Export Import Policy and its related Measures

1. Export Import Policy and its related Measures Prepared By Avani Agrawal

2. Content • Import Facilities for Exporters • Duty Remission Schemes • Post Export Schemes • Fiscal Incentives Marketing • Marketing Assistance • Supply of Raw Material

3. Import Facilities for Exporters • Export Promotional Capital Goods Scheme (EPCG) • Advance Authorization Scheme • Duty Free Import Authorization Scheme

4. Zero Duty E.P.C.G. Scheme • Exporters of Engineering, Electronic, Basic Chemicals, Pharmaceuticals, Apparels, Textiles, Plastic, Handicrafts, Chemicals/ Allied Products, Leather/Leather Products may import Capital Goods at zero duty. • Effective customs duty on import of capital goods is 21.52%. • Duty saved works out to 21.52%. • Export obligation is 6 times the duty saved in 6 years.

5. Concessional 3% Duty E.P.C.G. Scheme • Exporters may import capital goods at concessional 3% duty. • Effective customs duty on import of capital goods is 21.52%. • Duty saved works out to 18.52%. • Export obligation is 8 times the duty saved in 8 years.

6. E.P.C.G. • In case of agro and SSI units, export obligation is 6 times the duty saved over a period of 12 years. • Export obligation is over and above Average Export Performance of the last 3 years. • Only manufacturer or merchant exporter with supporting manufacturer are eligible.

7. E.P.C.G. • Applicant must hold valid RCMC. • Application is to be made to DGFT. • EPCG Licence is not transferable. • Third Party export is accepted towards export obligation.

8. E.P.C.G. Para 9.62 of FT Policy defines “Third Party Export” as under. • Exports made by an exporter or manufacturer on behalf of another exporter(s). • In such cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/ manufacturer and third party exporter(s). BRC, export order and invoice should be in the name of third party exporter.

9. Government PolicyTaxes & Levies are not to be exported • In case of import of inputs for manufacture of the goods for export, one pays following duties. • B.C.D. (Basic Customs Duty) • A.D. (Additional Customs Duty-CVD) • Special Additional Duty/Special CVD. • Education Cess.

10. Zero Duty E.P.C.G. Scheme

11. Zero Duty E.P.C.G. Scheme

12. Advance Authorization • Scheme allows duty free import of Inputs, along with Fuel, Oil, Catalyst etc., required for manufacturing the export product. • Inputs are allowed either as per Standard Input Output Norms (SION) or on adhoc Norms basis under Actual User condition. Norms are fixed by Technical Committee. • Minimum value addition prescribed is 15%, except for certain items. Exporter has to fulfill the export obligation over a specified time period, both quantity and value wise.

13. Advance Authorisation • Import of inputs exempted from Basic Customs Duty, Additional Customs Duty(CVD), Education Cess, Anti dumping duty & Safeguard Duty, if any. • Advance Authorization is issued subject to Actual User Condition. • Advance Authorisation is issued with Positive Value Addition.

14. Advance Authorisation • Positive Value Addition means Authorisation Holder has to export FOB value of goods in free foreign exchange more than the CIF value of inputs imported in free foreign exchange Value Addition(%)= (FOB Value-CIF Value) X 100 CIF Value

15. Advance Authorisation FOB value of exports USD 1,10,000 CIF value of imports USD 1,00,000 Value Addition (%) = (FOB Value-CIF Value) X 100 CIF Value Value Addition = 1,10,000 – 1,00,000 x 100/1,00,000 Value Addition = 10,000 x 100/1,00,000 Value Addition = 10%

16. Advance Authorization FOB value of exports USD 90,000 CIF value of imports USD 1,00,000 Value Addition (%) = (FOB Value-CIF Value) X 100 CIF Value Value Addition = 90,000 – 1,00,000 x 100/1,00,000 Value Addition = (-)10,000 x 100/1,00,000 Value Addition = (-) 10%

17. Advance Authorisation • Advance Authorisation is valid for 24 months from the date of issue. • Export obligation is to be fulfilled within 24 months from the date of issue. • Advance Authorisation and Materials imported there-under not transferable even after completion of export obligation. • Application is to be made to D.G.F.T. • Applicant must hold valid RCMC while making application.

18. Duty Free Import Authorization Scheme • DFIA Scheme has been made operational from 01.05.2006. One of the objective of the scheme is to facilitate transfer of the authorisation or the inputs imported as per SION, once export is completed. • Provisions of DFIA Scheme are similar to Advance Authorisation scheme. • A minimum value addition of 20% is required under the scheme.

19. Duty Remission Schemes • Duty Entitlement Passbook Scheme • Duty Drawback Scheme • Excise Duty Refund • Central Sales Tax Exemption • Exemption from Service Tax • Octroi Exemption

20. Duty Entitlement Passbook Scheme • Objective of D.E.P.B. is to neutralize the incidence of Basic Customs Duty on the deemed import content of Export Product. • Exporter has to file D.E.P.B. Shipping Bill through his CHA at the port of shipment. • Duty Credit is issued in the form of D.E.P.B.

21. D.E.P.B. • D.E.P.B. is issued against such export products and at such rate specified by D.G.F.T. • D.E.P.B. rate is a percentage of FOB value of export. • D.E.P.B. rates are fixed taking into account the deemed import content of the said export product as per SION and Basic Customs Duty payable on such deemed import content and value addition thereto.

22. Duty Drawback (D.B.K.) • Drawback rates are fixed by Central Board of Excise & Customs, Commerce Ministry, Govt. of India taking into account the deemed import content of the said export product as per SION. • Basic Customs Duty and Additional Duty payable on such deemed import content and value addition thereto are factored in drawback rates. • Drawback Rates are for All Industry.

23. Duty Drawback (D.B.K.) • There is no separate filing of a drawback claim with the Customs. Filing of Drawback Shipping Bill with the Customs itself is a claim of Drawback. • Once the CHA files Drawback S/Bill, Drawback amt. is directly credited to exporter’s bank a/c, say after a month under NEFT system.

24. Duty Drawback (D.B.K.) • Drawback amount is paid even before realization of export bill. • RBI notifies to the Customs the names of the exporters whose export bills have remained outstanding for a long time. • Exporter’s bank/AD keeps the RBI informed of the overdue export bills. • In case of unpaid export bills, the Customs sends notices to the exporters for recovery of Drawback paid to them.

25. Duty Drawback (D.B.K.) • Duty Drawback rates are grouped under various (HS) Chapters/ Chapter Heads (98 such Chapters). • Drawback rates are linked to their respective HS Code Numbers but not necessarily in 8 digit form. • To find out Drawback rate of a particular export item, one has to find out HS Code of the item first and then refer to Drawback Rates Schedule.

26. Duty Drawback (D.B.K.) • Duty Drawback rate is a percentage of FOB value of export. • Where there is a Drawback Cap per unit, it restricts the maximum drawback amount. • Unit of export may be in KG, MT, Piece etc.

27. Excise Duty Refund • Excise Duty is tax imposed by the central government on goods manufactured in India. • This duty is collected at source i.e before removal of goods from the factory premise. • However necessary clearance has to be obtained in one of the following ways: • Export Under rebate • Export Under bond

28. Central Sales Tax Exemption • Any dealer having sales tax number can claim exemption from sales tax if he exports the said goods • The exporter can also buy goods from dealer / manufacturer for the purpose of exports without payment of sales by issuing form H.

29. Exemption from Service Tax • Service Tax is leviable only on the taxable service supplied within India except Jammu and Kashmir. • As per the export of service Rules 2005, all services which are exported to the territory outside India may exempted from the payment of services tax.

30. Octroi Exemption • Octroi is a duty paid on manufactured goods, when they enter municipal limits of a city or a town. • However, export goods are exempted from octroi.

31. Post Export Scheme • Vishesh Krishi And Gram Udyog Yojana(VKUY) • Focus Market Scheme [FMS] • Focus Product Scheme [FPS] • Market Linked Focus Products Scrip [MLFPS]

32. Post Export Scheme • Vishesh Krishi And Gram Udyog Yojana(VKUY) • Focus Market Scheme [FMS] • Focus Product Scheme [FPS] • Market Linked Focus Products Scrip [MLFPS]

33. VKUY • Keeping in view the objective of Foreign Trade Policy 2009-14 to promote employment generation in rural and semi urban areas, VKUY has been expanded to include export of Agricultural Produce and their value added products; Minor Forest Produce and their value added variants; Gram Udyog Products; and Other Products, as notified from time to time. • Duty Credit Scrip benefits are granted with an aim to compensate high transport costs, and to offset other disadvantages.

34. VKUY • Exporters, of products notified in Appendix 37A of Hand Book of Procedures Vol.1,shall be entitled for Duty Credit Scrip equivalent to 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards. • However, reduced rate of 3% is applicable in such cases where exporter has also availed benefits of Drawback, at rates higher than 1%; or Specific DEPB rate

35. Focus Market Scheme • For offsetting high freight cost and other externalities to select international markets with a view to enhance India’s export competitiveness in these countries, “Focus Market Scheme” has been launched w.e.f. 1.4.2006 • Exporters of all products to notified countries shall be entitled for Duty Credit Scrip equivalent to 3% of FOB value of exports. So far, the Scheme covers a total of 110 markets.

36. Focus Product Market • To incentivize export of such products which have high export intensity / employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products, a Scheme called Focus Products Scheme, has been introduced w.e.f. 1.4.2006. • Exports of notified products to all countries shall be entitled for Duty Credit Scrip equivalent to 2% of FOB value of exports.

37. Market Linked Focus Products Scrip • To give significant boost to market penetration of specific product in specified markets, a variant under Focus Product Scheme called Market Linked Focus Products Scrip has been introduced from 1.4.2008. • Export of products / sectors of high export intensity / employment potential (which are not covered under present FPS List) would be incentivized at 2% of FOB value of exports

38. Market Linked Focus Products Scrip • To give significant boost to market penetration of specific product in specified markets, a variant under Focus Product Scheme called Market Linked Focus Products Scrip has been introduced from 1.4.2008. • Export of products / sectors of high export intensity / employment potential (which are not covered under present FPS List) would be incentivised at 2% of FOB value of exports

39. Products Included in MLFP Scrip • Presently the products covered under the scheme include :- Motor vehicles, auto-components, bicycles and parts, apparels, knitted and crocheted fabrics,pharma products, value added plastic and rubber goods, glass products, dyes and chemicals, household articles, machine tools, earth moving equipments, transmission towers, electrical and power equipments, steel tubes, pipes and galvanized sheets, compressors, iron and steel structures, auto components, Three wheelers and cotton woven fabrics etc.

40. Fiscal Incentives • Exemption from Income Tax: • In order to enable exporters to plough back their earnings and promote exports, the GOI has given tax exemption to exporters as per the following provision: • 10 years tax holiday in respect of newly established Industrial undertakings in Free Trade Zones (FTZs), Electronic Hardware Technology (EHTPs), Software Technology Parks (STPs). • 10 years of Tax Holidays in respect of newly established 100% Export Oriented Unit. • 15 years of tax holidays for New Special Economic Zone(SEZ)

41. Marketing Assistance • Market Development Assistance: • MDA is allowed to delegations travelling abroad for market survey sponsored by the export promotion councils, commodity boards and other organizations such as Federation of Indian Export Organization. • The amount granted under MDA varies from 25% to 60% of the actual expenditure incurred. • It is also allowed on export publicity including exhibition and service contract abroad.

42. Marketing Assistance • Market Access Initiative • MAI scheme is an export promotion scheme envisaged to act as a catalyst to promote India’s export on sustained basis. • The scheme is formulated on Focus product- focus country approach to evolve specific market and specific product through market studies/ surveys. • Financial assistance is provided for marketing projects abroad, capacity building, statutory compliance etc.

43. Supply of Raw material • IRMAC- Industrial Raw Material Assistance Centers scheme • Established by Government of India • Such centers import raw material in bulk & supply them to registered exporters against import valid license • Enable exporter to get timely supply of raw material at reasonable prices

44. Supply of Raw material • Back to Back Inland L/C • Can open in favor of local suppliers of raw materials or goods to enable exporters to get raw material or goods for export on credit basis • It is kind of PRE-SHIPMENT FINANCE procured by exporters for the processing of export orders.

45. EXIM DOCUMENTS : OVERVIEW

46. Role of Export Documentation • Vital role in international marketing as it facilitates the smooth flow of goods and payments thereof across national frontiers. • Required to follow certain formalities and procedures, using a number of documents. • Serves a specific purpose and hence carries its own significance. • A clear understanding of all documents and their purpose, how to prepare these, number of copies required, when and where to file, is a must for all export professionals.

47. Export Documentation in India • Export Documentation in India has evolved a great deal of interest since 1990. • Prior to 1990, documentation was manual and it lacked proper co-ordination. • The result was lot of delays and mistakes, rendering the task very clumsy, tiresome, repetitive, and truly frustrating. • India adopted the ADS (Aligned Documentation System) in 1991 which is the Internationally accepted documentation system

48. Contd…. • Proper Documentation will ensure smooth sailing with the requirements of the above agencies and the resulting transaction will be a successful one. • Inaccurate or incomplete documentation will result in serious financial and goodwill losses. • Such losses can be completely avoided by understanding clearly the documentation requirements of all concerned parties and then meticulously planning to get the right documents in the right numbers, at the right places and at the right time.

49. Function of Export Documentation • An attestation of facts, such as a certificate of origin • Evidence of the terms and conditions of a contract if carriage, such as in the case of an air way bill • Evidence of ownership or title to goods, such as in the case of a bill of lading • A promissory note; that is, a promise to pay • A demand for payment, as with a bill of exchange • A declaration of liability, such as with a customs bill of entry • A receipt for goods received.

50. Classification of Export Documents • Export Documents can be classified into following four categories: (1) Commercial Documents (2) Regulatory Documents (3) Export Assistance Documents (4) Documents Required by Importing Countries (1) Commercial Documents: These documents are used by exporters/importers to discharge their respective legal and other incidental responsibilities under sales contract.