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Foreign Trade and India

 Ancient maritime trading nation


 Bay of Bengal was once known as CHOLA
LAKE
 Exports touch $165 billion in 2008-09
 India is among the top ten in services
exports
 The export basket
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
Steps in Exporting
 A business organization
 Manufacturer exporter
 Merchant exporter
 Agent/ intermediary
 Service provider
 Product selection
 Procurement of order
Essentials of export contract
 Product, standards & specification
 Quantity
 Inspection
 Value
 Terms of delivery
 Taxes, duties and charges
 Period of shipment
Export contract contd….
 Packing, labeling,marking
 Terms of payment- Amount.mode & currency
 Discounts and commissions
 Licences and Permits
 Insurance
 Documentary requirements
 Guarantee
Export contract contd……

 Force majeure
 Remedies
 Arbitration
 The case of Dalmia & Arun Jain of Polaris
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
Incoterms contd------

 DAF– delivered at frontier


 DES--- delivered EX ship
 DDU--- delivered duty unpaid
 DDP---- delivered duty paid
 DEQ– delivered ex quay
Risks in International trade

 Credit risk
 Currency risk
 Carriage risk
 Country risk
 Voyage risk
Export registration
 IEC with DGFT
 PAN
 Bank account
 Appointment of agents
 Export licenses
 Customs registration
 Registration with export promotion councils
Export inspection
 IPQC– In process quality control
 ISI, AGMARK
 Fumigation
 ISO- 9000 & ISO – 14000
 EIA
 SA- 8000
 Global compact
Currency management

 Understanding currency fluctuations


 Invoicing currency
 Forward contract
 Hedging
 Repatriation
 EEFC
Reading FTP
 The policy
 The handbook of procedures
 The ITC- HSN classification
 Export licenses
 Import licenses
 OGL
 State Trading
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
Customs procedure contd----

 Importance of ICD/CFS/
 Customs bonded warehouse
 Green channel for exporters
 Assessment
 New concept of Transaction value
Customs import procedure
 Importer
 Person in charge of conveyance
 Bill of entry
 Import general manifest
 Assessment
 EDI
 RMS
Central excise export
procedure
 Exports are free of duty
 Bond clearances
 Rebate clearances
 ARE 1
 ARE 2
 UT1
 Proof of export
 Sealing of container
Export promotion schemes
 Section 65 of customs Act
 Advance authorization / DFIAS
 Export promotion capital goods
 DEPB
 Drawback
 EOU
 SEZ
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
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
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
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
Drawback

 Recouping of duties of customs and


central excise and service taxes
 All industry rates
 Brand rate
 Special brand rate
 Post export documentation
EPCG
 Import of capital goods at 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Service tax concessions

 Drawback
 Its limitations
 ASTR 1
 ASTR 2
 Clearances to SEZ exempt
 Refund of service tax paid on export related
input services
WTO/ GATT
 International Treaty
 Governing Principles
 MFN
 Non discrimination
 National treatment
 Reduction of tariffs
 Elimination of Non tariff barriers
Free Trade Agreements
 NAFTA
 EU
 MECOSUR
 ASEAN
 SAFTA
 Indian agreements with Sri Lanka, Thailand
and Singapore
 Implications of FTAs
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
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%
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
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
Port stake holders in India
 Customs
 Port Trusts
 Port Health Organization
 Plant Quarantine
 Immigration
 Terminal operator
 Vessel operating agent
continued
 Steamer agent / Mainline operator
 Container operating agent ( NVOCC, VOCC )
 Stevedore
 CHA / Exporters / Importers
 Transport operators
 CFS / ICD
 Security agencies / External players
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
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
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
Dwell time at Indian ports as on
2005 - 06
 Cargo type As on 2005-06 expected
export import exp imp

 Dry bulk 3.57 3.23 1.7 1.6


 Break Bulk 6.6 5.62 3.3 1.5
 Containers 3.78 1.88 1.5 1.00

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