for subsequent amendments/ updation of data in IEC data base.

(e) Communication with Committees of DGFT: For faster and paperless communication with various committees of DGFT, dedicated email addresses have been provided to each Norms Committee, Import Committee and Pre-Shipment Inspection Agency for faster communication.

(f) Online applications for refunds:

Online filing of application for refund of TED is being introduced for which a new ANF has been created.

11. Forthcoming e-Governance Initiatives

(a) DGFT is currently working on the following EDI initiatives:

(i) Message exchange for transmission of export reward scrips from DGFT to Customs.

(ii) Message exchange for transmission of Bills of Entry (import details) from Customs to DGFT.

(iii) Online issuance of Export Obligation Discharge Certificate (EODC).

(iv) Message exchange with Ministry of Corporate Affairs for CIN & DIN. (v) Message exchange with CBDT for PAN.

(vi) Facility to pay application fee using debit card / credit card. (vii) Open API

For submission of IEC application. (viii) Mobile applications for FTP.

D. Other new Initiatives

12. New initiatives for EOUs, EHTPs and STPs

(a) EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among themselves. This will enable units to utilize their infrastructural facilities in an optimum way and avoid duplication of efforts and cost to create separate infrastructural facilities in different units.

(b) Inter unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs, and BTPs. This will facilitate group of those units which source inputs centrally in order to obtain bulk discount. This will reduce cost of transportation, other logistic costs and result in maintaining effective supply chain.

(c) EOUs have been allowed facility to set up Warehouses near the port of export. This will help in reducing lead time for delivery of goods and will also address the issue of unpredictability of supply orders.

(d) STP units, EHTP units, software EOUs have been allowed the facility to use all duty free equipment/goods for training purposes. This will help these units in developing skills of their employees.

(e) 100% EOU units have been allowed facility of supply of spares/ components up to 2% of the value of the manufactured articles to a buyer in domestic market for the purpose of after sale services.

(f) At present, in a period of 5 years EOU units have to achieve Positive Net Foreign Exchange Earning (NEE) cumulatively. Because of adverse market condition or any ground of genuine hardship, then such period of 5 years for NFE completion can be extended by one year.

(f) Time period for validity of Letter of Permission (LOP) for EOUs/EHTP/ STPI/BTP Units has been revised for faster implementation and monitoring of projects. Now, LOP will have an initial validity of 2 years to enable the unit to construct the plant and install the machinery. Further extension can be granted by the Development Commissioner up to one year. Extension beyond 3 years of the validity of LOP, can be granted, in case unit has completed 2/3rd of activities, including the construction activities.

(g) At present, EOUs/EHTP/STPI units are permitted to transfer capital goods to other EOUs, EHTPs, STPs, SEZ units. Now a facility has been provided that if such transferred capital goods are rejected by the recipient, then the same can be returned to the supplying unit, without payment of duty.

(h) A simplified procedure will be provided to fast track the de-bonding / exit of the STP/ EHTP units. This will save time for these units and help in reduction of transaction cost.

(i) EOUs having physical export turnover of Rs.10 crore and above, have been allowed the facility of fast track clearances of import and domestic procurement. They will be allowed fast tract clearances of goods, for export production, on the basis of pre-authenticated procurement certificate, issued by customs / central excise authorities. They will not have to seek procurement permission for every import consignment.

13. Facilitating & Encouraging Export of dual use items (SCOMET).

(a) Validity of SCOMET export authorisation has been extended from the present 12 months to 24 months. It will help industry to plan their activity in an orderly manner and obviate the need to seek revalidation or relaxation from DGFT.

(b) Authorisation for repeat orders will be considered on automatic basis subject to certain conditions. (c) Verification of End User Certificate (EUC) is being simplified if SCOMET item is being exported under Defence Export Offset Policy. (c) Outreach programmes will be conducted at different locations to raise awareness among various stakeholders.

14 Facilitating & Encouraging Export of Defence Exports

(a) Normal export obligation period under advance authorization is 18 months. Export obligation period for export items falling in the category of defence, military store, aerospace and nuclear energy shall be 24 months from the date of issue of authorization or co-terminus with contracted duration of the export order, whichever is later. This provision will help export of defence items and other high technology items.

(b) A list of military stores requiring NOC of Department of Defence Production has been notified by DGFT recently. A committee has been formed to create ITC (HS) codes for defence and security items for which industrial licenses are issued by DIPP.

15. e-Commerce Exports

(a) Goods falling in the category of handloom products, books / periodicals, leather footwear, toys and customized fashion garments, having FOB value up to Rs.25000 per consignment (finalized using eCommerce platform) shall be eligible for benefits under FTP. Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai.

(b) Export of such goods under Courier Regulations shall be allowed manually on pilot basis through Airports at Delhi, Mumbai and Chennai as per appropriate amendments in regulations to be made by Department of Revenue. Department of Revenue shall fast track the implementation of EDI mode at courier terminals.

16. Duty Exemption

(a) Imports against Advance Authorization shall also be eligible for exemption from Transitional Product Specific Safeguard Duty.

(b) In order to encourage manufacturing of capital goods in India, import under EPCG Authorisation Scheme shall not be eligible for exemption from payment of anti-dumping duty, safeguard duty and transitional product specific safeguard duty.

17. Additional Ports allowed for Export and import

Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have been notified as registered ports for import and export.

18. Duty Free Tariff Preference (DFTP) Scheme

India has already extended duty free tariff preference to 33 Least Developed Countries (LDCs) across the globe. This is being notified under FTP.

19. Quality complaints and Trade Disputes

(a) In an endeavour to resolve quality complaints and trade disputes, between exporters and importers, a new chapter, namely, Chapter on Quality Complaints and Trade Disputes has been incorporated in the Foreign Trade Policy.

(b) For resolving such disputes at a faster pace, a Committee on Quality Complaints and Trade Disputes (CQCTD) is being constituted in 22 offices and would have members from EPCs/FIEOs/APEDA/EICs.

20. Vishakhapatnam and Bhimavaram added as Towns of Export Excellence Government has already recognized 33 towns as export excellence towns. It has been decided to add Vishakhapatnam and Bhimavaram in Andhra Pradesh as towns of export excellence (Product Category– Seafood).

Q2) Discuss about the Export trade facilitations and ease of doing business as FTP 2015-20.

A2)  The provisions provided under FTP 2015-20 export trade facilitation and ease of doing business are discussed below-

Online filing of documents/ applications and Paperless trade in 24x7 environment:

(a) DGFT already provides facility of Online filing of various applications under FTP by the exporters/importers. However, certain documents like Certificates issued by Chartered Accountants/ Company Secretary / Cost Accountant etc. have to be filed in physical forms only. In order to move further towards paperless processing of reward schemes, it has been decided to develop an online procedure to upload digitally signed documents by Chartered Accountant / Company Secretary / Cost Accountant. In the new system, it will be possible to upload online documents like annexure attached to ANF 3B, ANF 3C and ANF 3D, which are at present signed by these signatories and submitted physically.

(b) Henceforth, hardcopies of applications and specified documents would not be required to be submitted to RA, saving paper as well as cost and time for the exporters. To start with, applications under Chapter 3 & 4 of FTP are being covered (which account for nearly 70% of total applications in DGFT). Applications under Chapter-5 would be taken up in the next phase.

(c) As a measure of ease of doing business, landing documents of export consignment as proofs for notified market can be digitally uploaded in the following manner:-

(i) Any exporter may upload the scanned copy of Bill of Entry under his digital signature.

(ii) Status holders falling in the category of Three Star, Four Star or Five Star Export House may upload scanned copies of documents.

Online inter-ministerial consultations: It is proposed to have Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import Authorisations, Export Authorisation, in a phased manner, with the objective to reduce time for approval. As a result, there would not be any need to submit hard copies of documents for these purposes by the exporters.

Simplification of procedures/processes, digitisation and e-governance

(a) Under EPCG scheme, obtaining and submitting a certificate from an independent Chartered Engineer, confirming the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorizations has been dispensed with.

(b) At present, the EPCG Authorisation holders are required to maintain records for 3 years after redemption of Authorisations. Now the EPCG Authorization Holders shall be required to maintain records for a period of two years only. Government’s endeavour is to gradually phase out this requirement as the relevant records such as Shipping Bills, e-BRC are likely to be available in electronic mode which can be archived and retrieved whenever required.

(c) Exporter Importer Profile: Facility has been created to upload documents in Exporter/Importer Profile. There will be no need to submit copies of permanent records/ documents (e.g. IEC, Manufacturing licence, RCMC, PAN etc.) repeatedly with each application, once uploaded.

(d) Communication with Exporters/Importers: Certain information, like mobile number, e-mail address etc. has been added as mandatory fields, in IEC data base. This information once provided by exporters, would help in better communication with exporters. SMS/ email would be sent to exporters to inform them about issuance of authorisations or status of their applications.

(e) Online message exchange with CBDT and MCA: It has been decided to have on line message exchange with CBDT for PAN data and with Ministry of Corporate Affairs for CIN and DIN data. This integration would obviate the need for seeking information from IEC holders for subsequent amendments/ updation of data in IEC data base.

(e) Communication with Committees of DGFT: For faster and paperless communication with various committees of DGFT, dedicated email addresses have been provided to each Norms Committee, Import Committee and Pre-Shipment Inspection Agency for faster communication.

(f) Online applications for refunds:

Online filing of application for refund of TED is being introduced for which a new ANF has been created.

Q3) Discuss about the schemes introduced under the FTP 2015-20 for promotion of export of India.       8

A3) The schemes introduced under the FTP 2015-20 for promotion of export of India are discussed below- 

1. Merchandise Exports from India Scheme (MEIS)

(a) Earlier there were 5 different schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kinds of duty scrips with varying conditions (sector specific or actual user only) attached to their use. Now all these schemes have been merged into a single scheme, namely Merchandise Export from India Scheme (MEIS) and there would be no conditionality attached to the scrips issued under the scheme. The main features of MEIS, including details of various groups of products supported under MEIS and the country groupings are at Annexure-1.

(b) Rewards for export of notified goods to notified markets under ‘Merchandise Exports from India Scheme (MEIS) shall be payable as percentage of realized FOB value (in free foreign exchange). The debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment as duty drawback. At present, only the additional duty of customs / excise duty / service tax is allowed adjustment as CENVAT credit or drawback, as per Department of Revenue rules.

2. Service Exports from India Scheme (SEIS)

(a) Served From India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Thus SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. The list of services and the rates of rewards under SEIS are at Annexure-2.

(b) The rate of reward under SEIS would be based on net foreign exchange earned. The reward issued as duty credit scrip, would no longer be with actual user condition and will no longer be restricted to usage for specified types of goods but be freely transferable and usable for all types of goods and service tax debits on procurement of services / goods. Debits would be eligible for CENVAT credit or drawback.

3. Chapter -3 Incentives (MEIS & SEIS) to be available for SEZs

It is now proposed to extend Chapter -3 Incentives (MEIS & SEIS) to units located in SEZs also.

4. Duty credit scrips to be freely transferable and usable for payment of custom duty, excise duty and service tax.

(a) All scrips issued under MEIS and SEIS and the goods imported against these scrips would be fully transferable.

(b) Scrips issued under Exports from India Schemes can be used for the following:- (i) Payment of customs duty for import of inputs / goods including capital goods, except items listed in Appendix 3A.

(ii) Payment of excise duty on domestic procurement of inputs or goods, including capital goods as per DoR notification.

(c) Basic Customs Duty paid in cash or through debit under Duty Credit Scrip can be taken back as Duty Drawback as per DoR Rules, if inputs so imported are used for exports.

5. Status Holders

(a) Business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade are proposed to be recognized as Status Holders and given special treatment and privileges to facilitate their trade transactions, in order to reduce their transaction costs and time.

(b) The nomenclature of Export House, Star Export House, Trading House, Star Trading House, Premier Trading House certificate has been changed to One, Two, Three, Four, Five Star Export House.

(c) The criteria for export performance for recognition of status holder have been changed from Rupees to US dollar earnings. The new criteria is as under:-

(d) Approved Exporter Scheme - Self certification by Status Holders Manufacturers who are also Status

Holders will be enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different Preferential Trading Agreements [PTAs], Free Trade Agreements [FTAs], Comprehensive Economic Cooperation Agreements [CECAs] and Comprehensive Economic Partnerships Agreements [CEPAs] which are in operation. They shall be permitted to self-certify the goods as manufactured as per their Industrial Entrepreneur Memorandum (IEM) / Industrial Licence (IL)/ Letter of Intent (LOI).

Q4) Discuss the role Directorate General of Foreign trade.     5

A4) This directorate relating to foreign trade is headed by the director general of foreign trade and is responsible for the execution of the foreign trade policy (FTI) announced by the government form time to time for the promotion of exports. In addition, the work relating to issue of licenses and monitoring of export obligations, etc. is also looked after by this organization directorate. The directorate has its headquarters at New Delhi. In addition, there are 31 regional offices of the directorate in the field of information.

The following are the functions of DGFT

(a)    Implementation of foreign trade policy

DGFT is responsible for the implementation of foreign trade policy of India. The FTP is implemented by introducing various schemes and guide lines through its network of 32 regional offices spread across country.

(b)    Granting of IEC number

DFGT grants importer-exporter code number to exporters and importers from India. It is the registration number, which enables Indian parties to deal in foreign trade. The IEC number is issued by the regional offices of DGFT.

(c)    Regulates transit of goods

DGFT permits or regulates transit of goods form India or from countries adjacent of India in accordance with the bilateral treaties between India and other countries.

(d)    Resolving of export related problems

DGFT or its regional offices attends to the problems and grievances of exporters. It co-ordinates with other departments to resolve all the trade and export related problems to resolve all the trade and export related problems. For speedy redressal of genuine grievances of trade and industry relating to policy and procedures, grievance committees have been set up in the regional licensing offices.

(e)    Interaction with trade and industry

DGFT has opened a chat window on its web site for interacting with the trade and industry. It provides replies to queries on foreign trade policy and procedures. The chat window is open form 3 p.m. To 5 p.m. On second Wednesday of every month.

(f) Co-ordination with other offices

DGFT works in close co-ordination with other related economic offices like customs dept, central excise, enforcement directorate, etc.

(g)    Publications

DGFT is responsible for the publication of foreign trade policy and hand book of procedures, ITC (HS) classification of export-import items.

(h)    Trade facilitator

DGFT also acts like a trade facilitator. It deals with the quality complaints of foreign buyers. Trade facilitation on the part of DGFT helps to promote Indian exports in the overseas markets.

Q5) Write a brief note on negative list of foreign trade.     5

A5) Negative list of exports contains those export items which are either banned or con not be freely exported. The negative list of exports consists of these parts.

I)   Prohibited Items,

II)     Restricted Items,

III) Canalised Items.

I)   Prohibited Items

The prohibited items are banned from exporting. The latest list of prohibited items as on 1st January, 1996 contains 10 items. There are us follows.

(a) All forms of wild animals,

(b) Exotic birds,

(c) All items of plants,

(d) Human selection,

(e) Tallow of and animal’s origin,

(f) Fat of any animal’s origin,

(g) Oils of any animal’s origin,

(h) Chemicals,

(i) Sandal wood items,

(j) Red sanders wood in any form.

II)     Restricted Items

The restricted items are allowed to be exported only with special licencing by the DGFT. At present, there are 31 items. Some of restricted export items are as follows.

(a) Beche-de-mer of sizes below 3 inches,

(b) Cattle,

(c) Camel,

(d) Chemical fertilizer and micronutrient fertilizers,

(e) Fabrics/textile items with imprints of excerpts or verses of the Holy Quran (f) Deoiled qrundnut cakes,

(g) Fresh and frozen silver prmfrets of weight less than 300 gms,

(h) Fur of domestic animals, excluding lamb fur skin,

(i) Fodder, including wheat and rice shraw,

(j) Hides and skins as mentioned in the policy.

III) Canalised Items

This list contains those items which are to be exported only through designated canalized agencies. At present there are five items which are canalized. They are as follows

Q6) Write a brief note on deemed export.   5

A6) The Export and Import (EXIM) Policy (1997-2002) defines ‘Deemed Exports’ as the goods (and not services) manufactured in India and transported locally i.e. they do not leave India. Deemed export basically means that the supplier may receive the payment for this transaction in either Indian Rupees or convertible Forex.

Following are the conditions defined in FTP for any transaction to qualify as “deemed export”

The goods that are eligible for being considered as deemed exports receive the following benefits:

Q7) Highlight the benefits of Status holders in export marketing.         5

A7) The government has provided the following benefits for status holders for promotion of export-

The status holders/EHTP encourage exports of small scale industries and cottage industries. To assist SS units and SS & cottage industries in exporting their goods in foreign markets. For this, financial and technical assistance is provided.

2.  Product Development

To supply information and assist manufacturers in the product research and development activities so as to produce attractive and agreeable goods to buyers from target markets abroad.

3.  Introduction of New Product

To market the products of small manufacturers in foreign markets and to introduce their new/promising products in suitable markets abroad.

4.  Supply of Inputs

To supply raw materials, machinery and other inputs to their manufacturer suppliers so as to enable them to produce quality products which command market abroad.

5.  Product Research

The status holders undertake product research and development. To supply useful information to their manufacturer suppliers. Such information relates to needs and expectations of foreign buyers, market trends abroad, product requirements and so on.

6.  Risks Bearing

To undertake marketing risk credit risk in export trade transactions.

7.  Arrangements for Forwarding Goods

To look after packaging, transportation, documentation and other formalities  relating to assembling packing and forwarding goods to foreign in markets .

8. Providing Information Suggestions

To provided information and suggestions to Govt. Authorities as regards measures for export promotion, problems of exporters.

Q8) Write a brief note on Special Economic Zone.       8

A8)  The concept of special economic zones (SEZS) was suggested by the comer and industry minister late Mr. Murasoli Maran while introducing third revision to EXIM policy 1997-2002. The SEZs are in addition to EPZs and FTZs operating in India. A scheme for setting up SEZs in country to promote export was announced by the government in the Exim policy announced on 31st March, 2000. The SEZs intend to provide an internationally competitive and hassle free environment for export and are expected to give a further boost to the country’s exports.

The idea of SEZS is borrowed from china where such zones are operation efficiently and are contributing nearly 40 per cent of total exports. The government policy is for the creation of SEZS in all parts for export promotion. They are expected to provide an internationally competitive and hassle-free environment for exports. The SEZ scheme is expected to give a further boost to country’s exports. The state governments are expected to participate in export promotion by starting SEZs in their states. The SEZs can be set-up in the public, private joint sector or by state governments. The government policy is to provide convenient infra-structure facilities and various incentives to such SEZS so as to make them key engines of export growth.

The following are the features of special economic zones-

Figure: Benefits of SEZ

(a)    Domestic sales/purchases

Goods going into the SEZ area from DTA (Domestic Tariff Area) shall be traded as deemed exports and goods coming from the SEZ area into DTA shall be treated as if the goods are being imported.

(b)    Export and import of goods

SEZ units may export goods and services including agro-products, partly processed jewellery, sub-assemblies and components. It may also export by products, rejects, waste-scrap arising out of the production process. SEZ units import without payment of duty, all types of goods, including capital goods, whether second hand or new. The SEZ units can import goods free of cost or loan from clients.

(c)    Net foreign exchange earning (NFE)

A SEZ unit shall be a positive net foreign exchange earner. NFE shall calculate cumulatively for a period of five years form the commencement of commercial production.

(d)    Domestic tariff area (DTA) sales and supplies

Sales of SEZS from DTA are to be treated as exports. Sales to DTA from SEZ are to be exempted form special additional duty (SAD). This would make the sales to DTA from SEZ 4% cheaper than import. DTA sale by service/trading units shall be subject to achievement of positive NFE.

(e)    Export through status holder

A EZ units may also export goods manufactured by it though a merchant exporter/status holder or any other EOU/EPZ/SEZ units.

(f) Inter-limit transfer

Transfer of manufactured goods or imported goods from one SEZ units to another EPZ/EOU/SEZ unit is allowed, but not counted towards export performance.

(g) Administration and setting up of SEZ

SEZ will be under the administrative control of development commissioner. A SEZ may be set up in the public, private or joint sector. The existing EPZS may also be converted into SEZ by the ministry of commerce and industry.

(h) Export proceeds

SEZ unit can bring back their export proceeds in 360 days as against normal period of 180 days and can retain 100% of the proceeds in the EEFC Account.

The SEZ offers to entrepreneurs as attractive package of incentives and concessions, gradually introduced over a period of time.

(a)    All imports into the zone such as capital goods, raw materials, packing materials, components, office equipment etc. have been placed under OGL system and such import are permitted duty free entry into the zone, subject to the terms of the project approval.

(b) Indigenous goods such as capital goods, raw materials and other production requirement can be procured from domestic tariff area (DTA) into the zone free of central excise duty.

(c) There is total waiver of the provision of the export trade control order with regard to the products manufactured and exported from the SEZ.

(d) Central excise is also exempted on the products manufactured within the zone for export purposes.

(e) A five year tax holiday is the most significant fiscal benefit to units.

(f) The import policy permits sales up to 25% of their annual production in the home market without requirement of import license but subject to payment of leviable customs duty. This is in addition to the facility otherwise, available to the units for sale in the DTA against valid import licensees subject to payment of customs and other duties.

(g) For attracting foreign investors equity participation even up to 100% is permitted in the industrial ventures promoted in SEZ.

(h) Repatriation of dividends and profits is freely permitted, subject to payment of taxes as applicable.

(i) For export promotion, units in SEZ are given a special facility of blanket permits.

(j) Units in SEZ can given a longer credit period of up to 360 days.

Q9) Write a small note on BTP.        5

A9) The Department of Biotechnology has established Biotechnology Parks/Incubators across the country to translate research into products and services by providing necessary infrastructure support. These Biotechnology Parks offer facilities to Scientists, and Small and Medium sized Enterprises (SMEs) for technology incubation, technology demonstration and pilot plant studies for accelerated commercial development of Biotechnology. The Department so far, has supported 9 Biotechnology Parks in various States. These are:

These Parks are successfully accelerating the commercialization of new technologies, nurturing and maintaining emerging ventures and assisting new enterprises to forge appropriate linkages with other stakeholders of biotechnology sector including academia and Government. The Department has come up with ‘National Biotechnology Parks Scheme’ in which it is proposed to create an ecosystem to absorb the start-ups which have graduated from the incubators and give them a platform for further scaling up their R&D activities in collaboration with the state government and industry. Bio-Technology Parks (BTP) would be notified by the DGFT on the recommendations of Department of Biotechnology. In the case of units in the BTP, necessary approval/permission under relevant provisions of this chapter will be granted by designated officer of the Department of Biotechnology.

Q10) Write a note on Software Technology park (STP).             5

A10) Under STP scheme, a software development unit can be set up for the purpose of development of software, data entry and conversion, data, processing, data analysis and control data management or call centre services for exports. Under EHTP scheme, a unit can be set up for the purpose of manufacture and development of electronics hardware, and software in an integrated manner for export. The policy provisions for STP, EHTP and BTP schemes are substantially the same as those applicable to the general EOU scheme. Thus, the provisions of foreign trade policy regarding importability of goods, DTA sale, clearance of samples, sub-contracting, inter-unit transfer, repairs, re-conditioning and re-engineering, sale of unutilized material, de-bonding etc. are more or less same for STP/EHTP/BTP units as well as general EOUs. However, considering the special requirement of the software/hardware development sector, some specific provisions have been made for the STP/EHTP units in the foreign trade policy as well as in the customs notifications governing the scheme.

Functions of STP are as follows-

(a) An EHTP/STP/EOU units may export all goods and services subject to the fulfillment of conditions laid down in export import policy.

(b) EHTIP/STP/EOU unit may export goods manufactured/software developed by it through a merchant exporter/status holder recognized under the EXIM policy.

(c) These units may import without payment of duty all types of goods including capital goods as defined in the EXIM policy required by them for its activities. The goods can be imported which are required for the approved activity, including, capital goods, free of cost or on loan from clients.

(d) These units may procure from DTA without payment of duty specified goods for creating a central facility for use. The central facility for software development can also be accessed by units in the DTA for export of software.

(e) The import of second hand capital goods is also permitted without payment of duty.

Q11) Highlight the new initiatives undertaken by the FTP 2015-20.    5

A11) (a) EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among themselves. This will enable units to utilize their infrastructural facilities in an optimum way and avoid duplication of efforts and cost to create separate infrastructural facilities in different units.

(b) Inter unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs, and BTPs. This will facilitate group of those units which source inputs centrally in order to obtain bulk discount. This will reduce cost of transportation, other logistic costs and result in maintaining effective supply chain.

(c) EOUs have been allowed facility to set up Warehouses near the port of export. This will help in reducing lead time for delivery of goods and will also address the issue of unpredictability of supply orders.

(d) STP units, EHTP units, software EOUs have been allowed the facility to use all duty free equipment/goods for training purposes. This will help these units in developing skills of their employees.

(e) 100% EOU units have been allowed facility of supply of spares/ components up to 2% of the value of the manufactured articles to a buyer in domestic market for the purpose of after sale services.

(f) At present, in a period of 5 years EOU units have to achieve Positive Net Foreign Exchange Earning (NEE) cumulatively. Because of adverse market condition or any ground of genuine hardship, then such period of 5 years for NFE completion can be extended by one year.

(f) Time period for validity of Letter of Permission (LOP) for EOUs/EHTP/ STPI/BTP Units has been revised for faster implementation and monitoring of projects. Now, LOP will have an initial validity of 2 years to enable the unit to construct the plant and install the machinery. Further extension can be granted by the Development Commissioner up to one year. Extension beyond 3 years of the validity of LOP, can be granted, in case unit has completed 2/3rd of activities, including the construction activities.

(g) At present, EOUs/EHTP/STPI units are permitted to transfer capital goods to other EOUs, EHTPs, STPs, SEZ units. Now a facility has been provided that if such transferred capital goods are rejected by the recipient, then the same can be returned to the supplying unit, without payment of duty.

(h) A simplified procedure will be provided to fast track the de-bonding / exit of the STP/ EHTP units. This will save time for these units and help in reduction of transaction cost.

(i) EOUs having physical export turnover of Rs.10 crore and above, have been allowed the facility of fast track clearances of import and domestic procurement. They will be allowed fast tract clearances of goods, for export production, on the basis of pre-authenticated procurement certificate, issued by customs / central excise authorities. They will not have to seek procurement permission for every import consignment.

Q12) Highlight the provisions of FTP 2015-20 regarding promotion of defence export and e-commerce export.              5

A12) Facilitating & Encouraging Export of Defence Exports

(a) Normal export obligation period under advance authorization is 18 months. Export obligation period for export items falling in the category of defence, military store, aerospace and nuclear energy shall be 24 months from the date of issue of authorization or co-terminus with contracted duration of the export order, whichever is later. This provision will help export of defence items and other high technology items.

(b) A list of military stores requiring NOC of Department of Defence Production has been notified by DGFT recently. A committee has been formed to create ITC (HS) codes for defence and security items for which industrial licenses are issued by DIPP.

E-Commerce Exports

(a) Goods falling in the category of handloom products, books / periodicals, leather footwear, toys and customized fashion garments, having FOB value up to Rs.25000 per consignment (finalized using eCommerce platform) shall be eligible for benefits under FTP. Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai.

(b) Export of such goods under Courier Regulations shall be allowed manually on pilot basis through Airports at Delhi, Mumbai and Chennai as per appropriate amendments in regulations to be made by Department of Revenue. Department of Revenue shall fast track the implementation of EDI mode at courier terminals.

Q13) What kind of benefits are provided under deemed export.   5

A13)

Q14) Write a brief note of Agricultural Economic Zone (AEZ).     8

A14) The concept of Agri Export Zone (AEZ) was introduced in 2001, through EXIM Policy 1997-2001, to take a comprehensive look at a particular produce/product located in a contiguous area for the purpose of developing and sourcing the raw materials, their processing/packaging, leading to final exports. The concept hinged primarily on convergence of existing Central and State Government schemes to take care of financial interventions required at various stages of value chain; partnership among various stakeholders viz. Central Government, State Government, farmer, processor, exporter etc.; and focus on targeted products and areas to identify required policy interventions.

Measures to promote exports from Agri Export Zone

A. Financial Assistance

B. Fiscal Incentives

Benefits of AEZ are-

i) Strengthening of backward linkages with a market oriented approach.

Ii) Product acceptability and its competitiveness abroad as well as in the domestic market.

Iii) Value addition to basic agricultural produce.

Iv) Bring down cost of production through economy of scale.

v) Better price for agricultural produce.

Vi) Improvement in product quality and packaging.

Vii) Promote trade related research and development.

Viii) Increase employment opportunities.

Q15) Write a brief note on Export Oriented Units (EOU).     5

A15) The export oriented units (EOUs) scheme, introduced in early 1981, is complementary to the EPZ scheme. It adopts the same production regime but offers a winder option in location with reference to factors like source of raw materials, port, hinterland facilities, availability of technological skills, existence of an industrial base and the need for a larger area of land for the project.

EOUS have been established with a view to generating additional production capacity for exports by capacity for exports by providing an appropriate policy framework, flexibility of operations and incentives.

Benefits/incentives given to 100% EOUs

(a) The EOUS are mainly concentrated in the engineering, chemicals, plastics, granites and food processing. Such units ae permitted to import raw materials, spare parts, machinery, etc, without the payment of import duty. They can also procure indigenous capital goods, components and raw materials without payment of excise duty and in return must produce goods for exports for 10 years.

(b) EOUS need not pay excise duty when they use domestic raw materials, etc, for the production which are to be exported.

(c) 100% EOUS need not be located in the FTZS. They may be located at any place and may be of any size.

(d) 100% EOUS are given special concessions such as five year tax holiday and two years gestation period before exporting.

(e) EOUS export the entire or at least 75% their production and there by contribute in promoting exports.

(f) Foreign equity up to 100% is permissible in the case of EOUS.