Foreign trade

policy
2009 S.CLEMENT
- 2014

GENESIS

Up to 1945 Defence of India Rules

1946 lapse of DIR
1947 Import & Export( control) Act 1947
1985 Import & Export Policy
1992 Foreign Trade(DEV &Regulation) Act
1991 BOP CRISIS
1992 1992-97 PLICY( for 5 yrs)
1997 economic recession in
China/Srilanka/Pakistan

GENESIS
1997-2002 EXIM PPOLICY
Service exports recognized
EPCG O duty reduced from 20 cr to 2
cr for sectors like chemicals/plastic/textile
etc
Ombudsman in ports

Policy implementation
Sec 5 of Foreign Trade (DEV & Reg) Act
1992
Announced by MOCI
Implemented by DGFT
Policy covers exportability & importability
of goods and services in ITC(HS)
Procedures and formats in in Hand book
of procedures in VOL I & II

ITC (HS)
HS Code List or India Harmonised Code System Code.

ITC-HS Codes or better known as Indian Trade Clarification based on

Harmonized System of Coding was adopted in India for import-export
operations. Indian custom uses an eight digit ITC-HS Codes to suit the
national trade requirements
Indian custom uses an eight digit ITC-HS Codes to suit the national
trade requirements.
ITC-HS Codes Schedules
ITC-HS codes are divided into two schedules.
ITC(HS) Import Schedule I describe the rules and guidelines related to
import policies where as Schedule II describe the rules and regulation
related to export policies. Schedule I of the ITC-HS code is divided into
21 sections and each section is further divided into chapters. The total
number of chapters in the schedule I is 98. The chapters are further
divided into sub-heading under which different HS codes are mentioned.
Export Policy Schedule II of the ITC-HS code contain 97 chapters
giving all the details about the guidelines related to the export policies.

ITC Major Code Classification

Animals & Animal Products

Vegetable Products
Animal Or Vegetable Fats
Prepared Foodstuffs
Mineral Products
Chemical Products
Plastics & Rubber
Hides & Skins
Wood & Wood Products
Wood Pulp Products
Textiles & Textile Articles
Footwear, Headgear
Articles Of Stone, Plaster, Cement, Asbestos
Pearls, Precious Or Semi-Precious Stones, Metals
Base Metals & Articles Thereof
Machinery & Mechanical Appliances
Transportation Equipment
Instruments - Measuring, Musical

Foreign trade Policy

2004-09
Objectives
Double the % of share n the global trade
from 0.8%(04) to 2%(09) ( USD 61.84 bn
to 195 bn.).
Stimulate economic growth for
employment generation in rural and semi
urban centres

Objective
Focused product To promote export of products having large
employment potential in rural and semi urban
areas. The scheme allows duty credit facility @
2.5% of FOB value of exports to 50% of export
turnover of notified products such as value added
fish,leather, stationery items, fire works, sports
goods, handlooms and handicraft items.
Focus market identifying market segment on
the basis of demand for Indian products.
Penetration of strategic markets by indian
products where our presence is low. Duty free
credit @ 2.5%

strategy

Unshackling of controls
Simplifying procedures to reduce transaction cost
Creating base for global hub for manufacturing and
services
Improvement in infrastructure
Identification of for special focus areas
Technological up gradation to attain world
standards- import of capital goods/equipment
Revamping of Board of trade
Role Embassies- activate for export promotion for
trade intelligence/enquiry dissemination

Special focus initiatives

Sector with significant export prospects coupled
with potential for employment generation in
rural and semi urban centre
Threshold limit for towns of excellence is
reduced from Re 1000 to 250 cr for for
handloom,handicrafts,agriculture & fisheries.
For others it is Re 1000 cr.
Such towns will get preference in infrastructure
development.

Special focus areas

Agriculture
Handlooms
Handicrafts
Leather & Foot wear

FTP - 2009 - 2014

Sharma not sure of recovery, sets $200-b figure by March 2011

FTP 2009 -2014

The Foreign Trade Policy 2 009-2014
(FTP), incorporating provisions relating to
export and import of goods and services,
shall come into force with effect from 2 7 th
August, 2 009 and shall remain in force up
to 31st March,2014 unless otherwise
specified.
All exports and imports up to 2 6th August
2 009 shall be accordingly governed by
the FTP 2004-2009.

Journey so far
In the last five years our exports witnessed robust growth to
reach a level of US$ 168 billion in 2008-09 from US$

63 billion in 2003-04.
Our share of global merchandise trade was 0.83%
in 2003; it rose to 1.45% in 2008 as per WTO
estimates. Our share of global commercial
services export was 1.4% in 2003; it rose to 2.8%
in 2008. Indias total share in goods and services
trade was 0.92% in 2003; it increased to 1.64% in
2008.
On the employment front, studies have suggested that nearly
14 million jobs were created directly or indirectly as a result of
augmented exports in the last five years.

What is in for future?

The short term objective of our policy is to arrest and reverse
the declining trend of exports and
To provide additional support especially to those sectors which
have been hit badly by recession in the developed world.
MOCI would like 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 Foreign Trade Policy
i.e. up to 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 Indias exports of goods and
services. The long term policy objective for the Government is
to double Indias share in global trade by 2020.

Special Focus
With a view to continuously increasing our 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.
Government of India shall make concerted efforts to promote
exports in these sectors by specific sectoral strategies that shall
be notified from time to time

FTP 2009-14
The focus market scheme has been extended to
26 new markets, which includes 16 in Latin
America and 10 in Asia-Oceania.
The government also introduced a new marketlinked focus product scheme where incentives will
be given to export of select items to 13 identified
markets like Egypt, Kenya, Nigeria, South
Africa, Tanzania, Australia and New Zealand.
The policy also sought to ensure that dollar credit
needs of exporters are met in a timely manner by
setting up a committee, including finance
secretary, commerce secretary and the Indian
Banks Association (IBA) to monitor credit flow

FTP 2009 -14

To help the industry upgrade technology, the policy introduced a scheme for
importing capital goods at zero duty for identified sectors like engineering,
chemicals, electronic products, pharmaceuticals, textiles, handicrafts,
plastics and leather and leather products, subject to an obligation to carry
out specified amount of exports.
The existing export promotion capital goods (EPCG) scheme
allows import of machinery at 3% duty against an export obligation.
Status holding exporterswhose exports are over and above specified
levelswill be allowed additional duty credit scrips for import of capital
goods for personal use at lower import duties. The discount will be
equivalent to 1% of the exports made in the previous year.
The government has also announced continuation of the DEPB scheme
beyond December 31, 2009, to December 31, 2010, and the
enhanced ECGC cover till March 2010. The extension will help exporters in
taking pricing decisions over an extended period of time

Export Promotion Capital Goods Scheme

(EPCG)

Zero duty EPCG scheme allows import of capital

goods for pre production, production and post
production (including CKD/SKD thereof as well
as computer software systems) at zero Customs
duty.
It is subject to an export obligation equivalent to
6 times of duty saved on capital goods imported
under EPCG scheme, to be fulfilled in 6 years
reckoned from Authorization issue-date.
The scheme will be available for exporters of
engineering & electronic products, basic
chemicals & pharmaceuticals, apparels &
textiles, plastics, handicrafts, chemicals & allied
products and leather & leather products;

Duty Entitle Pass Book Scheme (DEPB)

Objective of DEPB is to neutralise incidence of customs
duty on import content of export product. Component
Scheme of customs duty on fuel appearing as consumable
shall also be factored in the DEPB rate.
Component of Special Additional Duty shall also be allowed
under DEPB (as brand rate) in case of non-availment of
CENVAT credit. Neutralisation shall be provided by way of
grant of duty credit against export product.
An exporter may apply for credit, at specified percentage of
FOB value of exports, made in freely convertible currency.
DEPB and / or items imported against it are freely
transferable.

MARKET AREA INITIATIVE

Under MAI scheme, Financial assistance is provided (MAI) for export
promotion activities on focus country, focus product basis.
Financial assistance is available for Export Promotion Councils (EPCs),
Industry and Trade Associations (ITAs), Agencies of State
Government,Indian Commercial Missions (ICMs) abroad and other
national level institutions/eligible entities as may be notified.
A whole range of activities can be funded under MAI scheme. These
include, amongst others,
i. Market studies/surveys,
ii. Setting up of showroom / warehouse,
iii. Participation in international trade fairs,
iv. Displays in International departmental stores,
v. Publicity campaigns,
vi. Brand promotion,
vii. Reimbursement of registration charges for
pharmaceuticals and expenses for carrying out clinical
trials etc., in fulfillment of statutory requirements in
the buyer country,
viii. Testing charges for engineering products abroad,
ix. Assistance for contesting Anti Dumping litigations
etc.
Each of these export promotion activities can receive financial assistance
from Government ranging from 25% to 1 00% of total cost depending
upon activity and implementing agency.

Market Development Assistance

Under MDA Scheme, financial assistance is provided
Assistance (MDA) for a range of export promotion
activities implemented by EPCs and Trade Promotion
Organizations on the basis of approved annual action
plans.
Assistance includes, amongst 31 others, participation in
i. Trade Fairs and Buyer Seller meets abroad or

in India,
ii. Export promotions seminars.
iii. Financial assistance with travel grant is
available to exporters traveling to focus areas, viz.,
Latin America, Africa, CIS region, ASEAN
countries, Australia and New Zealand.
In other areas, financial assistance without
travel grant is available.

Status Holders

Applicant shall be categorized depending on his total FOB

(FOR - for deemed exports) export performance during current plus
previous three years (taken together) upon exceeding limit below.
For Export House (EH) Status, export performance is necessary in at
least two out of four years (i.e., current plus previous three years).
Merchant as well as Manufacturer Exporters, Service and Trading
Houses Providers, Export Oriented Units (EOUs) and Units
Status located in Special Economic Zones (SEZs), Agri Export Zones
(AEZs), Electronic Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) and Bio- Technology Parks (BTPs) shall be
eligible for status.
Status Category Export Performance FOB / FOR Value
(Rupees in Crores)
Export house

20

Star Export house

100

Trading house

500

Star trading house

2500

Premier Trading house

7500

Privileges of status
holders
A Status Holder shall be eligible for privileges as under:
(i) Authorization and Customs Clearances for both imports
and exports on self-declaration basis;
(ii) Fixation of Input-Output norms on priority within 60 days;
Different standard Input Output Norms(SION) for different
industries such as chemical, electronics etc.
(iii) Exemption from compulsory negotiation of documents
through banks. Remittance / Receipts, however, would be
received through banking channels;
(iv) 100% retention of foreign exchange in EEFC account;

Privileges of status
(v) Exemption from furnishing of BG in Schemes under
holders

FTP
(vi) SEHs and above shall be permitted to establish Export
Warehouses subject to government norms.
(vii) For status holders, a decision on conferring of ACP Status
shall be communicated by Customs within 3 0 days from
receipt of application with Customs.
(viii) As an option, for Premier Trading House (PTH), the
average level of exports under EPCG Scheme shall be the
arithmetic mean of export performance in last5 years, instead
of 3 years.
(ix) Status Holders of specified sectors shall be eligible for
Status Holder Incentive Scrip under Para 3 .16 of FTP.
(x)Status Holders of Agri. Sector (Chapter 1 to 24 ) shall be
eligible for Agri. Infrastructure Incentive Scrip under VKGUY Para 3.13.4 of FTP.

Agriculture and Village

Industry
(a) Vishesh Krishi and Gram Udyog Yojana
(b) Capital goods imported under EPCG will be permitted
to be installed anywhere in AEZ.
(c) Import of restricted items, such as panels, are
allowed
under various export promotion schemes.
(d) Import of inputs such as pesticides are permitted
under Advance Authorisation for agro exports.
(e) New towns of export excellence with a threshold
limit of Rs 150 crore shall be notified.
(f) Certain specified flowers, fruits and vegetables are
entitled to a special duty credit scrip, in addition to the
normal benefit under VKGUY.

Handlooms
(a) Specific funds are earmarked under MAI / MDA
Scheme for promoting handloom exports.
(b) Duty free import entitlement of specified trimmings and
embellishments is 5 % of FOB value of exports during
previous financial year.
c) Duty free import entitlement of hand knotted carpet
samples is 1 % of FOB value of exports during previous
financial year.
(d) Duty free import of old pieces of hand knotted
carpets on consignment basis for re-export after repair is
permitted.
(e) New towns of export excellence with a threshold limit of
Rs 150 crore shall be notified.
(f) Machinery and equipment for effluent treatment plants
is exempt from customs duty.

Handicrafts
(a) Duty free import entitlement of tools, trimmings and embellishments
is 5 %of FOB value of exports during previous financial year. Entitlement
is broad banded, and shall extend also to merchant exporters tied up
with supporting manufacturers.
(b) Handicraft EPC is authorized to import trimmings, embellishments
and consumables on behalf of those exporters for whom directly
importing may not be viable.
(c) Specific funds are earmarked under MAI & MDA Schemes for
promoting Handicraft exports.
(d) CVD is exempted on duty free import of trimmings, embellishments
and consumables.
(e) New towns of export excellence with a reduced threshold limit of Rs
150 crore shall be notified.
(f) Machinery and equipment for effluent treatment plants are exempt
from customs duty.
(g) All handicraft exports would be treated as special Focus products
and entitled to higher incentives.

AGRICUTURE
New scheme Special Agricultural Produce
scheme for promoting export of
flowers/fruits/vegetables & minor forest
produce
Development of AEZ
Duty free imports under EPCG
Towns of excellence threshold limit @ 250 cr
Import of seeds/bulbs, tubers & planting
material liberalized

Special agricultural produce scheme

(Vikesh Krishi and Gram Udyog Yojana)
Objective promote export of fruits,
vegetables, flowers & minor forest produce
Entitlement duty free credit @3. 5% of FOB
of exports for each licensing year from 1.04.04.
Imports allowed inputs or goods including
capital goods permitted
Centvat/duty drawback- additional customs
and excise duty can be adjusted against
Centvat or DDB

HANDLOOMS

Special funds for MAI ( Market Access Initiative) /

MDA (Market Development Assistance) for
promoting handloom exports
Duty free entilement(5% of FOB value of exports)
for trimmings & embellishments
Duty free import @ 1% for hand knotted carpet
samples
Duty free import of old pieces offhand knotted
carpets for re export
New towns of excellence
Kannor/Karur/Madurai/Kekhra

HANDICRAFTS
New Handicrafts SEZ for procuring from cottage
sector and exporting
Duty free import entitlement @ 5%for trimmings
and embellishment
Handicraft Export Promotion Council to import
trimmings ,embellishment & consumableson behalf
of exporters for whom direct imports is not viable
CVD exemption for trimmings ,embellishment
Duty free import of commercial samples up to Re
10000
New towns of excellence - Jodhpur

LEATHER & FOOT WEAR

Duty free entitlement for imports @ 5%
Exemption from basic customs duty for
machinery and equipment for Effluent
Treatment Plants
Re-export of unsuitable imported materials
such as raw hides & skins and wet blue leather
is permited.
CVD exemption for lining and interlining
material

GEMS & JEWELLERY

Import of gold of 18c & above under
replenishment scheme
Duty free entitlement for consumables
Duty free entitlement of samples up to
Re 100,000.

Procedural
simplification
Exporters with turnover of 5 cr & good track
record exempted from BG (for customs) to
reduce transaction cost
Exemption from service tax
Validity of licences/enetilements increased to
24 months
Number returns to be filed is reduced
Enhanced delegatory powers for zonal DGFT
Tier bound introduction of EDI

Other iniatives
Import of second hand goods with out age
restriction
Setting up of Services promotion export council
To map up opportunities for key service
rpoviders like engineering,multimedia,software
developers etc
Development of Pragati maidan -develop into
world class complex for exhibition/conference
etc .
Common facilities centre for use by home based
service providers

Other iniatives
Free Trade & Ware housing zones- to
facilitate import and export of goods and
services with freedom to carry out trade
transactions in free currency for making a
global trading hub.
100 % FDI permitted to develop such
zones.

Other initiatives
LEGAL AID- for deserving exporters on the
basis of export promotion council for meeting
cost of legal expeses connected with trade
related matters
Grievance Redressal for speedy disposal of
trade and industry
Served from India Scheme - objective is to
accelerate service exports. Service providers
with exchange earning of atleast Re 10 lacs in
the preceding financial yr are eligible for duty
credit entitlement

Other intiatives
Market access Initiative (MAI) financial
assitance for medium term export
promotion to be used by export promotion
councils, state government, industry and
trade associations etc
For market studies, setting up of show
room, sales promotion campaigns ,
participation international fairs, brand
promotion etc

Other initiatives
Market development assistance (MDA)
Available for exporters with export turnover up
to Re 5 cr
Meant for export promotion activities such as
participation trade fairs, buyer seller meet,
export promotion seminars,travel abroad to
Focus area such as lation american countries,
ASEAN, Australia, & New Zealand.

Export Oriented Units

100 % CREDIT TO EEFC
Import of goods on self declaration basis
IT benefit on plant & machinery shall be
extended to DTA units on conversion to EOU
Exemption from service tax
Textiles and garments disposal of residual
material up to 2 % of CIF or quantity on
payment of duty on transition value

Special Economic Zones

SEZ duty free enclave and deemed foreign
territory of trade operations and duties and
tariffs
Deemed foreign territory for operations and
tariffs.
Goods and services going to SEZ treated as
exports and goods from DTA as imports
SEZ can import from DTA / Bonded Houses
with out payment of duty
Period of realization with out time limit

SEZ
Incentives for Developers of SEZ

Foreign Direct Investment (100%) allowed

Income Tax benefit 100% in 1st 5 years &
50% in next 2 years
Duty free import/domestic procurement of
goods for development, operation and
maintenance of SEZs
Exemption from Service tax for development,
operation and maintenance of SEZs
Exemption from Service Tax
Allocation of power to SEZ from central
quota

SEZ incentives for

developers .
Authorized to provide and maintain
services like water, electricity,
security, restaurants and recreation
centers on commercial lines.

SEZ- CRITERIA FOR

APPROVALS

SEZ size not to be less than 1000 hectares

Sector specific SEZ can be set up in lesser area
Units to be approved under the SEZ Scheme
At least 25% area in integrated SEZ to be earmarked
as processing area