Amity School of Business

Module- 6 Foreign Trade Policy 2009-14

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Foreign Trade policy 2009-14

The year 2009 is witnessing one of the most severe global recessions global trade is likely to decline by 9% according to WTO. The World Bank estimate suggests that 53 million more people would fall into the poverty net this year our exports have suffered a decline in the last 10 months
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Foreign trade policy 2004-09

Two objectives To double our percentage share of global merchandize trade within 5 years and
use trade expansion as an effective instrument of economic growth and employment generation.
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Recent developments
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.

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Recent developments
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.

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Foreign Trade policy 2009-14

Anand Sharma, Minister of Commerce & Industry has announced new foreign trade policy in Sept. 2009. The short term objective of new 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.
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Other Objectives
To achieve an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the last three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum.
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Other Objectives

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To double Indias exports of goods and services by 2014. The long term policy objective for the Government is to double Indias share in global trade by 2020. A special thrust needs to be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of textile, leather, handicrafts, etc.
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Three pillars of new policy

Improvement in infrastructure related to exports. Bringing down transaction costs. providing full refund of all indirect taxes.

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Policy measures
fiscal incentives institutional changes Procedural rationalization Enhanced market access across the world Diversification of export markets

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Different Policy measures of new foreign trade policy

continue with the DEPB Scheme upto December 2010 income tax benefits under Section 10(A) for IT industry till 31st march 2011. income tax benefits under section 10(B) for 100% export oriented units till 31st March 2011. Enhanced insurance coverage and exposure for exports through ECGC Schemes has been ensured till 31st March 2010.
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Different Policy measures of new foreign trade policy

Indias Look East Policy Comprehensive Economic Partnership Agreement with South Korea which will give enhanced market access to Indian exports. Trade in Goods Agreement with ASEAN which will come in force from January 01, 2010 Mercosur Preferential Trade Agreement

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Brand India through six or more Made in India shows to be organized across the world every year. promoting imports of capital goods for certain sectors under EPCG at zero percent duty. Status holders recognition to exporters having good export performance. status holders will be permitted to import capital goods duty free.
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Different Policy measures of new foreign trade policy

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Different Policy measures of new foreign trade policy

Encourage production and export of green products Additional ports/locations would be enabled on the Electronic Data Interchange over the next few years to reduce the transaction cost and institutional bottlenecks.
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Special Focus Initiative: Market Diversification 26 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%. There has been a significant increase in the outlay under Market Linked Focus Product Scheme by inclusion of more markets and products. This ensures support for exports to all countries in Africa

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It is important to take an initiative to diversify our export markets in emerging markets of Africa, Latin America, Oceania and CIS countries through appropriate policy instruments. We have endeavored to diversify products and markets through rationalization of incentive schemes including the enhancement of incentive rates which have been based on the perceived long term competitive advantage of India in a particular product group and market. New emerging

Market Diversification

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Technological Up gradation
EPCG Scheme at zero duty has been introduced for certain engineering products, electronic products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts, chemicals and allied products and leather and leather products. Steps to encourage Project Exports shall be taken.
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Support to status holders

To incentivize and encourage the status holders, as well as to encourage Technological up gradation of export production, additional duty credit scrip @ 1 % of the FOB of past export shall be granted for specified product groups including leather, specific sub sectors in engineering, textiles, plastics, handicrafts and jute.

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Agriculture and Village Industry

Vishesh Krishi and Gram Udyog Yojana Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ. 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.
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Handlooms & Handicrafts

Specific funds are earmarked under MAI / MDA Scheme for promoting handloom exports. Duty free import entitlement of specified trimmings and embellishments is 5 % of FOB value of exports during previous financial year. Duty free import entitlement of hand knotted carpet samples is 1 % of FOB value of exports during previous financial year.

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Gems & Jewellery

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Duty Free Import Entitlement (based on FOB value of exports during previous financial year) of Consumables and Tools, for Jewellery made out of
(a) Precious metals (other than Gold &Platinum) 2% (b) Gold and Platinum 1% (c ) Rhodium finished Silver 3% d) Cut and Polished Diamonds 1%

(d) Duty free re-import entitlement for rejected jewellery shall be 2% of FOB value of exports.
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Leather and Footwear

Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year. Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty. Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted.

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Marine Sector
Imports for technological upgradation under EPCG in fisheries sector. Duty free import of specified specialised inputs / chemicals and flavouring oils is allowed to the extent of 1% of FOB value of preceding financial years export. Marine products are considered for VKGUY scheme.

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Electronics and IT Hardware Manufacturing Industries

Expeditious clearance of approvals required from DGFT shall be ensured. Exporters /Associations would be entitled to utilize MAI & MDA Schemes for promoting Electronics and IT Hardware Manufacturing industry exports.

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Sports Goods and Toys

Duty free import of specified specialised 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. Applications relating to Sports Goods and Toys shall be considered for fast track clearance by DGFT.
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Green products and technologies

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. To begin with, focus would be on items relating to transportation, solar and wind power generation and other products as may be notified which will be incentivized under Reward Schemes of Chapter 3 of FTP.
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Incentives for Exports from the North Eastern Region

In order to give a fillip to exports of products from the north-eastern States, notified products of this region would be incentivized under Reward Schemes

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Export Documents and Procedures

On the basis of the functions to be performed, export documents are classified under four categories:
1. Trade Documents: These include commercial invoices, bills of exchange, bills of lading, letter of credit, marine insurance policy and certificates, etc. 2. Regulatory Documents: These are the documents which are required for complying with the rules and regulations governing export trade transactions such as foreign exchange regulations, customs formalities, export inspection, etc. 3. Export Assistance Documents: These are the documents which are required for claiming assistance under the various export assistance measures as may in operation form time to time. 4. Foreign Documents: These are the documents which are required by the importer to satisfy the requirements of his government . These include certificates of origin, consular invoice, quality control certificate etc.

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Characteristics of Export Documents: 1. Commercial Invoice:

Basic document in an export transaction, contains all the information which is required for the preparation of all other documents, gives description of the goods, customs co-operation council nomenclature, price charged, the terms of shipment and the marks and numbers on the packages containing the merchandise. The date, name and address of both buyer and seller, name of shipping vessel and the port of debarkation should be included.
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2. GR Form

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This form has been prescribed by the RBI to ensure that the foreign exchange receipts in respect of exports are repatriated to India. This form has to be prepared in duplicate. Both of the copies have to be submitted to the customs authority at the port of shipment.

3. Letter of Credit, 4. Bill of Exchange, 5. Bill of Lading. Covered in module 4.

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6. Shipping bill, 7. Marine Insurance Policy. 8. Airway Bill 9. Transport Document.

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INCOTERMS:

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Inco terms, also referred to as Terms of Sale, stand for International Commercial Terms. Inco terms define the terms of shipment and delivery, as well as the transfer of risk, between the buyer and seller. Contract of Carriage
The Inco term utilized in a transaction will dictate which party is responsible for each transportation segment and its corresponding contract of carriage.

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Pre-Carriage: the transportation segment from the sellers location to the point where the cargo would leave from the sellers side. Example, to arrange for pre-carriage, you would contract with an inland carrier to make delivery to a port or airport. Main Carriage: the transportation segment from the sellers side to the buyers side. Example, to arrange for maincarriage, you would contract for ocean or air carriage. On-Carriage: the transportation segment from the point of arrival on the buyers side to the designated ultimate receiver. Example, to arrange for on-carriage, you would contract with an inland carrier to make delivery from the port/airport of arrival to the ultimate receiver. Delivery: Delivery is the point where the risk transfers from the seller to the buyer. Delivery is defined for each Inco term.

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General Groups of Terms E term: sellers obligation and control of shipment is at its minimum F terms: require the buyer to arrange for main carriage C terms: require the seller to arrange for main carriage D terms: sellers obligation and control is at its maximum Inco terms 11 Terms EXW - Ex Works FCA Free Carrier CPT Carriage Paid To CIP Carriage and Insurance Paid To DAT Delivered at Terminal DAP Delivered at Place DDP Delivered Duty Paid FAS Free Alongside Ship FOB Free On Board CFR Cost and Freight CIF Cost, Insurance and Freight

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Refer to Word Document for INCOTERMS

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Processing of an Export Order:

Why is an Export Order Processed?
To meet the requirements of materials required by the importers. Timely delivery of material, conforming to the specifications stipulated.

Parties, Acts and Publications Involved.

The most important acts/publications which must be consulted by an exporter are: Foreign Trade(Development and Regulation) Act, Carriage of goods by Sea Act, Schedule of charges of Goods in respect of the port of shipment, EXIM Policy of the government, Handbook of procedures.

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The important steps required to enable a businessman to undertake export business: 1. Obtaining the RBI Code number. 2. Registration with Export promotion councils. 3. Obtaining the Importer Exporter code number.

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Stages:

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First stage: The exporter should scrutinize the export order with reference to the terms and conditions of the contract. This is the most important stage. The export order must specify the mode of payment in unmistakable terms such as letter of credit, Documents on payment, Documents against acceptance, the essential terms and conditions of the export order must tally with those of the L/C. The documents which are demanded by the importer are; Bills of exchange, Commercial Invoices, On board clean bill of lading, marine insurance policy, packing list, certificate of origin.
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Second Stage: As soon as the export order is

confirmed, preparation for the dispatch of goods are started. A delivery note is sent to the works manager or Factory manager. It includes the description of goods as has been given to the export order, along with the instructions from the importer. Third stage: After the goods have been manufactured, the clearance of the Excise authorities has to be obtained, export inspection authority has to informed to conduct quality checks, the goods are dispatched to the port of shipment.
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Fourth Stage: After the goods have been dispatched to

the port town, the works manager sends a dispatch advice to the Export department, the application is sent to the insurance company for marine insurance cover.

Fifth Stage: The clearing and forwarding agent takes

delivery of the consignment from the Railways and arranges its storage in the warehouse. Thereafter, he prepares the requisite copies of the shipping bill. The particulars to be filled in the shipping bill are: Consignees name and address, Vessels name, Agents name, Color, Port, Final destination, Exporters name and address, Number of packages, value, numbers etc.
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Sixth Stage: After the shipping bill has been passed

by the Customs, the clearing and forwarding agent present the port trust copy of the shipping bill to the shed superintendent and obtains carting order for bringing the export cargo in the transit shed cargo, the dock challan is prepared. Delivery of the material to the importer. Scrutiny of the documents with reference to the L/C. PAYMENT MADE TO THE EXPORTER.

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