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Foreign Trade and India

Discover the rich history of India as an ancient maritime trading nation, delve into export laws, steps in exporting, essentials of export contracts, Incoterms, risks in international trade, export registration, currency management, reading FTP, customs procedures, export promotion schemes, EOU details, EPCG benefits, Advance Authorization details, and more.

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Foreign Trade and India

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  1. Foreign Trade and India • Ancient maritime trading nation • Bay of Bengal was once known as CHOLA LAKE • Exports touch $155 billion in 2007-08 • India is among the top ten in services exports • The export basket

  2. 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

  3. Steps in Exporting • A business organization • Manufacturer exporter • Merchant exporter • Agent/ intermediary • Service provider • Product selection • Procurement of order

  4. Essentials of export contract • Product, standards & specification • Quantity • Inspection • Value • Terms of delivery • Taxes, duties and charges • Period of shipment

  5. Export contract contd…. • Packing, labeling,marking • Terms of payment- Amount.mode & currency • Discounts and commissions • Licences and Permits • Insurance • Documentary requirements • Guarantee

  6. Export contract contd…… • Force majeure • Remedies • Arbitration • The case of Dalmia & Arun Jain of Polaris

  7. 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

  8. Incoterms contd------ • DAF– delivered at frontier • DES--- delivered EX ship • DDU--- delivered duty unpaid • DDP---- delivered duty paid • DEQ– delivered ex quay

  9. Risks in International trade • Credit risk • Currency risk • Carriage risk • Country risk • Voyage risk

  10. Export registration • IEC with DGFT • PAN • Bank account • Appointment of agents • Export licenses • Customs registration • Registration with export promotion councils

  11. Export inspection • IPQC– In process quality control • ISI, AGMARK • Fumigation • ISO- 9000 & ISO – 14000 • EIA • SA- 8000 • Global compact

  12. Currency management • Understanding currency fluctuations • Invoicing currency • Forward contract • Hedging • Repatriation • EEFC

  13. Reading FTP • The policy • The handbook of procedures • The ITC- HSN classification • Export licenses • Import licenses • OGL • State Trading

  14. Customs procedure- export • 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

  15. Customs procedure contd---- • Importance of ICD/CFS/ • Customs bonded warehouse • Green channel for exporters • Assessment • New concept of Transaction value

  16. Customs import procedure • Importer • Person in charge of conveyance • Bill of entry • Import general manifest • Assessment • EDI • RMS

  17. Central excise export procedure • Exports are free of duty • Bond clearances • Rebate clearances • ARE 1 • ARE 2 • UT1 • Proof of export • Sealing of container

  18. Export promotion schemes • Section 65 of customs Act • Advance authorization / DFIAS • Export promotion capital goods • DEPB • Drawback • EOU • SEZ

  19. 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

  20. 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

  21. 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

  22. 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

  23. Drawback • Recouping of duties of customs and central excise and service taxes • All industry rates • Brand rate • Special brand rate • Post export documentation

  24. EPCG • Import of capital goods at 5% 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

  25. 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

  26. 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

  27. 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

  28. 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

  29. 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

  30. 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

  31. 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

  32. 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

  33. 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

  34. 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

  35. 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

  36. 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

  37. 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

  38. 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

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

  40. WTO/ GATT • International Treaty • Governing Principles • MFN • Non discrimination • National treatment • Reduction of tariffs • Elimination of Non tariff barriers

  41. Free Trade Agreements • NAFTA • EU • MECOSUR • ASEAN • SAFTA • Indian agreements with Sri Lanka, Thailand and Singapore • Implications of FTAs

  42. 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

  43. 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%

  44. 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

  45. 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

  46. Port stake holders in India • Customs • Port Trusts • Port Health Organization • Plant Quarantine • Immigration • Terminal operator • Vessel operating agent

  47. continued • Steamer agent / Mainline operator • Container operating agent ( NVOCC, VOCC ) • Stevedore • CHA / Exporters / Importers • Transport operators • CFS / ICD • Security agencies / External players

  48. A comparison • Factor JNPT SINGAPORE PORT • Terminals 3 4 • Vessels per terminal 9 41 • Quay length 600 m 11,754 m • Total area 133 ha 425 ha

  49. continued • Factor JNPT SINGAPORE • Total no of quay cranes 8 131 • Crane moves per hour 20 – 25 25 -30 • Crane rate per hour 60 -70 100

  50. 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

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