Foreign Trade and IndiaForeign Trade and India

• Ancient maritime trading nation

• Bay of Bengal was once known as CHOLA LAKE

• Exports touch $155 billion in 2007-08

• India is among the top ten in services exports

• The export basket

Laws to noteLaws 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 ExportingSteps in Exporting

• A business organization

• Manufacturer exporter

• Merchant exporter

• Agent/ intermediary

• Service provider

• Product selection

• Procurement of order

Essentials of export contractEssentials of export contract

• Product, standards & specification

• Quantity

• Inspection

• Value

• Terms of delivery

• Taxes, duties and charges

• Period of shipment

Export contract contd….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……Export contract contd……

• Force majeure

• Remedies

• Arbitration

• The case of Dalmia & Arun Jain of Polaris

IncotermsIncoterms

• 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------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 tradeRisks in International trade

• Credit risk

• Currency risk

• Carriage risk

• Country risk

• Voyage risk

Export registrationExport registration

• IEC with DGFT• PAN• Bank account• Appointment of agents• Export licenses• Customs registration• Registration with export promotion

councils

Export inspectionExport inspection

• IPQC– In process quality control

• ISI, AGMARK

• Fumigation

• ISO- 9000 & ISO – 14000

• EIA

• SA- 8000

• Global compact

Currency managementCurrency management

• Understanding currency fluctuations

• Invoicing currency

• Forward contract

• Hedging

• Repatriation

• EEFC

Reading FTPReading FTP

• The policy

• The handbook of procedures

• The ITC- HSN classification

• Export licenses

• Import licenses

• OGL

• State Trading

Customs procedure- exportCustoms 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----Customs procedure contd----

• Importance of ICD/CFS/

• Customs bonded warehouse

• Green channel for exporters

• Assessment

• New concept of Transaction value

Customs import procedureCustoms import procedure

• Importer

• Person in charge of conveyance

• Bill of entry

• Import general manifest

• Assessment

• EDI

• RMS

Central excise export procedureCentral 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 schemesExport promotion schemes

• Section 65 of customs Act

• Advance authorization / DFIAS

• Export promotion capital goods

• DEPB

• Drawback

• EOU

• SEZ

EOUEOU

• 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-------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-----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-----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

DrawbackDrawback

• Recouping of duties of customs and central excise and service taxes

• All industry rates

• Brand rate

• Special brand rate

• Post export documentation

EPCGEPCG

• Import of capital goods at 5% 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-----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 authorizationAdvance 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 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

DEPBDEPB

• 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

SEZSEZ

• 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 High Tech products promotion schemescheme

• 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 schemeFocus 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 schemeFocus 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 ExportsDeemed 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-----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 exportsBenefits 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 schemeServed 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 FTPStatus 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 concessionsExcise 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 concessionsService tax concessions

• Drawback

• Its limitations

• ASTR 1

• ASTR 2

• Clearances to SEZ exempt

• Refund of service tax paid on export related input services

WTO/ GATTWTO/ GATT

• International Treaty

• Governing Principles

• MFN

• Non discrimination

• National treatment

• Reduction of tariffs

• Elimination of Non tariff barriers

Free Trade AgreementsFree Trade Agreements

• NAFTA• EU• MECOSUR• ASEAN• SAFTA• Indian agreements with Sri Lanka,

Thailand and Singapore• Implications of FTAs

Importance of Ports in International Importance of Ports in International TradeTrade

• 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 IndiaPorts 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 PortsProblems 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 Requirements of modern World class portclass 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 IndiaPort stake holders in India

• Customs

• Port Trusts

• Port Health Organization

• Plant Quarantine

• Immigration

• Terminal operator

• Vessel operating agent

continuedcontinued

• Steamer agent / Mainline operator• Container operating agent ( NVOCC,

VOCC )• Stevedore• CHA / Exporters / Importers• Transport operators• CFS / ICD• Security agencies / External players

A comparison 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

continuedcontinued

• 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

continuedcontinued

• 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 Dwell time at Indian ports as on 2005 - 062005 - 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