FOREIGN TRADE POLICY (2009-2014)/(2010-2014)

Team Members

Tanvi- 33 Ricken- 45 Urvika- 35 Priti- 04 Vanessa- 38 Viral- 41

Definition
A Handbook of Export Import Policy of Indian, Procedures, Taxes, Duties and Notifications of India Trade Policy

Introduction

The foreign trade policy for the period 2009-2014 was announced on 27th August 2009 at a time when the world was emerging from the shadow of a challenging economic period, the worst we have seen in the last 7 decades. Economies and markets across the world were in turmoil, causing sharp contraction in international trade, adversely impacting global investment flows, rendering over 50 million people jobless

The world trade witness an unprecedented contraction of over 12%. In this backdrop, the key objective for foreign trade policy was to arrest the declining exports and reverse trend. A multi-pronged strategy was adopted to provide stability of policy and giving additional support, especially to employment intensive sectors

Market diversification strategy under pinned out approach to reach out to non-traditional destinations in Africa, Latin America and Asia since our traditional markets in the developed world witnessed a sharp contraction in demand. We were also committed to encourage technological upgradation of exports and undertake an exercise of simplification of procedures for reducing transaction costs

These constituted the key principles based on which the policy was announced last year and we can look back with a sense of satisfaction that we are able to achieve the immediate objectives of our policy. Exports which were steadily declining since October 2008 turned the corner in October 2009 and we ended last year with exports of US$ 178.66 billion. In the first quarter of 2010-11, exports have grown by 32%, compared to last year

In the last one year, we have undertaken significant measures in reaching out to the world and have been actively engaged in bilateral trade negotiations.

As part of our Look East policy, we concluded Trade in Goods Agreement with ASEAN and Korea and are now currently engaged in negotiations with Malaysia, Japan and the EU.

We have been holding a continuous dialogue with all stakeholders including industry associations, Export Promotion Councils to obtain sectoral feedback to enable us to make mid-course corrections. This year, we are coming out with a supplement to the policy announced last year, building on experience which we gained while maintaining continuity and stability in policy and also providing benefit to those sectors which are still struggling.

Labour intensive sectors are being given special attention and the policy parameters have been crafted to enhance the competitiveness of our exports by supporting upgradation in technologies. A committee of experts had been constituted to examine the whole gamut of transaction costs and the entire value chain of exports.

The recommendations of the committee are being finalized and will be implemented over the next few months.

Foreign Trade Policy 2009-2014; Objectives

To arrest and reverse declining trend of exports is the main aim of policy, aim to be reviewed after 2 years. To double export of goods and services from India by 2014 To double Indias share in global merchandise trade Simplification of the application procedure for availing various benefits

Foreign Trade Policy 2009-2014; Aims in general

To develop export potential, improve export performance, boost foreign trade and earning valuable foreign exchange. FTP assumes great significance this year as India's exports have been battered by the global recession. To generate new employment opportunities because a fall in exports has led to the closure of several small- and medium-scale export-oriented units, resulting in large-scale unemployment.

Legal Framework

The Preamble spells out the broad framework and is an integral part of the Foreign Trade Policy. The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.

Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy.

Licences, certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such licence, certificate or permission was issued unless otherwise stipulated.

Special Focus Initiatives

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. Further Sectoral Initiatives in other sectors will also be announced from time to time.

Market Diversification

During 2008-09 and 2009-10, weaker demand in developed economies, triggered by falling asset prices and increased economic uncertainty had pulled down the growth of Indias exports to developed countries. To insulate Indian exports from the decline in demand from developed countries, in this Policy, focus is on diversification of Indian exports to other markets, specially those located in Latin America, Africa, parts of Asia and Oceania.

To achieve diversification of Indian exports, following initiatives have been taken under this Policy.

1.

2.

27 new countries have been included within the ambit of Focus Market Scheme. The incentives provided under Focus Market Scheme have been increased from 2.5% to 3%.

Technological Upgradation

To usher in the next phase of export growth, India needs to move up in the value chain of export goods. This objective is sought to be achieved by encouraging technological upgradation of our export sector. A number of initiatives have been taken in this Policy to focus on technological upgradation, such initiatives include:

1.

The existing 3% EPCG(Export Promotion Capital Goods) Scheme has been considerably simplified, to ease its usage by the exporters. The facility of EPCG Scheme for Annual Requirement is being introduced to reduce documentation and transaction time.

2.

3.

To encourage value added manufacture export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme has been stipulated.

Agriculture and Village Industry

1.

Vishesh Krishi and Gram Udyog Yojana. Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ(Agri Export Zone). Import of restricted items, such as panels, are allowed under various export promotion schemes. Import of inputs such as pesticides are permitted under Advance Authorization for agro exports.

2.

3.

4.

Handlooms
1.

2% bonus benefits under focus product scheme. Specific funds are earmarked under MAI(Market Access Initiative) / MDA(Market Development Assistance) Schemes for promoting handloom exports. Duty free import entitlement of specified trimmings and embellishments is 5% of FOB value of exports during previous financial year. Handloom madeups have also been included for the entitlement.

2.

3.

Handicrafts
1.

Handicraft EPC is authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable. Specific funds are earmarked under MAI & MDA Schemes for promoting Handicraft exports. CVD(Countervailing Duty) is exempted on duty free import of trimmings, embellishments and consumables. New towns of export excellence with a reduced threshold limit of Rs 150 crores shall be notified.

2.

3.

4.

Gems & Jewellery

1.

Import of gold of 8k and above is allowed under replenishment scheme subject to import being accompanied by an Assay Certificate specifying purity, weight and alloy content. Duty free import entitlement of commercial samples shall be Rs. 300,000.

2.

3.

Duty free re-import entitlement for rejected jewellery shall be 2% of FOB value of exports.

Leather and Footwear

1.

Additional 2% bonus benefits under Focus Product Scheme. Finished Leather exports to be incentivized under Focus Product Scheme. Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year.

2.

3.

Marine Sector

Duty free import of specified specialized inputs / chemicals and flavouring oils is allowed to the extent of 1% of FOB(Free On Board) value of preceding financial years export.
To allow import of monofilament longline system for tuna fishing at a concessional rate of duty and Bait Fish for tuna fishing at Nil duty.

Electronics and IT Hardware Manufacturing Industries

1.

Export of electronic goods to be incentivized under Focus Product Scheme. Expeditious clearance of approvals required from DGFT(Director General Of Foreign Trade), shall be ensured. Exporters /Associations would be entitled to utilize MAI & MDA Schemes for promoting Electronics and IT Hardware Manufacturing industries exports.

2.

3.

Sports Goods and Toys

1.

Duty free import of specified specialized inputs allowed to the extent of 3% of FOB value of preceding financial years export. Sports goods and toys shall be treated as a Priority sector under MDA / MAI Scheme. Specific funds would be earmarked under MAI / MDA Scheme for promoting exports from this sector. In addition to above, 2% bonus benefits under Focus Product Scheme for Sports Goods & Toys.

2.

3.

Green Products & Technologies

1.

India aims to become a hub for production and export of green products and technologies. To achieve this objective, special initiative will be taken to promote development and manufacture of such products and technologies for exports.

2.

General Provisions Regarding Imports And Exports

1.

Exports and Imports shall be free, except where regulated by FTP(Foreign Trade Policy) or any other law in force. The item wise export and import policy shall be, as specified in ITC(Indian Trade Classification (HS) notified by DGFT, as amended from time to time.

2.

Import / export of arms and related material from / to Iraq shall be prohibited.

All imported goods shall also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods. No import or export of rough diamonds shall be permitted unless accompanied by Kimberley Process (KP) Certificate as specified by Gem & Jewellery EPC(Export Promotion Council).

DGFT may, through a notification, adopt and enforce any measure necessary for: Protection of public morals. Protection of human, animal or plant life or health. Protection of patents, trademarks and copyrights and the prevention of deceptive practices. Prevention of use of prison labour. Protection of national treasures of artistic, historic or archaeological value.

Conservation of exhaustible natural resources. Protection of trade of fissionable material or material from which they are derived; and Prevention of traffic in arms, ammunition and implements of war.

Every Authorization shall be valid for prescribed period of validity and shall contain such terms and conditions as may be specified by RA(Regional Authority) which may include: Quantity, description and value of goods Actual User condition Export obligation Value addition to be achieved Minimum export / import price

DGFT may issue instructions or frame schemes as may be required to promote trade and strengthen economic ties with neighbouring countries. Transit of goods through India from / or to countries adjacent to India shall be regulated in accordance with bilateral treaties between India and those countries and will be subject to such restrictions as may be specified by DGFT in accordance with International Conventions.

All second hand goods, except second hand capital goods, shall be restricted for imports and may be imported only in accordance with provisions of FTP, ITC (HS), HBP(Hand Book Procedures) volume1, Public Notice or an Authorization issued in this regard. Import of second hand capital goods, including refurbished / re-conditioned spares shall be allowed freely. However, second hand personal computers / laptops, photocopier machines, air conditioners, diesel generating sets will only be allowed against a license.

Any waste or scrap or remnant including any form of metallic waste & scrap generated during manufacturing or processing activities of an SEZ Unit/ Developer/Co-developer shall be allowed to be disposed in DTA(Domestic Tariff Area) freely subject to payment of applicable Customs Duty. Sale of goods on high seas for import into India may be made subject to FTP or any other law in force.

Goods, including edible items, of value not exceeding Rs.5,00,000 /- in a licensing year, may be exported as a gift.

Units in SEZ shall be exempted from service tax.

For all goods and services exported from India, services received / rendered abroad, where ever possible, shall be exempted from service tax.

Promotional Measures

Scheme for Assistance to States for Developing Export Infrastructure and Allied Activities (ASIDE) is formulated to involve the States in the export effort by providing assistance to the State Governments for creating appropriate infrastructure for the development and growth of exports. The Scheme is administered by Department of Commerce (DoC).

The objective of scheme is to establish a mechanism for involving the State Governments to participate in funding of infrastructure critical for growth of exports by providing export performance linked financial assistance to them. The specific purposes for which funds allocated under the Scheme can be sanctioned and utilized are as follows:

Creation of new Export Promotion Industrial Parks/Zones (SEZs/Agri Business Zones) and augmenting facilities in the existing ones. Setting up of electronics and other related infrastructure in export conclave. Equity participation in infrastructure projects including the setting up of SEZs. Meeting requirements of capital outlay of EPIPs/EPZs/SEZs.

Development of complementary infrastructure such as, roads connecting the production centres with the ports, setting up of Inland Container Depots and Container Freight Stations. Stabilizing power supply through additional transformers and islanding of export production centre etc. Development of minor ports and jetties to serve export purpose.

Assistance for setting up Common Effluent Treatment facilities. Any other activity as may be notified by DoC.

Under MAI scheme, Financial assistance is provided for export promotion activities on focus country, focus product basis.

A whole range of activities can be funded under MAI scheme. These include, amongst others Market studies/surveys, Setting up of showroom / warehouse,

Participation in international trade fairs Displays in International departmental stores Publicity campaigns Brand promotion Testing charges for engineering products abroad. Assistance for contesting Anti Dumping litigations etc.

Duty Exemption & Remission Schemes

Duty exemption schemes enable duty free import of inputs required for export production. Duty Exemption Schemes consist of (a) Advance Authorization scheme and (b) Duty Free Import Authorization (DFIA) scheme. A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in export product. Duty remission schemes consist of (a) Duty Entitlement Passbook (DEPB) Scheme and (b) Duty Drawback (DBK) Scheme.

EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS (BTPs).

An EOU / EHTP(Electronic Hardware Technology Park) / STP(Software Technology Park) / BTP(Biotechnology Park) unit may export all kinds of goods and services except items that are prohibited in ITC (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in ITC(HS).

Procurement and supply of export promotion material like brochure/literature, pamphlets, hoardings, catalogues, posters etc, up to a maximum value limit of 1.5% of FOB value of previous years exports shall also be allowed. EOU / EHTP / STP / BTP units may import / procure from DTA, without payment of duty, certain specified goods for creating a central facility. Software EOU / DTA units may use such facility for export of software.

Gems and jewellery EOUs may source gold / silver / platinum through nominated agencies on loan / outright purchase basis. Units obtaining gold / silver / platinum from nominated agencies, either on loan basis or outright purchase basis shall export gold / silver / platinum within 90 days from date of release.

Procurement and export of spares / components, upto 5% of FOB value of exports, may be allowed to same consignee / buyer of the export article, subject to the condition that it shall not count for NFE(Net Foreign Exchange) and direct tax benefits. Second hand capital goods, without any age limit, may also be imported duty free.

Other entitlements of EOU / EHTP / STP / BTP units are as under: Exemption from Income Tax as per Section 10A and 10B of Income Tax Act. Exemption from industrial licensing for manufacture of items reserved for SSI sector. Export proceeds will be realized within 12 months.

Units will be allowed to retain 100% of its export earning in the EEFC(Exchange Earners Foreign Currency) account. Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, where unit has, A turnover of Rs. 5 crores or above Unit is in existence for at least three years 100% FDI investment permitted through automatic route similar to SEZ units.

1.

2.
3.

Special Economic Zones

Special Economic Zones (SEZ) are growth engines that can boost manufacturing, augment exports and generate employment. The private sector has been actively associated with the development of SEZs. The SEZs require special fiscal and regulatory regime in order to impart a hassle free operational regime encompassing the state of the art infrastructure and support services.

The proposed legislation on SEZs to be enacted in the near future would cover the concepts of the developer and co- developer , incorporate the provision of virtual SEZs, have fiscal concessions under the Income Tax and Customs Act, provide for Offshore Banking Units (OBUs) etc

SEZ units may export goods and services including agro-products, partly processed goods, subassemblies and components except prohibited items of exports in ITC (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfilment of the conditions indicated in the ITC (HS) Classification of Export and Import Items.

SEZ units, other than trading/service unit, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer, subject to RBI clearance, if any. Gem & Jewellery units may also source gold/ silver/ platinum through the nominated agencies. SEZ units may import/procure goods and services from DTA without payment of duty for setting up, operation and maintenance of units in the Zone.

Free Trade & Warehousing Zones

The objective is to create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency.

The scheme envisages creation of world-class infrastructure for warehousing of various products, state-of-the-art equipment, transportation and handling facilities, commercial office-space, water, power, communications and connectivity, with onestop clearance of import and export formality, to support the integrated Zones as international trading hubs.

These Zones would be established in areas proximate to seaports, airports or dry ports so as to offer easy access by rail and road.

Deemed Exports

Deemed Exports refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange.

Highlights of the Policy

Special Bonus Benefit Scheme

It has been decided to introduce a new scheme to provide special assistance to specified sectors Engineering, Pharmaceutical and Chemical sectors.

Some of the major items under Engineering are cast article of alloys steel and stainless steel, hand tools, gas compressors, motorcycles and goods vehicle. The list under chemicals and pharma include carbon black, potassium iodide, niacin amide, erythromycin and its derivatives, ciprofloxacine etc.

Special Focus Market Scheme (SFMS)

Special Focus Market Scheme has been introduced with a view to increase the competitiveness of exports with a geographical targeting. The scheme would provide additional 1 % duty credit when exports are made to these countries. The markets are categorized into three groups, namely Latin American, African and CIS (Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) countries.

Support to Apparel Sector

Items were granted duty credit for export to USA till 30.9.2010 and for exports to EU up to 31.3.2011. However, at present the readymade garments are not covered. The duty credit would be available to exports made during 1.4.2011 to 31.3.2012 @ 2 % of FOB value of exports.

Focus Product Scheme

The list of items under FPS has been expanded to include 130 additional items. These items are mainly in the sectors of Chemical/Pharmaceuticals, Textiles, handicrafts, Engineering and electronics sector. These include chemicals like soda ash, other amides and their derivatives, silicon in primary forms, oxygen function amino compound and methyl diethanolamine.

Important electronics items included in the list are: static converters, optical disc drives, parts of mobile hand sets, push button phones, telephone answering machines, standard wires cables of copper, optical fibre cable, parts of telecom transmission equipment. Important engineering items like other Ferrochromium, insulated conductors, vending machines, lithographic plates, and biomass gasifiers, fittings for doors and windows made of brass, name sign plates have also been included in the list.

Textile items like polyester textured yarn, fully drawn yarn of polyester, viscose rayon type yarn, polyester chips, woven cotton fabrics denim 85% cotton, unbleached or bleached cotton fabrics, dyed cotton fabrics knitted or crocheted have been included under the scheme.

This Scheme has also been extended to printing on cartons, boxes, cases, bags and other packing containers, erasers and pencil sharpeners.

The items covered under FPS are entitled to get duty credit scrip @ 2% of FOB value of exports.

Market Linked Focus Product Scheme

The list of items under MLFPS has been extended to cover new items to specified countries. It has been decided to extend MLFPS for exports of Agricultural tractors> 1800cc capacity which would now be eligible for duty credit for exports made to Turkey. Sugar machinery & high-pressure boilers would be eligible for Brazil, Kenya, South Africa, Tanzania and Egypt. The scheme has also been extended to all existing MLFPS Countries for printing inks, writing ink etc. The items covered under MLFPS are entitled to get duty credit scrip @ 2% of FOB value of exports.

Towns of Export Excellence

The towns of Firozabad for glassware, Bhubaneswar for marine products and Agartala for bamboo and cane products have been notified as town of export excellence. Selected towns producing goods of Rs. 1000 crore or more will be notified as Towns of Exports Excellence on the basis of potential for growth in exports. However for the Towns of Export Excellence in the Handloom, Handicraft, Agriculture and Fisheries sector, the threshold limit would be Rs 250 crores.

Procedural Simplification

Import of Radioimmunoassay Kits was classified in the Restricted category. Since the import item is intended for the diagnosis of disease / disorders in Humans and Animals, the import policy regime for this item is being liberalized to Free subject to prior permission of Atomic Energy Regulatory Board. The procedures for Transfer/ sale of imported firearms have been simplified. For sale/transfer of imported firearms prior permission from DGFT is not required after 10 years of import.

Change in Export Promotion Capital Goods Scheme

Export obligation reduced to 50% to increase the life of existing plant and machinery Export obligation period was increased by 5 years

Changes in Marine Sector

Fisheries have been included in sectors which are exempted from maintenance of average export obligation under Export Promotion Capital Goods scheme Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector

Changes in Gems and Jewellery Sector

Plan of establishing Diamond Bourses around the country. Import of cut and polished diamonds for certification and grading has been introduced on consignment basis.

1. 2.

Personal carriage limit increased For exhibitions US$ 5 million For samples US$ 1 million

Changes in Agriculture Sector

To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

Changes in Leather Sector

Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty. Enhancement of FPS rate to 2%, would also significantly benefit the leather sector

Changes for Export of Tea

Minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%.

DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%. Export of tea has been covered under VKGUY Scheme benefits.

Changes in Handloom Sector

To simplify claims under FPS, requirement of Handloom Mark for availing benefits under FPS has been removed.

Changes for Export Oriented Units

EOUs can sell 90% of their production in Domestic Tariff Area EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards

Conclusion

Conversion of Imports and Exports (Control) Act, 1947 to Foreign Trade Development and Regulation Act, 1992 was a remarkable change

Foreign Trade Policy 2004-2009 had a good impact on Indias trade Focus Market Scheme in Foreign Trade Policy 2009-2014 was an important factor.

Free Trade Agreement

Free Trade Agreement

A free-trade area (FTA) is a trade bloc whose member countries have signed a free-trade agreement (FTA), which eliminates,

Tariffs, Import quotas, Preferences on most (if not all) goods and services traded between them.

If people are also free to move between the countries, in addition to FTA, it would also be considered an open border. It can be considered the second stage of economic integration. Countries choose this kind of economic integration if their economical structures are complementary. If their economical structures are competitive, they are more likely to form a customs union.

Advantages

The aim of a free-trade area is to reduce barriers to exchange so that trade can grow as a result of specialization. Division of labour, and most importantly via comparative advantage. Within an industrialized country there are usually few if any significant barriers to the easy exchange of goods and services between parts of that country. For example, there are usually no trade tariffs or import quotas;

There are usually no delays as goods pass from one part of the country to another (other than those that distance imposes) There are usually no differences of taxation and regulation. Between countries, On the other hand, many of these barriers to the easy exchange of goods often do occur. It is commonplace for there to be import duties of one kind or another (as goods enter a country) and the levels of sales tax and regulation often vary by country.

Description

Members of a free-trade area do not have a common external tariff, which means they have different quotas and customs, as well as other policies with respect to non-members. To avoid tariff evasion (through re-exportation) the countries use the system of certification of origin most commonly called rules of origin,

Where there is a requirement for the minimum extent of local material inputs and local transformations adding value to the goods.

Only goods that meet these minimum requirements are entitled to the special treatment envisioned by the free trade area provisions.

SAFTA South Asia Free Trade Area

The Agreement on South Asian Free Trade Area (SAFTA) came into force from 1st January,2006. India, Pakistan and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCS). Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States

Article 7 of the SAFTA Agreement provides for a phased tariff liberalization programme. (TLP) under which, in two years, NLDCS would bring down tariffs to 20%. While LDCS will bring them down to 30%.

Non-LDCS will then bring down tariffs from 20% to 0-5% in 5 years (Sri Lanka 6 years), while LDCS will do so in 8 years. NLDCs will reduce their tariffs for L.D.C. products to 0-5% in 3 years. This TLP would cover all tariff lines except those kept in the sensitive list (negative list) by the member states.

Rules of Origin

For giving preferential access to the Member Countries under SAFTA, the goods shall have undergone substantial manufacturing process in the exporting countries. The substantial manufacturing process are defined in terms of twin criteria of Change of Tariff Heading (CTH) at four-digit Harmonized Coding System (HS) and value content of 40% (30% for LDCSs).

Apart from the general rules, to provide for ProductsSpecific Rules (PSR) for 191 tariff lines to accommodate the interest of LDCSs given their limited base for natural resources and undiversified industrial structure. The Products Specific Rules have been provided clearly on technical grounds i.e. where both inputs and outputs are at the same four-digit HS level.

India would provide zero duty market access for 8 million pieces of garments from Bangladesh . Which are in the Sensitive list of India without any sourcing condition. A Memorandum of Understanding signed by both sides would be notified soon.

Mechanism for Compensation of Revenue Loss (MCRL) for the Least Developed Contracting States

The compensation to LDCSs, except to Maldives, would be available for four years To Maldives it would be for six years. The MCRL to Afghanistan, which is due to Become a party to the SAFTA, will also be at par with Maldives.

The compensation would be in the form of grant in US dollar. The compensation shall be subject to a cap of 1%, 1%, 5% and 3% of customs. Revenue collected on non sensitive items under bilateral trade in the base year. Average of 2004 and 2005.

Technical Assistance to Least Developed Contracting States in Agreed Areas

The main areas covered are - capacity building in standards, product certification, training of human resources, data management, institutional up gradations, improvement of legal Systems and administration, customs procedures and trade facilitation, market development and promotion.

The Asia-Pacific Trade Agreement

Bangladesh China India Republic of Korea Sri Lanka

RECOGNIZING the urgent need to take action to implement a trade expansion programme among the developing member countries.

Of the Economic and Social Commission for Asia and the Pacific (ESCAP) pursuant to the decisions contained in the Kabul Declaration of the Council of Ministers on Asian Economic Co-operation.

And within the framework of the Asian Trade Expansion Programme which was adopted by the Intergovernmental Committee on a Trade Expansion Programme created under the Kabul Declaration. REALIZING that the expansion of trade could act as a powerful stimulus to the development of their national economies,

By expanding investment and production opportunities through benefits to be gained from specialization and economies of scale.

Thus providing greater opportunities of employment and securing higher living standards for their populations.

Direct Consignment

The following shall be considered as directly consigned from the exporting Participating State to the importing Participating State: If the products are transported without passing through the territory of any non- Participating State The products whose transport involves transit through one or more intermediate non- Participating States with or without transshipment or temporary storage in such countries, provided that

The transit entry is justified for geographical reason or by considerations related exclusively to transport requirements; The products have not entered into trade or consumption there ; and The products have not undergone any operation there other than unloading and reloading or any operation required to keep them in good condition.

Certificate of Origin
Products eligible for preferential concessions shall be supported by a Certificate of Origin8 issued by an authority designated by the government of the exporting Participating State and notified to the other Participating States in accordance with the attached sample Certificate of Origin and notes for the completion thereof.

Prohibition and Co-Operation

Any Participating State may prohibit importation of products containing any inputs originating from States with which it does not have economic and commercial relations. Participating States will do their best to co-operate in order to specify origin of inputs in the Certificate of Origin.

Special Criteria Percentage

Products originating in least developed Participating States can be allowed a favorable 10 percentage points applied to the percentages established in Rules 3 and 4. Thus, for Rule 3, the percentage would not exceed 65 percent, and for Rule 4, the percentage would not be less than 50 percent.

Products Included

The following shall be considered as wholly produced or obtained in the exporting Participating State: Raw or mineral products extracted from its soil, its water or its sea beds Agricultural products harvested there, Animals born and raised there,

Products eligible for preferential concessions shall be supported by a Certificate of Origin8 issued by an authority designated by the government of the exporting Participating State and notified to the other Participating States in accordance with the attached sample Certificate of Origin and notes for the completion thereof. Products obtained by hunting or fishing conducted there. Products of sea fishing and other marine products taken from the high seas by its vessels.

Products processed and/ or made on board its factory ships exclusively from products referred to in paragraph above. Parts or raw materials recovered there from used articles which can no longer perform their original purpose nor are capable. Used articles collected there which can no longer perform their original purpose there nor are capable of being restored or repaired and which are fit only for disposal or for the recovery of parts or raw materials.

AIFTA

AIFTA means the ASEAN-India Free Trade Area under the Framework Agreement on Comprehensive Economic Cooperation between the Republic of India and the Association of Southeast Asian Nations. GATT 1994 means the General Agreement on Tariff and Trade 1994 in Annex 1A to the WTO Agreement, including its Notes and Supplementary Provisions.

New ASEAN Member States refers to Cambodia, Lao PDR, Myanmar and Viet Nam. Parties means India and ASEAN Member States collectively. This Agreement shall apply to trade in goods and all other matters relating thereto as envisaged in the Framework Agreement.

Countries

Brunei Darussalam Cambodia India Indonesia Lao PDR Malaysia Myanmar Singapore Thailand Vietnam India (for Philippines only) The Philippines

Advantages

REITERATING the importance of special and differential treatment to ensure the increasing participation of the new ASEAN Member States in economic integration and cooperation activities between India and ASEAN. REAFFIRMING the Parties commitment to establish the ASEAN-India Free Trade Area while allowing flexibility to Parties to address their sensitive areas as provided in the Framework Agreement

India-Sri Lanka FTA

The Contracting Parties shall establish a Free Trade Area in accordance with the provisions of this Agreement and in conformity with relevant provisions of the General Agreement on Tariff and Trade, 1994. The objectives of this Agreement are: To promote through the expansion of trade the harmonious development of the economic relations between India and Sri Lanka.

In the implementation of this Agreement the Contracting Parties shall pay due regard to the principle of reciprocity. To contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade.

To provide fair conditions of competition for trade between India and Sri Lanka.

Elimination of Tariffs The Contracting Parties hereby agree to establish a Free Trade Area for the purpose of free movement of goods between their countries through elimination of tariffs on the movement of goods.

General Exceptions Nothing in this Agreement shall prevent any Contracting Party from taking action and adopting measures, which it considers necessary for the protection of its national security, the protection of public morals, the protection of human, animal or plant life and health, and the protection of articles of artistic, historic and archaeological value, as is provided for in Articles XX and XXI of the General Agreement on Tariff and Trade, 1994.

Concession offered by India

The Government of India shall grant duty free access to all exports from Sri Lanka in respect of items freely importable into India, except on items listed in Annex D of this Agreement, in accordance with the phase out schedule detailed below: Upon entry into force of the Agreement. Zero duty access for the items in Annexure E.

50% margin of preference on the remaining items except on items listed in Annexure D. Concessions on items in Chapters 51 to 56, 58 to 60 and 63 shall be restricted to 25%. The margin of preference on the items mentioned in (b) above shall be increased to 100% in two stages within three years of the coming into force of the Agreement, except for the textiles items referred to in 1(b) above.

Concession offered by Sri Lanka

Government of Sri Lanka shall provide tariff concessions on exports from India to Sri Lanka in respect of items freely importable into Sri Lanka, as detailed below:Zero duty for the items in Annex F I, upon entering into force of the Agreement.

50% margin of preference for the items in Annex F II, upon coming into force of the Agreement. The margin of preference in respect of these items shall be deepened to 70%, 90% and 100%, respectively, at the end of the first, second and third year of the entry into force of the Agreement. For the remaining items except those in Annex D, the tariffs shall be brought down by not less than 35% before the expiry of three years and 70% before the expiry of the sixth year and 100% before the expiry of eight years, from the date of entry into force of the Agreement.

Products Included

Raw or mineral products extracted from its soil, its water or its seabed. Vegetable products harvested there.

Animals born and raised there.

Products obtained by hunting or fishing conducted there.

Used articles collected there, fit only for the recovery of raw materials. Waste and scrap resulting from manufacturing operations conducted there. Products extracted from the seabed or below seabed which is situated outside its territorial waters, provided that it has exclusive exploitation rights.

Other Agreements/ Negotiations

Agreement on implementation of India Malaysia CECA Framework Agreement with ASEAN Framework agreement with Chile Framework Agreement with GCC States Framework Agreement with Thailand India EU Trade and Investment Agreement TIA

India US Trade Policy Forum Joint Statement India and Australia Joint Free Trade Agreement India Bangladesh Trade Agreement India Ceylon Trade Agreement India DPR Korea Trade Agreement India EU Strategic Partnership Joint Action Plan India Indonesia Joint Study Group Report

India-Australia FTA

Need

Setting a target of doubling bilateral trade in five years, India and Australia on Thursday agreed to start talks on a comprehensive free trade agreement (FTA) in June. Bilateral trade between the two economies was about $20 billion in 2009-10, tilted in favor of Australia because of India's need for natural resources. A free trade agreement will open up markets in goods and services and facilitate investments in both countries.

Benefits

India is Australia's fourth largest export market, being a heavy importer of gold, coal and copper. It is also a big contributor to Australia's lucrative foreign student market. In the nine months to March, it had a trade deficit of A$9.6 billion with Australia.

Both countries are expected to make substantial welfare gains from the FTA, with Australia's being slightly more than India's, according to the IndiaAustralia joint FTA feasibility study carried out by experts from both sides. The welfare gains could be in the range of 0.15%1.14% of GDP for India, and 0.23%-1.17% of GDP for Australia, the study says.

Products Included

Services is one area where India is seen benefiting the most, as an FTA would offer more opportunities to Indian professionals to work in Australia.

Australia's main exports to India include coal, gold, copper, fertilizers, manganese, wool and aluminum. India mainly exports machinery & equipment, clothing, diamonds, iron and steel products and medicines to Australia.

Regional Trade Agreements

Introduction

A regional trade agreement is a treaty which several countries sign with one another. Some famous regional trade agreements include the European Common Market and the North American Free Trade Agreement. A regional trade agreement requires the approval of the legislators of the countries which sign the trade agreement

Regionalism and multilateralism represent two alternative trade policy options. When multilateralism falters regionalism picks up the pace Nearly every member of the WTO is also a member of at least one RTA Over 150 RTAs exist

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They can be attractive, for example, because it may be easier for a small group of neighboring countries with similar concerns and cultures to agree on market opening in a particular area than to reach agreement in a wider forum such as the WTO. They can also offer new approaches to rule-making and so act as stepping stones on the way to a multilateral agreement.

But regional agreements also risk making it harder for countries outside the region to trade with those inside and may discourage further opening up of markets, ultimately limiting growth prospects for all. Moreover, broad-based multilateral negotiations, with more players and more sectors, will offer greater potential for mutual gain than limited bilateral or regional deals.

Types of Regional Trade Agreements

Regional Trade Agreements

Consider two countriesIndia and Bangkok Suppose these countries initially pursue independent and non-preferential trade policies Trade policies of these two countries are not coordinated in any way and do not discriminate among countries. There is no integration of the countries labor, capital, and money markets.

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First-level RTA is known as preferential trade area India and Bangkok lower their trade barriers between each other, but do not eliminate them Labor and capital markets remain un-integrated Because the two countries have not fully eliminated trade barriers between each other, this type of RTA is not allowed by the WTO

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Regional Trade Agreements

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Second-level RTA is known as free trade area India and Bangkok eliminate the trade barriers between each other With regard to non-member countries India and Bangkok pursue independent policies Labor and capital markets remain un-integrated. Third-level regional agreement is known as customs union India and Bangkok eliminate the trade barriers between each other

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Additionally, member countries adopt common trade barriers with regard to non-member countries (often referred to as a common external tariff) Labor and capital markets remain un-integrated. Fourth-level RTA is known as common market A customs union in which labor and capital markets are integrated into a regional market Any restrictions on movements of labor and physical capital (direct foreign investment) have been removed

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Regional Trade Agreements

WTO members who wish to form FTAs or CUs may do so However, there are certain requirements

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Trade barriers against non-members cannot be higher or more restrictive than those in existence prior to the FTA or CU FTA or CU must be formed within a reasonable length of time

3.

FTA or CU must eliminate trade barriers on substantially all the trade among the members. With regards to services, the General Agreement on trade in Services(GATS) requires that the FTA or CU involve substantial sectoral coverage.

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Advantages of RTA

Dispute Remedies Dispute Resolution Rewarding Allies

Disadvantages of RTA

Expense Competition

Domestic Instability

India-Afghanistan PTA

Objectives The Contracting Parties shall establish a Preferential Trading Arrangement in accordance with the provisions of this Agreement. The objectives of this Agreement are:

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To promote through the expansion of trade the harmonious development of the economic relations between India and Afghanistan.

India-Afghanistan PTA OUTCOME

Elimination of Tariffs General Exceptions National Treatment State Trading Enterprises Rules of Origin Safeguard Measures

Domestic Legislation Balance of Payment Measures Joint Committee Consultations Settlement of Disputes Duration and Termination of Agreement

Preferential Trade Agreement (PTA) with Chile

A Framework Agreement to Promote Economic Cooperation between India and Chile was signed on January 20, 2005. The Framework Agreement envisaged a Preferential Trade Agreement (PTA) between the two countries as a first step.
As a follow up to the Framework Agreement, a PTA was finalized after four rounds of negotiations between the two sides. The last round of negotiations was held in New Delhi in November 2005

While India had offered to provide fixed tariff preferences ranging from 10% to 50% on 178 tariff lines at the 8 digit level to Chile, the latter had offered us tariff preferences on 296 tariff lines at the 8 digit level with margin of preference ranging from 10% to 100%.

Preferential Trade Agreement (PTA) with Chile

The products on which India has offered tariff concessions Meat and fish products (84 tariff lines) Rock salt (1 tariff line) Iodine (1 tariff line) Copper ore and concentrates (1 tariff line)

Chemicals (13 tariff lines) Leather products (7 tariff lines)

Newsprint and paper (6 tariff lines)

Wood and plywood articles (42 tariff lines) Some industrial products (12 tariff lines)

India-MERCOSUR PTA

MERCOSUR is a trading bloc in Latin America comprising Brazil, Argentina, Uruguay and Paraguay. MERCOSUR was formed in 1991 with the objective of facilitating the free movement of goods, services, capital and people among the four member countries. It is the third largest integrated market after the European Union (EU), North American Free Trade Agreement (NAFTA).

A framework agreement had been signed between India and MERCOSUR on 17th June 2003 at Asuncion, Paraguay. The aim of this Framework Agreement was to create conditions and mechanisms for negotiations in the first stage, by granting reciprocal tariff preferences and in the second stage, to negotiate a free trade area between the two parties in conformity with the rules of the World Trade Organization.

India-MERCOSUR PTA

The major products covered in Indian offer list are Meat and meat products, Organic & inorganic chemicals, Dyes & pigments, Raw hides and skins, Leather articles,

Cotton yarn, Glass and glassware, Articles of iron and steel, Machinery items, Electrical machinery and equipments,

India-MERCOSUR PTA

The major product groups covered in the offer list of MERCOSUR are Food preparations,

Organic chemicals,
Pharmaceuticals, Essential oils,

Plastics & articles, Rubber and rubber products, Tools and implements, Machinery items, Electrical machinery and equipments

India- Sri Lanka Comprehensive Economic Partnership Agreement (CEPA) negotiations

India-Sri Lanka Free Trade Agreement (ISLFTA), which was signed in 1998, has become operational in 2000.
Sri Lanka is Indias largest trading partner country in the SAARC region. The bilateral trade between India and Sri Lanka has grown four times in the last nine years increasing from US $ 658 million in 2000 to US $ 2719 million in 2009.

Joint Study Group (JSG) and Comprehensive Economic Partnership Agreement (CEPA)

A JSG was set up in April, 2003 with a view to widen the ambit of ISLFTA and include Services and Investment. Report of JSG was submitted in October, 2003. Based on the recommendation of the JSG, CEPA negotiations were started in February, 2005 and concluded in July 2008 after 13 rounds of negotiations. But due to reservations expressed by Government of Sri Lanka, both sides have still not signed the Agreement.
Negotiations on Investment and Services have been resumed in December, 2010.

India-Singapore Comprehensive Economic Cooperation Agreement (CECA)

The Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore was signed on 29th June, 2005 by the Prime Minister Mr. Manmohan Singh and H.E. Mr. Lee Hsien Loong, Prime Minister of Singapore. The CECA has become operational with effect from 1-8-2005.

India-Singapore

India-Singapore CECA is reviewed from time to time. 1st Review was concluded on 1st October 2007. The 2nd Review of India-Singapore CECA was launched by the Commerce & Industry Minister, India on 11th May, 2010. The 1st Secretary level meeting of the 2nd Review was held in Singapore on 3rd August, 2010. Thereafter, Working Group meetings on Goods and Services & Investment were held time to time, with the last meeting held in Singapore in September 2011".

India-Canada Comprehensive Economic Partnership Agreement (CEPA)

During the visit of Prime Minister of Canada, Mr. Stephen Harper to India during November 15-18, 2009, two countries announced the setting up of a Joint Study Group (JSG) that will explore the possibility of a Comprehensive Economic Partnership Agreement (CEPA) between India and Canada.

India-Canada

The JSG was mandated to undertake a detailed study of bilateral economic relationship between the two countries, covering among others, trade in goods and services, investment flows and other areas of economic cooperation and make comprehensive recommendations for enhancing bilateral economic engagements between the two countries.

The JSG in its report has concluded that a CEPA between the two countries is likely to increase bilateral trade both in goods and services and enhance linkages in investment flows, technology transfer, movement of natural persons, R&D etc. Both countries have agreed to initiate negotiations towards a CEPA covering trade in goods, services and other areas of economic cooperation. The inaugural session of the negotiations was held in New Delhi on 16th November 2010.

India-Australia Comprehensive Economic Cooperation Agreement (CECA)

In April 2008, a Joint Study Group (JSG) was constituted to, inter alia, examine the feasibility for establishing a Free Trade Agreement (FTA) between India and Australia. Based on the recommendations of the JSG, India-Australia are negotiating CECA covering trade in goods, services, investment and IPR related issues. The 1st round of India-Australia CECA negotiations was held during 28th-29th July, 2011.

India-Indonesia Comprehensive Economic Cooperation Agreement (CECA)

Commencement of negotiations on India-Indonesia CECA was announced on 25th January, 2011 during the visit of Indonesian President to New Delhi.

India-SACU Preferential Trade Agreement (PTA) negotiations

South African Customs Union (SACU) comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia. So far, 5 rounds of negotiations of IndiaSACU PTA have been held. The 1st round of technical discussions for India-SACU PTA took place in Pretoria on 5th6th October, 2007.

The 2nd round of PTA negotiations was held at Walvis Bay, Namibia on 21-22 February, 2008 while 3rd round was held at New Delhi on 25th27th November, 2008 During the 3rd round of negotiations, a Memorandum of Understanding (MOU), was signed on 26th November, 2008 by the representatives of India and SACU to facilitate negotiations. 4th round of negotiations was held at Pretoria on 7th 8th October, 2009.

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The 5th round of negotiations was held during 7th 8th October, 2010. During this round of negotiations, SACU has presented a revised text of the PTA as a working document. Further, both sides have agreed on the following:The text on Dispute Settlement Procedures To use the text proposed by India on Customs Cooperation and Trade Facilitation and TBT as the working text To use the text on SPS proposed by SACU as the working text.