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OVERVIEW

Foreign Trade – Elements

Elements of Foreign Trade – Commercial Transaction

Foreign Trade -

Commercial Elements

Import

Export

Manufacturing

Logistics

Banking & Finance

Insurance

Statutory CompliancesInternatioanl Laws

Receipts & Payments

Foreign Trade – Stake Holders

Elements of Foreign Trade – Stake Holders & Agencies

Foreign TradeTransactions

Company / Unit

Bank

Insurance Agency

Freight Forwarders

Liners / Shipping Co.

Customs House Agents

Credit / Rating Agencies

Inspection Agencies & Certifying Bodies

Accredited Labs & Testing Agencies

Customs

Excise

Export Promotion Councils

Suppliers

Customers

DGFT / FTP

Foreign Trade - Regulations

Laws, Policies, Schemes applicable for Foreign Trade in India

Foreign Trade Policy Intellectual Property Rights Rules Foreign Trade Development & Regulation Act FSSAI RegulationsCustoms Law Food / Plant Quarantine Import Regulations Foreign Exchange Management Act Labeling & Marking Rules for Imports RBI Master Circulars Weights & Measures Rules Central Excise Law BIS Quality Standards Export Quality & Inspection Act Hazardous Wastes / Metal Scrap Import

Foreign Trade Agreements

Foreign Trade – Case Study

Export Item is made of Imported Stainless Steel

It is one end threaded It is a connecting Rod of

the Engine The engine is a Diesel

Engine The engine is for a Car The Rod is drawn thru a

forging process

The item is exported to NISSAN Auto - JAPAN


The Classification of Items are guided by the General Rules of Interpretation of Customs and there 6 Rules of Guidance.

Finished Goods Classification

HS Classification

73181900THREADED ARTICLES MADE OF STAINLESS

STEEL

73269060FORGED ARTICLES (MACHINED

COMPONENTS)84099949 OTHERS (PARTS OF DIESEL ENGINES)

87089900OTHERS (PARTS AND ACCESSORIES OF

MOTOR VEHICLES)

ITCHS CODE

ITC HS DESCRIPTION

Foreign Trade - Initiatives

W.e.f October 2011

W.e.f April 2015

Concessional Duty Benefits

FOREIGN TRADE PROMOTION

Duty Drawback (Ministry of Finance)

When CENVAT Facility is availed

When CENVAT Facility is not availed

Foreign Trade Policy 2015-20 (Ministry of Commerce)

Administered thru DGFT - Regional

Authorities & Delhi

Export Promotion Measure - Chapter 3 of FTP

Import for Export - Chapter 4 & 5 of the FTP

Merchandise Export India Scheme 2% / 3% / 5%

Service Export India Scheme 3% / 5%

++

EPCG License - 0%

Advance Authorisation

Industry Specific Customs Notification (Ministry of Finance)

BilateralTrade Agreements (Ministry of Commerce)

Deemed Export Drawback Scheme

Foreign Trade Agreements

Foreign Trade Agreements in Force

Agreement on South Asia Free Trade Area SAFTA

Asia Pacific Trade Agreement APTA

CECA between The Republic of India and the Republic of Singapore

Comprehensive Economic Cooperation Agreement between India and Malaysia

Global System of Trade Preferences GSTP

India Africa Trade Agreement

India Chile PTA

India Afghanistan PTA

India ASEAN Agreements

India Bhutan Trade Agreement

India Japan CEPA

India Korea CEPA

India MERCOSUR PTA

India Nepal Trade Treaty

India Sri Lanka FTA

SAARC Agreement on Trade in Services SATIS

Primary Condition for availing the

benefit:

The Importer need to produce the Preferential

Rate of Certificate of Origin issued by designated

Authority by the Export Country

Duty Drawback (AIR)

The Duty Draw Back scheme is effective from 1st Oct 2011, and is applicable for all direct physical exports

Two components in the duty drawback a) when Cenvat Credit availed b) When Cenvat Credit not availed. DBK Code to be selected

The drawback scheme is applicable irrespective of import / customs duty content. Minimum All Industry Rate of 1.9% to 2.0%, certain items have value cap based on UOM.

The claim procedure is automated, with the generation of Drawback shipping bill in the Customs, the EDI credits the bank account of the exporter thru RTGS.

Exporters need to file half yearly returns to respective Customs Port – Negative return.

Exports under Advance Authorization is not eligible for Duty Drawback claim Drawback may be clubbed with EPCG and Chapter 3 Schemes

All Industry Rate Duty Drawback is a Duties & Taxes Compensating mechanism on the inputs for exports, suffered indirectly having cascading impact

Promotional Schemes – FTP 09-14

Under the earlier FTP the following schemes were available for Direct Exports: Focus Product Scheme – FPSFocus Market Scheme – FMSMarket Linked Focus Product Scheme – MLFPSIncremental Exports Scheme – 2013-14 (-) 2012-13 for Specified regions (USA, Europe, ASEAN)Status Holders Incentives Scrip – 12-13, 13-14 (For exporters holding EH during the respective years, where no zero % EPCG was availed)Served from India Scheme – 13-14,14-15 - @ 10%

Chapter 3: Export Incentives for Product and Services

Promotional Schemes – FTP 15-20Promotional Schemes – FTP 15-20

Under the new FTP the existing schemes are merged and two new simple schemes are announced:

(i) Merchandise Exports from India Scheme (MEIS)

(ii) Service Exports from India Scheme (SEIS)

Chapter 3: Export Incentives for Product and Services


The objective of MEIS is "to provide rewards to exporters for offsetting infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/ manufactured in India

Under MEIS, exports of notified goods to notified markets will be eligible for rewards in the form of duty credit scrip's

2% or 3% or 5% of FOB value of notified goods exported to notified markets

[based on three distinct categories framed and covered in Appendix 3B]. Category A: Traditional Markets (30) -European Union (28), USA, Canada. Category B: Emerging & Focus Markets (139) Category C: Other Markets (70)

MEIS Entitlement

Merchandise Exports From India Scheme ('MEIS')


Only non free shipping bills are eligible i.e, Drawback/EPCG/AA/EOU Exports realization need to be in Foreign Currency or the INR credit thru

deposit in FC thru Nostro account outside the ACU region. SB to carry the declaration – ‘We intend to claim rewards under MEIS’ Scheme Reward column to be selected as “YES” against each line item E-BRC must have been uploaded by the bank for inward remittance The ITC HS Code and Description should exactly match with the MEIS Table Proof of Landing is necessary when the incentive is not listed in for all the

country categories and is having different percentages. Delivery advice (b) tracking report (c’) Bill of entry attested by landing port etc.,

The scrip may be utilized for payment of import duties / excise / service and is freely transferable in the market

Key Observations


EOUs/EHTPs/ BTPs/ STPs who are availing direct tax benefit / exemption

Supplies made from DTA units to SEZ unitsDeemed ExportsSEZ / EOU / EHTP / BPT / FTWZ products exported through DTA unitsService ExportDiamond Gold, Silver, Platinum, other precious metal in any form

including plain and studded jewellery and other precious and semiprecious stones

Ores and concentrates of all types and in all formationsCereals of all typesFew others as listed in FTP

Ineligible Categories


The objective of SEIS is "to encourage export of notified Services from India". Under - SEIS, Service providers of notified services will be eligible for rewards in the form of duty credit scrips.

The rates of reward under SEIS are 3% and 5% on the net foreign exchange earned from notified services.

SEIS shall apply to ‘Service Providers located in India The invoice description need to match with the notified services list Minimum net free foreign exchange earnings in the preceding year to be eligible for

Duty Credit Scrip:• For Individual Service Providers and Sole Proprietorship - $ l0,000/-• Other Service Providers-$ 15,000/-

The scrip is issued on Net Foreign Exchange earned by the Unit: Net Foreign Exchange = (Gross Earnings of Foreign Exchange relating to service sector in the Financial year) minus (Total expenses / Payment / remittances of Foreign Exchange by the IEC holder, relating to service sector in the financial year).

Service Exports from India Scheme ('SEIS’)


Export turnover relating to services of units operating under SEZ / EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units

Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA Service Providers

Exports of Goods Service providers in Telecom Sector Others as per para 3.09 of FTP

As in the case of MEIS, the reward scrip's under SEIS will not carry any actual user condition and will be freely transferable and usable for all types of goods and services including for payment of Import Duties, Excise and Service Tax

Ineligible Categories

Utilization of SEIS scrip's and transferability


S.No Sectors Admissible Rate

1 Business Services

A Professional services Legal services, Accounting, auditing and bookkeeping services, Taxation services, Architectural services , Engineering services, Integrated engineering services, Urban planning and landscape architectural services, Medical and dental services, Veterinary services, Services provided by midwives, nurses, physiotherapists and paramedical personnel

5%


S.No Sectors Admissible Rate

1 Business Services

D Other business services Advertising services, Market research and public opinion polling services Management consulting service, Services related to management consulting, Technical testing and analysis services, Services incidental to agricultural, hunting and forestry, Services incidental to fishing, Services incidental to mining, Services incidental to manufacturing, Services incidental to energy distribution, Placement and supply services of personnel, Investigation and security, Related scientific and technical consulting services, Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment), Building- cleaning services, Photographic services, Packaging services,

Printing, publishing and Convention services

3%


Status holders are business leaders who have excelled in international trade and have successfully contributed to country's foreign Trade.

Status Holders qualify for the Export House status Certificate under the scheme

The export performance will be counted on the basis of FOB value of export proceeds realized during current and previous two FY Category Export Performance FOB / FOR Value

Status holder


One Star Export House 3 Million US$

Two Star Export House 25 Million US$

Three Star Export House 100 Million US$

Four Star Export House 500 Million US$

Five Star Export I-Rinse 2000 Million US$

For granting status, export performance is necessary in at least two out of three years. For deemed exports, FOR value of exports in Indian Rupees shall be converted into

US$.

a) The exports by IEC holders under the following categories shall be granted double weightage for calculation of export performance for grant of status. (i) Micro, Small & Medium Enterprises (MSME) as defined in Micro, Small & Medium Enterprises Development (MSMED) Act 2006. (ii) Manufacturing units having ISO/BIS.

Grant of double weightage

Status category


a) Authorization and Customs Clearances for both imports and exports may be granted on self-declaration basis;

b) Input-Output norms may be fixed on priority within 60 days by the Norms Committee;

c) Exemption from furnishing of Bank Guarantee for Schemes under FTP, unless specified otherwise anywhere in FTP or HBP;

d) Exemption from compulsory negotiation of documents through banks. Remittance / receipts, however, would be received through banking channels

e) Two star and above Export houses shall be permitted to establish Export Warehouses as per Department of Revenue guidelines

Privileges of Status Holders


(f) Three Star and above Export House shall be entitled to get benefit of Accredited Clients Programme (ACP)

(g) The status holders would be entitled to preferential treatment and priority in handling of their consignments by the concerned agencies.

(h) Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled to self—certify their manufactured goods (as per their IEM/IL/LOI) as originating from India with a view to qualify for preferential treatment under different Free Trade Agreements (FTAs),

(i) Manufacturer exporters who are also Status Holders shall be eligible to self-certify their goods as originating from India as per Para 2.l08 (d) of Hand Book of Procedures.

(j) Self Write off Bad Debts upto 10% of the previous FY Exports

Export Promotion Capital Goods (EPCG) Scheme

EPCG Scheme allows import of capital goods for pre-production, production and

post-production at Zero customs duty. Alternatively, the Authorization holder may

also procure Capital Goods from indigenous sources.

EPCG scheme shall include:

(i) Capital Goods including in CKD/SKD condition

(ii) Computer software systems;

(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories for initial

lining and spare refractories and Catalysts for initial charge

.

Overview


Import of capital goods for Project Imports notified by Central Board of Excise and

Customs is also permitted under EPCG Scheme.

Import under EPCG Scheme shall be subject to an export obligation equivalent to 6

times of duty saved on capital goods, to be fulfilled in 6 years reckoned from date of

issue of Authorization.

Authorization shall be valid for import for 9 months from the date of issue. Revalidation

of EPCG Authorization shall not be permitted.

Second hand capital goods shall not be permitted to be imported under EPCG

Scheme.

EPCG scheme covers manufacturer exporters with or without supporting manufacturer

(s), merchant exporters tied to supporting manufacturer (s) and service providers.

Key Observations


Authorization holder shall produce, within six months from date of completion

of import, to the concerned RA, a certificate from the jurisdictional Central

Excise Authority or an independent Chartered Engineer, at the option of the

authorization holder, confirming installation of capital goods at factory/premises

of authorization holder or his supporting manufacturer(s)

EPCG Authorization shall be issued with a single port of registration for

imports. However, exports can be made from any port

Key Observations


EO under the scheme shall be, over and above, the average level of exports achieved by the applicant in the preceding three licensing years for the same and similar products within the overall EO period including extended period.

Such average would be the arithmetic mean of export performance in the preceding three licensing years for same and similar products.

In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the EO stipulated

Shipments under Advance Authorization, DFIA, Drawback scheme or reward schemes under Chapter 3 of FTP; would also count for fulfillment of EO under EPCG Scheme.

Export Obligation (EO)


For fulfillment of Export obligation, Export shall be physical export. However,

deemed exports as specified in paragraph 7.02 (a), (b), (e), (f) & (h) of FTP shall

also be counted towards fulfillment of export obligation, along with usual

benefits available under paragraph 7.03 of FTP.

EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in

free foreign exchange.

Royalty payments received by the Authorization holder in freely convertible currency

and foreign exchange received for R&D services shall also be counted for discharge

under EPCG.

Payment received in rupee terms for such Services as notified in Appendix 3E shall

also be counted towards discharge of export obligation under the EPCG scheme.


Only one extension of upto 2 years in export obligation on payment of

composition fee equal to 2% of proportionate duty saved amount on unfulfilled

export obligation

Authorization holder shall apply for redemption to DGFT on fulfillment of EO

RA concerned shall issue a certificate of discharge of export obligation to the

EPCG authorization holder and forward a copy to Customs Authorities with

whom BG/LUT has been executed.

Customs Shall release the Bond or Cancel the Bank Guarantee as the case may

be.

The unit needs to submit the cancelled BG copy to bank for release of BG / lien

Reliefs & Redemption


The scheme facilitates units to avail the benefit of Duty Saving under EPCG License without being bound by the export obligation condition

Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who intend to import capital goods on full payment of applicable duties in cash and choose to opt for this scheme.

Basic Customs duty paid on Capital Goods shall be remitted in the form of freely transferable duty credit scrip(s), similar to those issued under Chapter 3 of FTP.

Specific EO shall be 85% of the applicable specific EO under the EPCG Scheme. However, average EO shall remain unchanged.

Duty remission shall be in proportion to the EO fulfilled

Post Export EPCG Duty Credit Scrip

Govt Initiatives – FTP 15-20

The new Policy gives a boost to the

‘Make In India’ vision of the Government by reducing the

Export Obligation for domestic procurement

under the EPCG Scheme and prescribing a

reduction in the Specific Export Obligation

for domestic capital goods manufacturing

industry to 75% from the present 90%.

Duty Exemption / Remission Scheme

Schemes under this Chapter enable duty free import of inputs for export production, including replenishment of input or duty remission

The Duty Exemption schemes consist of the following: (a) Advance Authorization (AA) – Pre export (b) Duty Free Import Authorization (DFIA) – Post Export for SION items

Advance Authorization is issued for inputs in relation to resultant product, on the following basis(i) As per Standard Input Output Norms (SION) or(ii) On the basis of self declaration

Objective


For AA minimum value addition is 15%

For DFIA minimum value addition is 20%

AA may be obtained for domestic importer for invalidation / ARO for

reduction in Import duty

Obligation to fulfilled within a period of 18 / 24 months

AA under Norms Committee is subject to fixation / revisions of norms by NC

Obligation may be fulfilled against supplies to Deemed Exports / SEZ

AIR Duty Drawback is not applicable against AA exports

Shipping Bills to carry the AA No. and items consumed in relation to exports

Key Observations


Particulars CASE I CASE II

Selling Price (In Rs) 100 100

Import Content (In Rs.)

40 20

Customs Duty % 7.5% 7.5%

Savings by Adv License (In Rs)

3.00 1.50

Duty Drawback - 2% (In Rs)

2.00 2.00

COMPARISON OF ADV LICENCE AS AGAINST DRAWBACK

Deemed Exports

“Deemed Exports” refer to those transactions in which goods supplied do

not leave country, and payment for such supplies is received either in Indian

rupees or in free foreign exchange.

Supply of goods under following categories (a) to (d) by a manufacturer and

under categories (e) to (h) by main / sub-contractors shall be regarded as

“Deemed Exports”:

What is Deemed Exports ?

Categories of Supply

Deemed Exports

(a) Supply of goods against Advance Authorization / Advance Authorization for

annual requirement / DFIA;

(b) Supply of goods to EOU / STP / EHTP / BTP;

(c) Supply of capital goods against EPCG Authorization;

(d) Supply of marine freight containers by 100% EOU

A. Supply by manufacturer:

Deemed Exports

Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as

notified by Department of Economic Affairs (DEA), MOF

Supplies under International Competitive Bidding (ICB)

Supply of goods to any project or for any purpose in respect of which the Ministry of

Finance, by Notification No. 12/2012 – Customs dated 17.3.2012, permits import of

such goods at zero customs duty. Benefits of deemed exports shall be available only

if the supply is made under procedure of ICB.

Supply of goods required for setting up of any mega power project, as specified in

the list 32A, at Sl. No. 507 of Department of Revenue Notification No. 12/2012-

Customs dated 17.03.2012

Supply of goods to nuclear power projects / Drinking water projects

Above supply conditions are governed by the FTP chapter 7

B. Supply by main / sub-contractor (s):

Deemed Exports

Deemed exports shall be eligible for any / all of following benefits in

respect of manufacture and supply of goods.

(a) Advance Authorisation / Advance Authorisation for annual requirement /

DFIA.

(b) Deemed Export Drawback

(c) Refund of Terminal Excise Duty

Benefits for Deemed Exports

Deemed Exports

(a) In case CENVAT credit / rebate has not been availed on the inputs / input

services, by the supplier of goods, then, benefit as per Column ‘A’ of All

Industry Rate of Duty Drawback Schedule shall be admissible.

(b) If CENVAT credit / rebate has been availed by the supplier of goods, on

inputs / input services, then, no Drawback shall be admissible as per

Column ‘B’ of All Industry Rate of Duty Drawback Schedule. However, in

such cases, Basic Customs Duty paid can be claimed as Brand Rate of

Duty Drawback based upon submission of documents evidencing actual

payment of duties

Conditions for refund of deemed export drawback

Deemed Exports

(i) Supply of goods will be eligible for refund of terminal excise duty provided

recipient of goods does not avail CENVAT credit/rebate on such goods.

(ii) Supply of goods which are exempted ab-initio from payment of Terminal

Excise Duty would be ineligible to get refund of TED. Exemption from TED

is available to the following:

(a) Supplies under ICB;

(b) Supplies of intermediate goods, against invalidation letter, made by an

Advance Authorisation holder to another Advance Authorisation holder;

(c) Goods Procured by EOU / EHTP / STP / BTP unit from a unit in DTA

(d) Supply of goods to UN/International Organisation or project funded by it.

Conditions for refund of terminal excise duty

Deemed Exports

Benefits on supplies, as given in Para 7.03 above, whichever is applicable.

Supply againstPara 7.03 (a)


Para 7.03(b)Duty Drawback

Para 7.03 (c)Terminal Excise Duty


Yes (for intermediate

supplies against an invalidation

letter)

Yes (against ARO or Back to Back letter of credit)

(i) Exemption, in case of Invalidation Letter(ii) Refund, in case of ARO or back to back letter of

credit(iii) No exemption/ refund against supply to DFIA

as CVD is not exempted

EOU/EHTP/STP/BTP

Yes Yes

(i) Exemption, in case of Invalidation Letter(ii) Refund, in case of ARO or back to back letter of

credit(iii) No exemption/ refund against supply to DFIA

as CVD is not exemptedEPCG No Yes Refund

DEA/MOF Project

Yes Yes Refund

MPP / Customs Not 12/2012

Yes Yes Exemption

Deemed Exports

Normally, drawback may be allowed as per All Industry Rate fixed by DOR

in the Drawback Schedule. An application in ANF- 7A, along with documents

prescribed in ANF-7A & Appendix-7E, may be made to RA or DC

concerned, as the case may be, for fixation of brand rate.

Fixation of Brand Rate

Industry Specific Customs Notifications

The units may examine the applicability of the specific Customs Notification for exemptions or concessions subject to the conditions of the notifications. Few such important notifications are listed below:

Jumbo Notification No. 12/2012-Cus., dated 17-3-2012 - Effective rates of basic and additional duty for specified goods falling under Chapters 1 to 98:

The Jumbo notification either provides an exemption or concession of Basic Customs duty and SAD on the Imported inputs against the manufacture of specific end product subject the conditions against the List No. The concessions / exemptions vary for each S.No with conditions.

Few Important Customs Notifications for exemptions / concessions


Exemption to goods imported for execution of an export order for jobbing Notification No. 32/97-Customs Dt 01-04-97

Goods are imported for execution of an export order placed on the importer by the supplier of goods for jobbing exempted from the whole of the duty of customs and whole of the additional duty of CustomsProvided:

• That the goods are imported for execution of an export order placed on the importer by the supplier of goods for jobbing

• That the goods so imported have to be exported within six months from the date of clearance.

• FOB value of the resultant products exported is at least 10% more than the C.I.F. value of all goods imported



• Exemption to containers of durable nature: vide Notification No. 104/94-Cus., dated 16-3-1994

Containers which are of durable nature, when imported into India, whole of the duty of customs and whole of the additional duty of Customs (SAD) is exempt.Provided:

a. Importer has to Furnish a Bondb. Re-export the said containers within six months from the date of their

importation.



• Goods exported from India and Imported after being subjected to specified processes Exempted vide Notification No. 43/96-Cus., dated 23-7-1996:manufacturing process was undertaken in India and which were exported out of India for carrying out further manufacturing process of coating, electroplating or polishing or a combination of one or more of these processes, when re-imported into India, after completion of the said processes, exempted from the whole of the duty of customs and whole of the additional dutyProvided

a. The identity of goodsb. that the goods are re-imported within a period of one year from the date of

their exportation from India for carrying out the said processes



• Exemption to goods imported for carrying out repairs, reconditioning or reengineering Notification No. 134/94-Cus., dated 22-6-1994When Goods mention in the above notification imported into India for carrying out repairs, reconditioning, reengineering, testing, calibration or maintenance (including service) exempted from the whole of the duty of customs and whole of the additional dutyProvided:

a. The above repairs, reconditioning, reengineering, testing, calibration or maintenance (including service) is undertaken in accordance with the provisions of section 65 of the Customs Act, 1962

b. After the above activity CG/RM id to be exported.



• Nil duty or 5% duty on specified goods when imported into India for use in the manufacture of the finished goods Notification No. 25/99-Cus Dt 28-02-99 (Predominantly for manufacture of Electronics Products)Goods mentioned in the List A and List B of the above notification imported into India for use in the manufacture of the finished goods specified in the corresponding entry of the said Table, exempted from that portion of the duty of customs.

(a) Nil Duty in the case of the imported goods specified in List A; and(b) 5% Duty ad valorem in the case of the imported goods specified in List B;



• Exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for the manufacture thereof Notification No. 24/05 and 25/05-Customs Dt 01-03-05 (Information Technology Agreement)

This Notification exempts the goods of the description manufactured as the final product in the Table and falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 when imported into India, from the whole of the duty of custom duty.Provided:

• Bond needs to be furnished• Annexure III procedure to be followed


Trade Restrictions

• Exporters, while undertaking export of defence items, are required to first refer to the list of military stores and then, SCOMET list of DGFT.

• If the items, proposed to be exported by the exporter, are listed in the list of military stores attached to the DGFT notification (115 (RE-2013)/2009-2014 dated 13.03.2015, the exporters are required to obtain a No Objection Certificate (NOC) from Department of Defence Production. However, if the items of export are listed in the SCOMET list of the DGFT, the exporters would be required to obtain the NOC from the O/o DGFT as per the rules and procedures of DGFT.

• Products for Exports may be Restricted or Prohibited. The respective ministry NOC / License / Permit need to be obtained for Restricted items exports

SCOMET List, Military Stores and Defense Supply restrictions

Trade & Facilitation & Ease of Doing Business

• Online filing of documents/ applications and Paperless trade in 24x7 environment

• Online inter-ministerial consultations

• Simplification of procedures/processes, digitization and e-governance

• DGFT is working on more forthcoming e-Governance Initiatives

Foreign Trade

Foreign Trade Finance


• Trade Credits are credits extended either by an overseas bank to the overseas supplier to import goods into India, or by an overseas bank to importer’s bank for imports into India. Depending upon source of finance, such trade credits are known as Suppliers credit or Short Term ECB.

• Trade credits are extended under RBI’s Automatic route for original maturity of less than 3 years from date of shipment.

• Trade Credits are for Capital Goods and Non Capital Goods. The guide lines are provided in the RBI Master Circular - 12/2015-16 dtd July 1st 2015

Short Term ECB /Buyers credit


• The PCFC Scheme enables exporters to avail Packing Credit at international interest rates through Authorised Persons.

• The Scheme covers the cost of both domestic as well as imported inputs of exported goods.

• All exporters having firm export orders / irrevocable L/Cs are normally eligible for PCFC,

• As regards existing customers, PCFC can be carved out of the the EPC limits available to them, subject to the outstandings under both the Rupee & Forex facilities (Converted at the prescribed notional rate) not exceeding the limits sanctioned.

Packing Credit in Foreign Currency


• Pre-Shipment Finance, also referred to as EPC(EXPORT PACKING CREDIT), is extended as WC for purchase of RM, processing, packing, transportation, warehousing, etc., of goods meant for exports.

• Post-Shipment Finance is extended after shipment to bridge the time lag between the shipment of goods and the realisation of proceeds.

Foreign Trade Promotion

• Market Development Assistance - MDA• Market Access Initiative – MAI• ECGC Coverage for Exports• Sector specific Subsidy by the ministries• Technology and Innovation funds / schemes• DSIR / DSIT benefits for R&D and Scaling up for Commercial Production• Stand by line of credit for Project Exporters by EXIM Bank• Trading exporters may import the goods to the Bonded Warehouse /

FTWZ without payment of duty and export directly from the warehouse with the option of re-labeling / re-packing / re-branding.

• Authoirsed Economic Operator Program - Customs

Other Benefits - Exports


The Promoter Shri Shekar (BE Mechanical) is the proprietor of a unit – HI TECH INDUSTRIES. After serving 25 years in various engineer companies for manufacture of engineering / Automotive / Aerospace parts.

He is registered with Central Excise, has an IEC and is in the MSME category With his personal contacts & skills, he received a confirmed PO from NISSAN – Auto Japan,

subject to the condition that he will install a brand new CNC VMC as per the spec from either of the two vendors: HAAS USA or DOOSAN South. Korea.

Both costs around Rs 100 lacs (1,42,000 USD) FOB price. HAAS is ready for LC at Sight Payment and DOOSAN for Usance LC with 180 days Credit. The Karnataka Bank Ltd is ready to sanction Term Loan and provide Working Capital Limits. He has been exporting to an EOU unit: 12-13 = Rs 40 lacs, 13-14 = Rs 60 lacs, 15-16 Rs 50

lacs. The monthly export quantity schedule is 10000 PCS @ US$ 10 / PC The import CIF cost after considering 5% material wastage is US$ 6 / PC (with an option to

buy thru the local dealer)

HI TECH INDUSTRIES - BANGALORE


Export Item is made of Imported Stainless Steel

It is one end threaded It is a connecting Rod of

the Engine The engine is a Diesel

Engine The engine is for a Car The Rod is drawn thru a

forging process It is machined in a

sophisticated Imported Vertical Machining Centre

The item is exported to NISSAN Auto - JAPAN


What exemptions are applicable on Import of Machinery ? What concessions are available for Import of Material ? Any concession if purchased thru Dealer ? What export benefits are applicable for Direct Exports ? Any benefits for EOU Supplies ? What financing options are available for Import of Capital Goods ? Any working capital concessions for Import of Raw Material ? Further any subsidy is available for machinery purchased ?

Mr. Shekar’s Questions ?


The Classification of Items are guided by the General Rules of Interpretation of Customs and there 6 Rules of Guidance.

Finished Goods Classification

HS Classification

73181900THREADED ARTICLES MADE OF STAINLESS

STEEL


COMPONENTS)84099949 OTHERS (PARTS OF DIESEL ENGINES)

87089900OTHERS (PARTS AND ACCESSORIES OF

MOTOR VEHICLES)

ITCHS CODE

ITC HS DESCRIPTION Imported Vertical Machining Centre 84571020

Raw material - Stainless Steel Rods 72221191


The Unit can avail the EPCG License for import of Machinery with the below obligation. Rs 100 lacs X 27% (7.5 + 12.5 + 4) = 27.00 lacs (denominated in US$). Export obligation =27 lacs X 6 times = 162 lacs to be fulfilled in a period of six years. Further unit need to maintain annual average exports of Rs 150 lacs. OR

If imported from Doosan Korea, the unit can avail Basic Customs Duty Exemption of 7.50% against India S.Korea Foreign Trade Agreement, and pay and avail the CENVAT / SAD input Credit OR

The Unit can avail the Post Export EPCG License with the same conditions as Pre-Import EPCG and claim the refund of Import Duty on fulfillment of Export Obligation in full / prorate

Import of Capital Goods – Vertical Machining Centre - 84571020


The Unit can avail the Zero % Advance Authorisation for Import of Raw Material (to be imported within 12 months) with 15% minimum value addition to be exported within a period of 18 months from date of License.

If the Unit is buying thru a dealer, the unit can avail the AA with invalidation in favour of the dealer, who can import back to back against an AA. This kind of supply by dealer falls under the Deemed Export Category. The dealer is exempted from charging Excise duty ab-intio.

If the unit is importing from S.Korea, the BCD is 0.94% instead of 10% Basic Customs Duty, if the Unit is importing from Japan the BCD is 0.80%.

Import of Raw Materials Goods – Stainless Steel Rod 72221191 HS Code


Export Incentives

A B CDBK Code DBK %

Value Cap

DBK Code DBK %

Value Cap

73181900THREADED ARTICLES MADE OF

STAINLESS STEELOTHER THREADED ARTICLES 2% 2% 0%

7318A 7% 11.5 7318B 2% 3.3


COMPONENTS)Manufactrs Of Stnles Stl(Excl

Utnsils),Nes2% 2% 0% 732603A 2% 13 732603B 2% 13

84099949OTHERS (PARTS OF DIESEL

ENGINES)

Other Parts Of Diesel/Semi

Diesel Engines3% 3% 0% 8409A 2% 13 8409B 2% 13

87089900OTHERS (PARTS AND

ACCESSORIES OF MOTOR VEHICLES)

Otr Prtsandaccssrs Of Vhcls Of Hdg 8701-8705

3% 3% 3% 870899A 7% 36 870899B 2% 10

Value Cap / Kg

Drawback when Cenvatfacility has not been ITCHS

CODEDESCRIPTION (MEIS)ITC HS DESCRIPTION

Drawback when Cenvatfacility has been availed

EXPORT INCENTIVES

APPLICABLE COUNTRIES


The Unit can avail USANCE LC of 180 / 360 / 720 or 1081 days if the supplier agrees for the credit period. The sublimit of LC is sanctioned under the Term Loan OR

If the supplier does not agree for USANCE LC, Mr.Shekar may opt for LC at Sight with Short Term ECB / Buyers Credit, where in Canara Bank Baharin or BOI Tokyo (or any other Bank) will fund the NOSTRO A/c of Karnataka Bank Ltd for USD 1,42,000/- against the LOU issued by Karnataka Bank Ltd

The rate of Interest is LIBOR + 90 BPS or below per annum with a Rollover option of 180 days for period of total three years.

The Unit is exposed to Foreign Exchange fluctuation risk Mr. Shekar may opt for forward contracts which is valid for six month / one year. Since there is a natural hedging, he may also consider partial booking of Forward

Contract or remain with open risk. The unit is eligible for 15% Credit Linked Capital Subsidy (Max of Rs 15.00 lacs)

Financing – Import of Capital Goods


The Unit can avail maximum USANCE LC of 180 days if the supplier agrees for the credit period. The sublimit of LC is sanctioned under the Working Capital as Non Fund Based Limit OR

If the supplier does not agree for USANCE LC, Mr.Shekar may opt for LC at Sight with Short Term ECB / Buyers Credit, where in Canara Bank Baharin or BOI Tokyo (or any other Bank) will fund the NOSTRO A/c of Karnataka Bank Ltd for against the LOU issued by Karnataka Bank Ltd

The rate of Interest is LIBOR + 90 BPS or below per annum with a maximum period of 80 days.

The Unit is exposed to Foreign Exchange fluctuation risk Mr. Shekar may opt for forward contracts which is valid for six month.. Since there is a natural hedging, he may also consider partial booking of

Forward Contract or remain with open risk.

Financing – Import of Raw Materials


The Unit is eligible for two types of export financing under the Working Capital:

a) Export Packing Credit in Rupees (OR / AND) – Rate of Interest is around 10.50% - 3% = 7% pa (concession under Interest equalization scheme)

b) Packing Credit in Foreign Currency (Pre- Shipment / Post Shipment) LIBOR + 400 BPS = (4.6% pa approx)

Financing – Exports

Foreign Trade Compliances

In Shipping Bills The type of Shipping bill is either Drawback or EPCG or Advance

Authorization or EOU / EHTP / BTP as the case may be under each line item of export

The export item HS Code and Description precisely matches with EPCG / Advance Authorisation

MEIS description is appearing as an extended description in the Brackets Consumption of inputs as per Advance Authorisation is stated in the

Shipping Bills MEIS declaration “We intend to claim rewards under the MEIS Scheme of

FTP 15-20 Rewards column is selected as “YES” EP Copy is maintained by the Unit and is to be submitted only to DGFT

Please ensure the following compliances !

Foreign Trade Compliances

Others• Installation Certificate is obtained from the CE (FTP 15-20) / Central

Excise within Six months.• Half yearly Duty Drawback returns are filed to the respective ports

within two months from the end date• e-BRC are regularly updated by the Bank• Proof of landing is obtained for all the MEIS Shipping Bills atleast

once in a Quarter• Amendment of EPCG before shifting of Machinery or change in Item

Please ensure the following compliances !

Any Questions / Clarifications ?

Portals for reference / updates www.indiantradeportal.in

www.icegate.gov.inwww.dgft.gov.inwww.cbec.gov.inwww.rbi.org.in

FAQs on Free Trade Agreement & e-book – www.commerce.nic.in

http://www.indiantradeportal.in/

http://www.icegate.gov.in/

http://www.dgft.gov.in/

http://www.cbec.gov.in/

http://www.rbi.org.in/

http://www.commerce.nic.in/

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