“DISTANCE”is dead

And it’s good news for Foreign trade

“Marine chronometer”that helped maritime

trade possible in modern times

Developed by John Harrison

An instrument that helped overcame

distance…

Marine chronometer• A clock used as a portable time

standard; used to determine longitude by means of celestial navigation

• Revolutionized naval (and later aerial) navigation and enabling the Age of Discovery and Colonialism to accelerate.

Menace of Distance in foreign trade has been removed by Technological advancement in:

• Transportation & logistics• Telecommunication• Internet & Information Technology• Investments• Infrastructure• Energy

Along with many initiatives & efforts undertaken by the Governments to promote and push foreign trade

Ancient Trade routes in the Indian Ocean

This 1st century coin with Indian ship is testimony to the naval, seafaring and trading capabilities of India

It was the lead coin of Vasisthiputra Sri Pulamavi, of Satavahana rulers (Andhara Pradesh)

• Maritime trade between Mesopotamia and the Indus Valley started in 2500 BC

• 1st oceanic trading routes between Greek and India began in around 130 BC

• Greek navigator Eudoxos of Cyzicus, under Ptolemy VIII, who was king of Egypt, recorded it in 118BC.

He sailed from the Arabian port of Aden (Eudaemon in Greek) to the west coast of India using the Indian Ocean's seasonal monsoon winds.

Interesting facts

Muziris, as shown in the 4th century Tabula Peutingeriana.A presentation by Dr.Amiya Chandra

"the city where the beautiful vessels, the masterpieces of the Yavanas [Westerners], stir white foam on the Culli [Periyar], river of the Chera, arriving with gold and departing with pepper-when that Muciri, brimming with prosperity, was besieged by the din of war.“

Description of Muziris is in Akanaṉūṟu, an anthology of early Tamil bardic poems (poem number 149.7-11) in Eṭṭuttokai

European trade with Calicut, India in c.1572Source: Georg Braun & Frans Hogenberg’s atlas Civitates orbis terrarum

Trade made modern India

possible…

Indian subcontinent had more than 730 Princely States, which were united by East India Company (British), French &

Portuguese

Foreign Trade

An Introduction…

Foreign trade

It is the exchange or trade of capital, goods, and services across international borders or territories.

It is most significant

Determinant of economic development of a country

Movement of goods and services results into outflow and inflow of foreign exchange

Also called EXIM Trade.

3 Types of Foreign Trade

ExPortare

Outflow of goods from home country to

foreign country

Three Categories of Exports

ImPortare

Inflow of goods and services from foreign country to home country

Four Categories of Imports

entrePoser

A trading post where goods can be imported/exported without paying import duties, often at a profit

Also known as Re-export.

entrepôt

Need & Importance of Foreign Trade

1. Division of labour and specialisation– Countries with abundant natural resources export raw materials and import finished goods from countries which are

advanced in skilled manpower.

2. Optimum allocation and utilisation of resources– Due to specialisation, unproductive lines can be eliminated and wastage of resources avoided.

3. Equality of prices– Foreign trade keeps the demand and supply position stable, which in turn stabilises the prices, making allowances for

transport and other marketing expenses.

4. Availability of multiple choices– Foreign trade helps provide better choice by making available new varieties to consumers

5. Ensures quality and standard goods– Highly competitive, to maintain and increase the demand, the exporting countries have to keep up the quality of goods.

Thus quality and standardised goods are produced.

6. Raises standard of living of the people– People have a choice of new and better varieties of goods and services and hence improve their standard of living.

7. Generate employment opportunities– by increasing mobility of labour and resources and generates direct employment in export-import sector and indirect

employment in other sector of economy eg Industry, Service Sector (insurance, banking, transport, communication), etc.

8. Facilitate economic development– By import of capital goods and technology, a country can generate growth in all sectors of the economy, i.e. agriculture,

industry and service sector.

9. Assistance during natural calamities– During natural calamities such as earthquakes, floods, famines etc

10.Maintains balance of payment position– Every country has to maintain its balance of payment position.

11.Brings reputation and helps earn goodwill– A country which is strongly involved in exports earns goodwill in the international market

12.Promotes World Peace– Foreign trade brings countries closer, creates friendly atmosphere for avoiding wars & conflicts

Foreign Trade Business & Emerging Trends

Chan

ging

Lan

dsca

pe

International trade has grown tremendously in the last 30

years, much faster than global output.

Measured in gross terms, the dollar value of world merchandise trade increased by 7% per year on average between 1980 and 2011, reaching a peak of US$ 18 trillion

Commercial services trade grew faster, at 8% per year on average- US$ 4 trillion in 2011.

Since 1980, world trade has grown on average nearly twice as fast as world production

Reductions in tariffs and other barriers to trade during this period also contributed to the expansion.

New players have risen to prominence in world trade, most

notably large developing countries and rapidly

industrializing Asian economies.

• Developing economies rose from 34% of world exports in 1980 to 47% by 2011

• Developed economies dropped from 66% to 53%

• China boosted its share in exports from 1% in 1980 to 11% in 2011, making China the world’s largest exporter

• United States, Japan and the European Union recorded declining shares in world exports.

• A similar picture emerges on the import side. • Developing economies raised their collective share in

world trade, by trading with each other. – As evidence ,the share of “South-South” trade in world

trade rose from 8% in 1990 to 24% in 2011. – North-South trade also increased slightly, from 33% to 38%,

but trade among developed economies slide from 56% to just 36%

Trade has tended to become more regionalized since 1990, particularly in Asia, but intra-

regional trade shares in Europe and North America have

remained steady or declined.

• Intra-regional trade in Asian exports rose from 42%in 1990 to 52% in 2011

• If individual EU states are counted separately, Europe had largest intra-regional share at 75% in 2011

• Intra-regional trade in North America’s exports increased from 41% to 56% between 1990 and 2000, before falling back to 48% in 2011

• Excluding intra-EU trade, Europe saw its within-region share of exports drop from 35% in 1980 to 29% in 2011

• Other WTO geographic regions (South America, Africa, Middle East and Commonwealth of Independent States) mostly export primary products to other regions. While their shares of intra-regional trade have increased, they remain small in comparison to other regions.

If measured in value-added terms, the contribution of

international supply chain & services to international trade is

much higher.

• Preliminary estimates of trade measured in value-added terms show that almost 30% of total trade consists of re-exports of intermediate inputs

• Indicating increased international interdependence through international production chains.

• Services are key contributors to trade in goods, either in their role of facilitating international transactions or through their incorporation in the total production cost of merchandise.

The efficient sourcing of intermediate inputs is crucial for

a country’s export competitiveness.

• Economies import more and more intermediate goods and services to produce both for the domestic market and for exports.

• A positive correlation has been found between access to imported inputs and export performance – the more an economy integrates into international supply chains, the more its exports grow.

• Efficient access to imports of intermediate inputs improves the capacity of firms to increase their productivity and remain competitive in an interconnected world.

Fundamental economic factors affecting

international trade

• Demography• Investment• Technology• Energy• Natural resources• Transportation costs• Government institutions

Demography

• Demographic developments affect trade patterns and the level of import demand.– Older groups in ageing countries will spend

more on communication, transport and health services.

– Demographic transition in its early stages, means per capita income will increase, and with it the size of the middle class

– The demand for goods and services that are typically consumed by the middle class, such as recreation equipment, cars and mobile phones, as well as recreation and culture services, will disproportionately come from emerging markets.

• Composition of the labour force linked to the demographic transition – Rising share of educated workers – Increase in female labour force

participation• International migration is a component of

demographic change

Investment

• Investment in physical capital can lead to the emergence of new players in international trade, especially in the context of international supply chains– Public investment in roads, ports and other

transport infrastructure reduces trade costs – For instance, the empirical literature suggests

that doubling the kilometres of paved roads or the number of the paved airports per square kilometre of a country’s territory can boost trade by 13%-14%

– Similarly, investment in information and communication technology (ICT) infrastructure could enable us to participate in world markets for services.

– Transform a relatively labour-intensive economy into a relatively capital intensive, as in case of Japan, which saw its capital-labour ratio increase from less than 10 in the early 1960s to almost 180 in 1990

Technology

• A two-way relationship exists between technology and trade. Technology drives trade and trade is one of the factors shaping technological progress

• Service trade is more benefited & driven by Technology improvements

• Trade affects technological progress through incentives to innovate and through technology transfers

• Technological innovations may also relocate business activities across countries and among large and small firms

Where to Export?

Key safeguards & consideration

Factors to be considered while

conducting foreign trade with any target

country

• Political • Economical• Social• Commercial• Technological

Advancement• Marketing

Political Stability & Relationship

• Stability• Continuity of Policies• Certainty• Predictability• Friendly / Un-friendly / Enemy

– Trade Restrictions & Embargo– War & Crime– Fund Restrictions & Transferability

Political Stability Risk Score by Country

Source: Economics and Statistics Administration analysis using data from the Economist Intelligence Unit.

Source: Economics and Statistics Administration analysis using data from Belgium's Office Nationale du Ducroire|Nationale Delcrederedienst (ONDD).

Security Risk Score by Country

Economic Status• Advanced Economies

– Economically stable– Higher income & spends– Indurially Developed

• In Transition– Relatively economic stability– High income & spends– Industrially strong

• Less Developed– Developing economies– Lower income & spends– Gaining industrial stability

• Least Developed– Underdeveloped economies– Industrially weak– Least income & spends– Rich in raw material

Economic Factor

Status Example Opportunity ScopeIndustrial Developed Countries

USA, Germany, Japan etc.

Labor Intensive Products i.e. Garments, Leather Goods, Engineering & Handicrafts etc.

Industrializing Countries

Brazil, Hongkong, South Africa etc

Machinery & Equipment to set up new Industries

Raw Material Exporting Countries

Africa, Gulf, Latin America etc.

Food Product, Transport Equipment, Consumer Durable, Railway Infrastructure, Hotel & Hospital Equipment etc.

Underdeveloped Countries

Bangladesh, Nepal, Africa, Srilanka etc

Railway, Road, Building, Power Transmission Equipment etc

Social Factor• Population of the Country

– Age Group & Sex– House hold statistics

• Culture of the Country• Social Class, Education,

Language• Size of the Market & Trade

Practice.• Transport & Communication

Facilities• Climate of the Country

Commercial Factor• Import & Export Restrictions

• Demand & Supply

• Tariff & Non – Tariff Barriers

• Foreign Exchange Position & Balance of Payment

• Inflation Rate

Transfer Risk Score by Country

• Banking System

• Currency Consideration, Control, Availability & Stability

• Foreign Trade Role In the Economy– Government Interference In International Trade Activities – Export Incentives– G. S. P.– Freight Rebate– Permit / License Restrictions

Marketing Factor1. Attitude towards foreign

products

2. Attitude towards your country’s products

3. Shipping distance

4. Product acceptance

5. Quality, design, price, delivery, after sale service etc.

• When Coca-Cola first came to China, it was given a Chinese name that sounded very similar . . . but the characters used for the name meant "Bite the Wax Tadpole.“

• Even a close translation might not be close enough -- "Jolly Green Giant" translates into Arabic as "Intimidating Green Ogre."

‘sOf

MARKETING

The name of your product. Sure, it sounds fine and intriguing , but what does it mean in the target market?

Chevrolet introduced their new automobile called the "Nova" in Venezuela -- which, in Spanish, means "doesn't go"!

The colors of your packaging. What do the colors connote in the country of destination?

• Vibrant, attention-grabbing red sometimes signifies "warning" or "danger" in the U.S., but in Chinese culture, it indicates good luck.

• Western cultures: The bright cheery nature of yellow is the predominant meaning in most Western nations. It is associated with warmth (the sun), summer and hospitality

• In Germany yellow is associated with envy

• Latin America On the contrary, yellow is associated with death and mourning

The size or quantity of your product itself.

One single Whopper may feed one American, but that same burger sold in France may make a lunch for two, or have to be tossed in the trash.

If too much of your product will go to waste, it's not economical or convenient for your consumer, and they won't buy it.

Overall packaging and labeling design. Besides your color choices, your illustrations or graphics need to be appropriate, appealing and understandable to your end-user.

– For example, if you put a smiling face on your package, but the purchase of that particular product is taken quite seriously in their country, would your labeling be trivial or cheap-looking, or even offensive?

– And if you want to sell your products in stores that scan data, bar-coding your product will be essential.

Other considerations

• Weights and measurements– Indicate weights and measurements on your label according to the local standard measures. Metric is considered the

global standard, but you must double-check.

• Will you need a bilingual label? – Canada requires a French-English label. Finland requires a Finnish-Swedish label. Most Middle East countries require an

Arabic-English label. – For some destinations, the first order or trial shipment requires only a sticker on the outside of the package in the

language of the importing country. Generally, this sticker should state the importing agent's name and address, the weight of the package in the country's standard units of measurement, an ingredient legend and the expiration date.

• Number of units per package– Some countries, particularly in the West, find 7 to be lucky and 13 to be unlucky. In Japan, the number 4 is the sign of

death, so packing anything four to a box will be the kiss of death for your marketing venture

• Pictures of your product on the label– A picture tells a thousand words. When Americans read PIZZA on the outside of a box, they know what's inside. But will

they in New Caledonia? Probably not. Keep this in mind when you develop packaging for worldwide sales.

• Packaging material– If your packaging is behind the times, don't think you'll be able to unload (export) it in the world market. Customers

worldwide appreciate innovation and cutting-edge technology, and they EXPECT it.– Replacing exporting all-metal tins of gourmet nut snacks with composite tin (made from sturdy cardboard) that was

safer and lighter in weight than an all-metal tin

• Extending current product applications– few months of actually living in a foreign country would really pay off in knowing how the locals do things and what they

need to be able to do better– Ask some simple questions: How do the people there like to spend their time? What are their favorite foods? How do

they clean their homes? How are their clothes laundered?

• Make sure electrical products are suitable for international use– If your wired product is not adjusted to the electrical standards in your target market, you'll have all sorts of problems,

especially if you have already shipped the unacceptable product! – If for some reason you don't find what you need, contact your local chamber of commerce or a government official in

the country where you are about to do business.

• How will you handle warranties, guarantees, consignment sales or service calls overseas?– Anticipate what it will take to put one of these commitments in place not locally, but globally. Can it be

done? If so, map out the logistics from start to finish and determine who will be responsible. If it is not feasible, then don't offer it.

• Environmental effects on your product– Humidity, high energy costs, poor water supply, extreme hot or cold temperatures, poor infrastructure

-- all can affect how your product holds up in a new market. • Country of origin

– In order to sell a product in retail stores or elsewhere, some countries require a statement on the product that indicates where the product is made. Check with your prospective customers, wholesalers, agents, embassies and logistics specialist to determine if it is required by law before you import/export a product in the country where you are about to do business.

1. Uniqueness. – If the product is a market "first“.

2. Quality.– Is the product's quality magical or marginal?

3. Your cost. – if your cost is low, it might mean that product is a mass commodity rather than a specialty and that the

market is already flooded with suspiciously similar, me-too items.

4. Is the product already established, or new-to-market? – Novel products get higher prices when new to market. But novelty also has its downside. A new-to-market

product doesn't have the brand recognition, image and popularity that overseas customers tend to look for when they want a product with sure-fire consumer appeal.

5. Customer contact. – Who's calling the shots, you or the customer? Your customer knows a rip-off when he sees one.

6. Product positioning.– How you position the product determines the price at which you'll sell it. Use the product's pricing in the

equivalent sector of the domestic market as a guide to your overseas profit margin.

7. Direct or indirect sale– If your product is handled by a series of intermediaries -- each of these "middlemen" will tack on their due

percentage. If you price high at the beginning, your product will be priced right out of the market by the time it gets to an end-user. Nobody wins.

8. How desperate are you? – Customer relationship comes first

9. Competition – Price your products to stay in the global game. If you are up against unlimited competition, make sure

you're offering comparable prices along with some extra form of value for your customers.

10. Are you endorsed by an internationally known celebrity or star? – That makes a world of difference. Mainstream pop culture is the best marketing tool

Additional 4 P’s of International

MarketingPPPPPart

ner

Polic

y

Patie

nce

Pass

ion

S W O T Analysis

• Strengths– Ascertain your strengths

• Weakness– Check your weakness

• Opportunities– Grab oppertunities

• Threats– Remove your threats

Indian Foreign Trade Policy

DGFT – Organization and FunctionsForeign Trade Policy (FTP) and Annual Supplements

Foreign Trade Policy Documents

• FOREIGN TRADE POLICY (FTP) –(Last printed in June 2012)

• HANDBOOK OF PROCEDURES • VOLUME -I - Procedures; the Appendices (Last printed in June 2012) & Aayat Niryat forms.• VOLUME – II - SION (Standard Input Output Norms) (Last printed in 2009)

• ITC (HS) CLASSIFICATION OF EXPORT AND IMPORT ITEMS (Last printed in 2012)

⁻ All these Policy documents are available in DGFT website: www.dgft.gov.in

Foreign Trade policy 2009-14

• India’s recent foreign trade policy modifications underline the importance of increasing exports and facilitate those imports which are required to stimulate the economy

– Major Provisions• Special focus areas (ch.1)• Import and Export controls (ch. 2)• Incentive schemes for export promotion (ch.3)• Schemes for Duty remission / neutralisation (ch.4)• Scheme for Technological Upgradation (ch.5)• EOU/STPI/EHTP/BTP.(ch.6)• SEZ/FTWZ (ch. 7 & 7A)• Deemed exports (ch.8)

FTP (2009-14) objectives: short-term

• Arrest and reverse declining trend of exports

• Achieve annual Export growth of 15% with target of US$ 200 billion by March 2011 (already achieved)

• Provide additional support to those sectors which have been hit badly by recession in the Developed World

FTP (2009-14) objectives: Medium term

• Achieve Annual Export growth of around 25% by 2014

• To double India’s exports of goods by 2014 i.e., to reach US $ 500 billion

FTP (2009-14) objectives: Long Term

• To double India’s share in Global Trade by 2020

Phasing out Foreign Trade Controls

As per outlined in FTP

Basis of Import & Export Controls– Security

– Public Health

– Public Morals

– Environment grounds

– Exhaustible Resources

Controls on Imports

• Import controls: 11,100 Lines are free for import.– From almost total control on imports in 1991, India removed restrictions in

phases over the next 10 years, removing almost all the QRs.

• Presently:– Prohibited items : 53 Lines– Restricted items: 485 Lines– STEs: 33 Lines.

• Prohibited items include beef, beef tallow, products of wild animals and ivory and other wild life products.

• Restricted items include live animals, birds, vegetable planting material, psychotropic substances, special chemicals, unworked stones, arms and ammunition, aircraft, security printing paper, second hand consumer goods, certain categories of waste and scrap, satellite and communication equipment of certain frequency and products of wild life.

• Products under STE include foodgrains, coconut oil, certain petroleum products, fertilizers etc.

Export Controls Restrictions fall under two Categories

General Trading Items - Export Facilitation Committee decides applications for license.

Dual Use Items (SCOMET items) – Special provision for these items under WMD Act, 2005.

– Prohibited items: 59 – Restricted items: 155 – Items reserved for STEs: 15

Some of the Export Controls

• Wheat & Wheat Products: Prohibited since 8.10.2007. E-GOM decision from time to time to relax control for specific quantities. Limited exports being allowed.

• Rice : Free now.• Edible Oil: Prohibited since 17.3.08 (with Exception). • Pulses: Export of pulses (except Kabuli Chana) is prohibited .• Cotton & Cotton Yarn: Now free subject to registration with DGFT.

• Export Duties: Primarily on raw materials like: Iron Ores:- 30% Raw leather:- 60% etc.

A presentation by Dr.Amiya Chandra

Schemes for Export Promotion

Schemes for

Sourcing Raw

Material

Scheme for

Importing Capital Goods

Schemes for

Specific Sectors

Schemes for

Specific Products

& Markets

Schemes for

Supplies within the

Country

SEZ, EOU Schemes –

Special Enclave

for Exports

Special Schemes available

to all Sectors

Universe of Export Promotion Scheme(categorization of all schemes available)

1 2 3 4 5 6 7

1: Schemes For Sourcing Raw MaterialPurpose/Availability Scheme

Schemes for import of raw material I. Advance Authorization schemeII. Duty-free- Import Authorisation

(DFIA)

Schemes for neutralization/refund of duties paid

Drawback scheme

2: Schemes For Importing Capital Goods

Purpose/Availability Scheme

All sectors requiring capital goods Export Promotion Capital Goods (EPCG) Scheme

3: Schemes For Specific SectorsPurpose/Availability Scheme

Diamond & gold sector Gems & Jewelry Export promotion Scheme

Service sector Served From India Scheme (SFIS)

Agriculture and village industry Sector

1. Vishesh Krishi and Gram Udyog Yojana(VKGUY)2. Scheme for import of capital goods for the Agriculture product

exports3. Agriculture Export development Schemes implemented by

APEDA

Small scale Sector Schemes for Assistance to the micro and small enterprises (MSEs)

4: Schemes For Specific Products & Markets

Purpose/Availability Scheme

Available to notified products & Markets

I. Focus Market Scheme (FMS)II. Focus Product Scheme (FPS)III. Market Linked Focus Product scheme

5: Schemes For Supplies within the Country

Purpose/Availability Scheme

Available to eligible supplies Deemed Exports

6: Special Enclave for Exports

Purpose/Availability Scheme

Dominant portion of production must be exported

I. Special Economic Zones (SEZ)II. 100% Export Oriented Units (EOU)

7a: Special Export Promotion SchemesPurpose/Availability Scheme

Recognition of exporters based on performance

I. Recognition of exporters as Export, Trading HousesII. Status Holders Incentive Scrip (SHIS)III. Incremental Exports In-Centivisation Scheme (IEIS)

Schemes for market development related assistance like providing money for participation in overseas exhibitions

I. Market development assistance (MDA) Scheme implemented by Department of Commerce

II. SSI-MDA Scheme for SSI Exporters

Scheme for providing assistance for export efforts though projects and studies, fighting legal cases etc.

Market Access Initiative (MAI)

7b: Special Export Promotion SchemesPurpose/Availability Scheme

Scheme for export related infrastructure development

Assistance to States for Infrastructure Development of Export (ASIDE)

Scheme for promoting export clusters

Towns of Export Excellence (TEE)

Scheme for complying Pre-shipment quality requirements

Pre-shipment Inspection

DGFT SCHEMES as outlined in Chapter 3 of FTP

Include promotional measures to boost exports by Department of Commerce and DGFT but also reward/incentive schemes run by DGFT

Reward Schemes by DGFT

Focus Product Scheme

(FPS)

Focus Market Scheme (FMS)

Market Linked Focus

Product Scheme (MLFPS)

Vishesh Krishi And Gram Upaj

Yojana (Special

Agriculture And Village

Industry Scheme ( VKGUY)

Agri Infra-structure Scheme(AISS)

Status Holder

Incentive Scrip

(SHIS)

Incremental Exports

Incentivisation Schme

(IEIS)

Served From India

Scheme(SFIS)

More than 1 lakh scrips issued in 2012-13 (most popular among all schemes run by DGFT)

Focus Product Scheme (FPS)• To promote exports of products with high export intensity /

employment potential– Over 1048 such products are listed in table O1 of Appendix-37D of HBPV1

• Export of products to all countries ( including SEZ units) are entitled for duty credit scrip's at 2% or 5% rate of FOB value of export– Some products are also granted 2% additional benefit– 1% additional benefit if exported through North-Eastern states

• Maximum benefit (including bonus benefit ) 7 % of fob value of export– 8% in case of export through North-Eastern states

• Required documents : – ANF-3C– Shipping Bill – B.R.C. (In case of manual

BRCS)– RCMC.

• Relevant Paras :– 3.15 OF FTP & 3.9 OF HBP

Focus Market Scheme (FMS)

• To offset high freight cost and other externalities to select International markets with a view to enhance export competitiveness in the countries notified in Appendix-37 C of HBPV1

– Export of all products (barring some ineligible categories) to such countries are eligible for this benefit.

– Countries listed in Table 01 and 02- at 3% rate of FOB.

– Countries listed in Table 03 – at 4 % rate of FOB.

• Required documents: – ANF-3C– Shipping Bill – B.R.C. (In case of manual

BRCS)– RCMC.– Landing certificate as per

para 3.8.2 OF HBP.

• Relevant Paras :– 3.14, 3.14.2 of FTP & 3.8

OF HBP.

Market Linked Focus Product Scheme (MLFPS)

• To incentivise export of such products /sectors of high export potential (not covered under present FPS list) to countries ( not covered in present FMS list)

– Such products along with name of countries are listed in table 02 of appendix-37D

– Benefit is granted at 2% rate of FOB value of export

• Required documents: – ANF-3C– Shipping Bill – B.R.C. ( In case of manual BRCS)– Landing certificate as per Para 3.8.2

OF HBP.

• Relevant Paras :– 3.15.3 OF FTP AND 3.8.2 OF HBP.

Vishesh Krishi & Gram Udyog Yojana (VKGUY)

• To compensate high transport costs and offset other disadvantages to promote export of agriculture, minor forest produce and their value products, Gram Udyog products & other products as notified from time to time.

– At present more than 800 products are notified under this scheme.– Products listed in appendix 37A of HBPV1 are entitled for benefit at

5% of FOB value of export

• Required documents: – ANF-3C– Shipping Bill – B.R.C. ( In case of

manual BRCS)– RCMC

• Relevant Paras :– 3.13 OF FTP AND

3.7.1 OF HBP

Incremental Export Incentivisation Scheme (IEIS)• Objective is to incentivise incremental exports

– IEC holder entitled for duty credit scrip at 2% on incremental growth during 01.01.2013 to 31.03.2013 vis-a-vis- 01.01.2012 to 31.03.2013.

– Exporter to achieve positive growth in financial year 2012-13 vis-a-vis financial year 2011-12.

– Region specific , covers exports to USA, Europe & Asian countries only.

– Ineligible categories for benefit under this scheme are Mentioned at para 3.14.4.D of FTP.

• Maximum benefit under this scheme is RS 20 lac per IEC.

• Required documents : – ANF-3C

• Relevant Paras :– 3.14.4 OF FTP AND 3.8.3

of HBP

Incremental Export Incentivisation Scheme (IEIS) on Annual Basis

• Objective is to incentivise incremental exports.

– IEC holder entitled for a duty credit scrip at 2% on incremental growth during 01.04.2013 to 31.03.2014 vis-a-vis- 01.04.2013 to 31.03.2014 on FOB value of exports

– Benefit under this scheme is not allowed to an exporter not having any export performance in 2011-12 and 2012-13.

– The scheme is region specific and covers exports to USA, Europe and Asian countries. In addition, 53 countries in Latin America and Africa as notified vide P.N. 3 dated 18.04.2013 are also eligible.

– Ineligible categories for benefit under this scheme are mentioned at Para 3.14.5.D of FTP.

• Maximum benefit allowed to an exporter is Rs 1 cr.

• Required documents : – ANF-3F

• Relevant Paras :– 3.14.5 OF FTP AND 3.8.3

of HBP

Status Holder Incentive Scrip (SHIS)

• Objective is to promote investment in up-gradation of technology.– Status holders in certain sectors as mentioned in Para 3.16.4 of FTP

and 3.10.8 of HBP are granted benefit at 1 % of FOB value of export.– Scheme is allowed for export made from 2009-10 to 2012-13.

• Status holders availing TUF benefit during the year are not eligible for this benefit.

• An exporter availing zero duty EPCG benefit during the year is not eligible under SHIS benefit for export made in previous year.

– Merchant exporter tied with supporting manufacturer exporter can also avail of this benefit.• SHIS is issued with actual user condition however limited transferability

among manufacturer exporters having status certificate is allowed.

– Duty credit scrip granted under this scheme can be utilised for import/domestic procurement of capital goods in those sectors allowed under this scheme

• Required documents : – ANF-3E– RCMC– Status certificate valid for year of

export

• Relevant Paras :– 3.16 OF FTP AND 3.10 of HBP

Promotional Measures in DGFTExport And Trading House

• Merchant As Well As Manufacturer Exporter, Service Exporter, EOU, EHTP, SEZs, AEZs, STPS and BTPS are Eligible for this recognition depending on their Export Performance.

• Export Performance In Current Plus Previous Three Years Are Counted To Recognise The Status.

• Categories Of Status Holders1. Export House- 20 Cr2. Star Export House 100 Cr3. Trading House 500 Cr4. Star Trading House 2500 Cr5. Premier Trading House 7500 Cr.

• Double weightage benefit is also allowed for certain categories as per Para 3.10.3 of FTP

Served From India Scheme (SFIS)

• Objective is to accelerate growth in export of services

– Benefit is given to Indian service providers as interpreted by pic in its meeting on 21.11.2013

– List of eligible services are mentioned in Appendix 41 .– Indian service providers having the net foreign exchange earning of at

least Rs 10Lakh (for individual service providers 5 lakhs) in a year are entitled for duty credit scrips at 10% rate of their earning.

– List of ineligible services are mentioned in Para 3.6.I of HBP.– Duty credit scrip may be utilised for import of capital goods related to

any service sector business of applicant. – It can also be utilised for payment of excise duty in case of domestic

procurement.

• Goods imported /procured shall be non-transferable except within group company and managed hotels

Agri Infrastructure Incentive Scrip (AIIS)• Status holders exporting products covered

under ITC HS chapters 01 to 24 are eligible for duty credit scrips equal to 10 % of FOB (including VKGUY benefit)– Zonal office CLA is licensing office for this scheme.– Scrips can be utilised for import of capital goods

as listed in Para 3.13.4 of FTP– Scrip issued under this scheme is non-transferable

however limited transferability is allowed to supporting manufacturer of status holders. • Required documents :

– ANF-3D– RCMC– Shipping Bills– BRCS (incase of manual BRCS)

Transferability Of Scrips• Duty Credit Scrip's issued under following schemes are freely transferable:

– FOCUS PRODUCT SCHEME– FOCUS MARKET SCHEME– MARKET LINKED FOCUS PRODUCT SCHEME– VISHES KRISHI AND GRAM UDYOG YOJANA– INCREMENTAL EXPORT INCENTIVISATION SCHEME– INCREMENTAL EXPORT INCENTIVISATION SCHEME ON ANNUAL BASIS

• Status Holder Incentive Scrip– TRANSFERABLE AMONG STATUS HOLDER HAVING MANUFACTURING CAPACITY.– CAN ALSO BE TRANSFERRED TO GROUP COMPANY HAVING MANUFACTRUING CAPACITY OF STAUS HOLDER

• Agri Infrastructure Incentive Scheme– ISSUED WITH ACTUAL USER CONDITION . HOWEVER TRANSFERABLE TO SUPPORTING MANUFACTURER

• Served From India Scheme– ISSUED WITH ACTUAL USER CONDITION.– TRANSFERABLE AMONG GROUP COMPANY AND MANAGED HOTELS

Schemes for Duty Remission / Neutralisation

Chapter-4

Basic Principle:

“ Goods & Services are exported & not the

Taxes & Levies”.

• Basic Customs Duty

• Excise Duties (Additional Customs Duties)

• Special Additional Duty (@4%)

• Education Cess and Higher Education Cess

Duties for Neutralisation

• The schemes for neutralisation can be categorized into:

• 100% EOUs/STP/BTP/ EHTP

• SEZ Scheme• Bonded Warehouses• Schemes for DTA units

Duty remission / Neutralisation for DTA unitsPurpose: Procure inputs and capital goods without the component of Central Indirect Taxes &

Levies

For Inputs

Pre Export Schemes :– Advance Authorisation Scheme (Actual User)– Duty Free Import Authorisation (DFIA) Scheme– Schemes for Gems & Jewelry Sector

Post Export Schemes :– Duty Drawback Scheme– Terminal Excise Duty (TED) Refund.

Advance Authorisation Scheme

Scheme for duty free import / procurement of Inputs (physically incorporated in the export product) along with Fuel, Oil, Catalyst etc. required for manufacturing the export product

– Approximately 8000 items already notified

– Scheme carries an export obligation over a specified period

– Advance authorisations are issued for physical exports, intermediate supplies & deemed exports.

Advance AuthorisationFor

Duty Free Inputs

Eligible Exports/ Supplies

Physical Exports out

of the Country

Intermediate Supplies to

another Advance

Authorisation Holder

Deemed Export

Supplies within the

Country

Inputs allowed on the basis of:

A. Quantity-wise Entitlement for individual inputs as per:1. Standard Input Output Norm (SION)– about 7500 SIONs notified2. Adhoc Norms ratified by the Technical Committee;3. Adhoc norms valid for two year.

B. Value-wise Limitation: Minimum prescribed VA: 15%. with exceptions

C. Actual User Condition: Inputs are with Actual User Condition even after fulfillment of Export Obligation

D. Except prohibited items, all other inputs allowed either direct import/ procurement or through the concerned STEs

E. Validity period of Imports - 18 months or co-terminus with duration of projects

• Required documents : – Export obligation period– Shipping Bills/ supply invoice– BRCS (in case of manual BRCS),

Appendix 23– Penalties for non-fulfilment– CD + Interest rate @18%PA

Who can apply:

─ Manufacturer Exporter

─ Merchant Exporter tied up with Manufacturer

─ Regd office/Head office or branch office/unit can apply

Advance Authorisation for Annual requirement• Similar to Advance Authorisation• Annual Entitlement:-

– 300% of FOB value of last years exports– At least exported for last two years– Not more than 5 authorisations under the same product group;

• Special features:-– Technical characteristics, quality and specifications shall be endorsed in the Bill of Entry /

invoice, duly attested by the Customs authority, in respect of following inputs: • Alloy steel including stainless steel, copper alloy, synthetic rubber, bearings, solvents,

perfumes/ essential oils/aromatic chemicals, surfactants, relevant fabrics and marble. – Flexibility to export any product falling under export product group using duty exempted

material.

Schemes for Gems & Jewelry Sector • Duty Neutralisation schemes:-

Duty Drawback scheme (Introduced in 2009) Replenishment scheme Advance Authorisation scheme Replenishment certificate for duty free import of

Consumables, Tools and other items namely, Tags and labels, Security censor on card, Staple wire, Poly bag etc [Entitlement % of FOB value of exports

Procurement of precious metal through loan basis

• Export Obligation:- Content of the precious metal as per wastage norms fixed and the value addition allowed in HBP, V1

Duty Free Import Authorisation (DFIA) SchemeIntroduced in 2006 and is similar to Advance Authorization Scheme.

• Differences are:– Higher value addition of 20%;– SION based only– Inputs/scrip freely transferable once exports

completed– Payment of Excise duty on imports after

transferability (Exceptions allowed)

Who avails it:– Where no hassles of

documentation with the supplier

– Sectors like Leather & Leather products, Food Products, Engineering etc.

Duty Drawback

“Drawback” in relation to any goods manufactured in India & exported, means rebate of duty chargeable on any imported material or excisable material used in manufacture of such goods in India. Goods include imported spares, if supplied with capital goods manufactured in India.

The Refund is in the form of cash.

• Admissibility of Drawback – Drawback shall be available for any duty paid material,

whether imported or indigenous, used in goods exported, as per drawback rate fixed by DOR, Ministry of Finance (Directorate of Drawback)

• Required documents : – Triplicate copy of Shipping bills– Examination report from custom officer– Import Invoice– Evidence of payment of Duties at the time of

Import of Goods– Permission from RBI for Re-export of goods

(wherever required)– Export Invoice & packing list– Copy of Bill of Landing or Airway Bill– Any other document as may be specified in

Deficiency Memo

Export Promotion Capital Goods (EPCG) Scheme

Chapter 5 of Foreign Trade Policy

Salient Features

• Import of capital goods at zero duty that may be used for producing or manufacturing goods

• These capital goods may be used at any stage of production viz. pre-production, production, post production, hence CKD – completely knocked down or SKD – semi knocked down capital goods can be imported

• Computer software systems too may be understood as capital goods • Capital goods shall include spares (including

refurbished/reconditioned) spares, tools, jigs, fixtures, dies and moulds

EPCG for Annual Requirement

• Status holders are eligible

• Exporters having past export performance in preceding two years are also eligible

• The entitlement in duty saved terms is up to 50% of FOB value of physical exports, service export and/or FOR value of deemed exports in preceding licensing year

Obligation for the exporter

• Exporter would have to export goods of value, six times the value of duty saved

• The time period to fulfil this would be six years from the date of issue of authorization

• However, if the exporter has a past export performance, then he would have to maintain the average of the last three years’ export performance

Eligibility• Manufacturer exporter, merchant exporter tied to

supporting manufacturer(s) and service providers

• Import of capital goods shall be subject to actual user condition till export obligation is completed

Invalidation

• Person holding EPCG Authorization may source capital goods from a domestic manufacturer. Such domestic manufacturer shall be eligible for deemed export benefit

• In case of direct imports, EO is fixed on the basis of actual duty saved amount. In case of domestic sourcing, EO shall be reckoned with reference to notional Customs duties saved on FOR value.

Incentives on EO fulfilment

• Only 75% EO fulfilment is sufficient for EO completion and claiming redemption if exports have been completed within half period from the date of issue

• For exporters of Green Technology Products, Specific EO shall be 75%

• For units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu & Kashmir, specific EO shall be 25% of the EO.

Export Products Covered Under Green Technology Products

i. Equipment for Solar Energy decentralized and grid connected products

ii. Bio-Mass Gassifieriii. Bio-Mass/Waste Boileriv. Vapour Absorption Chillersv. Waste Heat Boilervi. Waste Heat Recovery Unitsvii. Unfired Heat Recovery Steam Generatorsviii. Wind Turbineix. Solar Collector and Parts

x. Water Treatment Plantsxi. Wind Mill, Wind Mill Turbine / Enginexii. Other Generating Sets - Wind poweredxiii. Electrically Operated Vehicles – Motor Carsxiv. Electrically Operated Vehicles - Lorries and

Trucksxv. Electrically Operated Vehicles – Motor

Cycles/Mopedsxvi. Solar Cells

In case of export of goods relating to:i. Handicraftii. Handloomsiii. Cottage & Tiny sectoriv. Agriculturev. Aqua-culture (including Fisheries) Pisciculturevi. Animal husbandryvii. Floriculture & Horticultureviii. Poultryix. Viticulturex. Sericulturexi. Carpetsxii. Coir and Jute The EPCG authorization holders shall not be required to maintain average level of exports.

Operation of the Scheme• The Authorization holder under the EPCG scheme shall fulfil the export obligation over the

specified period in the following proportions:

– Period from the date of issue of Authorization– Minimum export obligation to be fulfilled– Block of 1st to 4th year 50%– Block of 5th and 6th year 50%

• Where EO of the first block is not fulfilled in terms of the above proportions, (except in such cases where the EO prescribed for first block is extended by the Regional Authority subject to payment of composition fee of 2% on duty saved amount equal to unfulfilled portion of EO), such Authorization holder shall, within 3 months from the expiry of the block, pay duties of customs

Other Information Source

1. Export Promotion Office / Commodity Boards2. Your Embassy Abroad3. Foreign Embassy In Your Country4. Import Promotion Organizations5. Chamber Of Commerce6. Monthly Statistic Of Foreign Trade 7. Overseas Business Report8. Economic Intelligence Report (EIU Report)9. Commodity Trade Statistic Of UNO

Today when we do so much business in foreign trade, we need the ability to identify an export or import opportunity very quickly, identifying where it came from where it has been yesterday, and where it is at today and if we don’t act now it would not be there tomorrow…

Knowledge, Speed, Network and Team are the key to win…

Thank you

Dr. Amiya ChandraJoint DGFT and A “Niryat Bandhu”

Talk to a “Niryat Bandhu”

today…