Export-import Policy

Export-import Policy

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Export-import Policy

The EXIM policy (export-import policy) aims at regulating and managing imports and promoting and maintaining exports. It does not allow exporting the goods that are scarce and are required within the country. The EXIM policy was first announced in 1992 to bring stability and continuity in the Indian economy.

Objective of Export-import policy

Its main objectives are as follows:

  • Deriving maximum benefits from expanding opportunities in the global market.

  • Stimulating economic growth by providing essential raw materials, components, and capital goods for production.

  • Enhancing the efficiency of agriculture and service sector and improving their competitiveness.

  • Generating new employment.

  • Encouraging the attainment of internationally accepted standards of quality.

  • Providing quality products at reasonable prices.

The Export-Import (EXIM) Policy was formulated to follow all the commitments made by India under the World Trade Organisation (WTO) in April 2002. The main focus of the EXIM Policy 2002 – 2007 was on the export and import of merchandise and services. In Exim Policy 1997 – 2002, the status of exporter was transformed into the business firm exporting services with effect from 1.4.1999 and these business firms are now known as Service Providers.

Some more principal objectives of this policy are as follows:

  • Support the export and help to attain a share of at least one percent of global merchandise trade.

  • To advance the prolonged economic growth by providing access to essential resources, such as intermediates, consumables, and capital goods.

  • Providing access to these resources further helps in improving the production of goods and services.

  • Support and improve technological strength and efficiency of Indian agriculture, industry, and services. This will further help in improving the competitive strength of the nation and generating new employment opportunities. It will also support and motivate in development of internationally accepted standards of quality.

  • Offer high quality goods and services to the consumers at internationally competitive prices.

Salient Features of Export-import Policy

The salient features of Export-Import Policy are as follows:

  • It introduced the removal of quantitative packaging restrictions on agriculture export.

  • It started providing transport assistance for agriculture based goods.

  • Export thrust on items identified in Medium Term Export Strategy.

  • The EXIM policy favoured the continuation of existing duty neutralisation schemes, until Value Added Tax (VAT) became fully operational.

  • It advocated the increase of time period from 8 to 12 years for executing export obligation under Export Promotion Capital Goods (EPCG) scheme.

  • Special Economic Zones (SEZs) were allowed to establish offshore banking units and they were free from statutory requirements like CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio).

  • This policy simplified the external commercial borrowing norms by allowing less than three years tenure loans.

  • EXIM policy provided a provision that allowed to repatriate export earnings within 360 days rather than 180 days.

  • It helped in retention of entire export earnings in Export Earners Foreigners Currency Account (EEFCA).

  • EXIM Policy provided tax benefits of sales from domestic tariffs to SEZ.

  • It also helped in reduction of processing fees and made provisions for receiving license in the same day of application from all the offices of DGFT (Director General of Foreign Trade).

  • This policy also helped in eliminating all the disputes related to classification by introducing common classification for DGFT and custom department.

  • No license was needed for relocation of overseas industrial plants in India.

  • Introduced Market Access Initiative (MAI) funds, which were given for the development of infrastructure in the industrial areas, such as Zirakpur, Panipat and Ludhiana.

  • Allocation of fund of Rs. 350 crore Assistance to States for Infrastructure Development (ASIDE) funds linked to their export performance.

  • Permission for captive power generation and duty free import of fuel for power generation.

  • Reduction in the eligibility for getting export house status from fifteen crore to five crore.

Evaluation of Export-import Policy

The EXIM policy was very significant for the Indian trade world especially for the foreign trade. It won’t be wrong to consider that the EXIM policy favoured export activity. The objective of this policy was to make export easier and rewarding and the policy was successful in its objective to some extent.

The following benefits can be seen if we evaluate the export import policy:

  • Comprehensive: The policy focuses on almost all the sectors including agriculture, cotton, handicraft, and cottage industry. It was developed in such a way to offer revenues and protection to rural people as well.

  • Supportive to Small, Cottage, and Handicraft Industry: These industries were once the backbone of the Indian economy, however now they need support to survive. Various incentives have been introduced for the survival and growth of small and cottage industries.

  • Growth oriented: The policy aims to reduce the India’s trade deficit by its progressive and export friendly policies.

  • Boost to agriculture export: The Indian economy is based on agriculture and supporting the export of agriculture is the need of the time.

  • Setting up agri-export zones: The government has agreed to setup 32 export sector zone that would be totally dedicated to agriculture.

  • Exploring new export market: It has been decided that now the export activity will take place in new countries, such as Latin and South America as well as Africa. The country is seeking to develop new market apart from USA and EU nations as these countries can be a promising market for the Indian products.

  • Overseas Banking Units: The EXIM policy also makes the way for the overseas bank to open their branches in SEZs. It will facilitate the export transaction as well. It helps Indian exporter to obtain loan for the trade at low interest rate.

  • Encouragement to Hardware Industry: The EXIM policy promoted the export of the computer hardware helping the market to grab a booming market.

  • Encouragement to Jewellery Industry: Elimination of duty on rough diamonds, concession to gems and jewellery industry, and reduction of value addition rates from 10 to seven percent on export of plain jewellery has encouraged and boosted the market.

  • Boost to Industrial Growth: Concession on the duty levied on the import of raw material capital goods and technology for the promotion of industrial growth.

  • Setting of a Business Center: Helping the exporter to learn about the intricacies of the foreign trade.

EXIM Policy was designed to bring vitality and growth in the country’s trade especially in export business. The policy was successful in its objective to a great extent.

Highlights of Export-import Policy 2009-2014

The highlights of recent EXIM policy 2009-2014 are given as follows:

  • Higher Support for Market and Product Diversification

    • Incentive schemes have been expanded by way of addition of new products and markets.

    • 26 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia Oceania.

    • The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%.

    • The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%.

    • A large number of products from various sectors have been included for benefits under FPS. These include Engineering products (agricultural machinery, parts of trailers, sewing machines, hand tools, garden tools, musical instruments, clocks and watches, railway locomotives etc.), Plastic (value added products), Jute and Sisal products, Technical Textiles, Green Technology products (wind mills, wind turbines, electric operated vehicles etc.), Project goods, vegetable textiles and certain Electronic items.

    • Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by inclusion of products classified under as many as 153 ITC (HS) Codes at 4 digit level. Some major products include; Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile made-ups, knitted and crocheted fabrics, glass products, certain iron and steel products and certain articles of aluminium among others. Benefits to these products will be provided, if exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand).

    • MLFPS benefits also extended for export to additional new markets for certain products. These products include auto components, motor cars, bicycle and its parts, and apparels among others.

    • A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY.

    • Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes is being provided.

Technological Upgradation

To aid technological upgradation of our export sector many initiatives have been taken. These include:

  • EPCG Scheme at zero duty for certain engineering products, electronic products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts, chemicals and allied products and leather and leather products.

  • The 3% EPCG scheme has been simplified for the convenience of exporters.

  • A minimum 15% value addition for imported inputs under advanced authorisation scheme has been stipulated to give boost to the added manufacture export.

  • A number of products including automobiles, engineering products have been included for incentives under the focus product and market linked focus product schemes.

EPCG Scheme Relaxations

  • To increase the life of existing plant and machinery, export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced to 50% of the normal specific export obligation.

  • Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14.

Support for Green products and products from Northeast

Focus Product Scheme benefit extended for export of ‘green products’; and for exports of some products originating from the North East.

Status Holders

  • To accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports. The duty credit scrips can be used for procurement of capital goods with Actual User condition.

    This facility shall be available for sectors of leather (excluding finished leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and ships, boats and floating structures), plastics and basic chemicals (excluding pharma products) [subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes (TUFS)].

    This facility was available upto 31.3.2011. Now, Regional Authority shall allow limited transferability of Status holder incentive scheme (SHIS) scrip within Group Company of the status holder provided the group company is a manufacturer.

  • Transferability for the Duty Credit scrips being issued to Status Holders under paragraph 3.8.6 of FTP under VKGUY Scheme has been permitted. This is subject to the condition that transfer would be only to Status Holders and Scrips would be utilised for the procurement of Cold Chain equipment(s) only.

Stability/Continuity of the Foreign Trade Policy

  • To impart stability to the Policy regime, Duty Entitlement Passbook (DEPB) Scheme was extended beyond 31-12- 2009 till 31.12.2010 and then discontinued.

  • Interest subvention of 2% for pre-shipment credit for 7 specified sectors was extended till 31.3.2010 in the Budget 2009-10.

  • Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act, were been extended for the financial year 2010-11 in the Budget 2009-10.

  • The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95%, to the adversely affected sectors, continued till March, 2010.

Marine Sector

  • Fisheries have been included in the sectors which are exempted from maintenance of average EO under EPCG Scheme, subject to the condition that Fishing Trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision. This would provide a fillip to the marine sector which has been affected by the present downturn in exports.

  • Additional flexibility under Target plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector.

Gems & Jewellery Sector

  • To neutralise duty incidence on gold Jewellery exports, it has now been decided to allow Duty Drawback on such exports.

  • In an endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse(s).”

  • A new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced.

  • To promote export of Gems & Jewellery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million.

Agriculture Sector

To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

Leather Sector

  • Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi-finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty.

  • Enhancement of FPS rate to 2% would also significantly benefit the leather sector.

Tea

  • Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%

  • DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%.

  • Export of tea has been covered under VKGUY Scheme benefits.

Pharmaceutical Sector

Export Obligation Period for advance authorisations issued with 6-APA as input has been increased from the existing 6 months to 36 months, as is available for other products. Pharma Sector extensively covered under MLFPS for countries in Africa and Latin America; some countries in Oceania and Far East.

Handloom Sector

To simplify claims under FPS, requirement of ‘Handloom Mark’ for availing benefits under FPS has been removed.

EOUs

  • EOUs have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale.

  • To provide clarity to the customs field formations, DOR shall issue a clarification to enable procurement of spares beyond 5% by granite sector EOUs.

  • EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

  • During this period of downturn, Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs.

  • EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale.

Thrust to Value Added Manufacturing

  • To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorisation Scheme has now been prescribed.

  • Coverage of Project Exports and a large number of manufactured goods under Focus Product Scheme (FPS) and Market Linked Focus Products Scheme (MLFPS).

Duty Entitlement Pass Book (DEPB)

DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms. Now, the passbook scheme has been discontinued.

Flexibility Provided to Exporters

  • Payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation/ Duty Free Import Authorisation (DFIA)/Export Promotion Capital Goods (EPCG) Authorisation has been allowed by way of debit of Duty Credit scrips. Earlier the payment was allowed in cash only.

  • Import of restricted items, as replenishment, shall now be allowed against transferred Duty Free Import Authorisations (DFIAs), in line with the erstwhile Duty Free Replenishment Certificate (DFRC) scheme.

  • Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA.

  • Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA.

  • Transit loss claims received from private approved insurance companies in India will now be allowed for the purpose of EO fulfilment under Export Promotion schemes. At present, the facility has been limited to public sector general insurance companies only.

Waiver of Incentives Recovery, on RBI Specific Write Off

In cases, where RBI specifically writes off the export proceeds realisation, the incentives under the FTP shall now not be recovered from the exporters subject to certain conditions.

Simplification of Procedures

  • To facilitate duty free import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. Customs clearance of such samples shall be based on declarations given by the importers with regard to the limit of value and quantity of samples.

  • To allow exemption for up to two stages from payment of excise duty in lieu of refund, in case of supply to an advance authorisation holder (against invalidation letter) by the domestic intermediate manufacturer. It would allow exemption for supplies made to a manufacturer, if such manufacturer in turn supplies the products to an ultimate exporter. At present, exemption is allowed upto one stage only

  • Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export Promotion scheme to other scheme. Customs shall now permit this conversion within three months, instead of the present limited period of only one month.

  • To reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. At present, the duty free imported goods could be taken only to the manufacturing unit of the authorisation holder or its supporting manufacturer.

  • Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty, even before fulfilment of export obligation under Advance Authorisation and EPCG Scheme.

  • Regional Authorities have now been authorised to issue licenses for import of sports weapons by ‘renowned shooters’, on the basis of NOC from the Ministry of Sports & Youth Affairs. Therefore, there will be no need to approach DGFT now.

  • The procedure for issue of Free Sale Certificate has been simplified and the validity of the Certificate has been increased from 1 year to 2 years. This will solve the problems faced by the medical devices industry.

  • Automobile industry, having their own R&D establishment, would be allowed free import of reference fuels (petrol and diesel), upto a maximum of 5 KL per annum, which are not manufactured in India.

  • Acceding to the demand of trade & industry, the application and redemption forms under EPCG scheme have been simplified.

Reduction of Transaction Costs

  • No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of FTP. Further, for all other Authorisations/ license applications, maximum applicable fee is being reduced to Rs. 100,000 from the existing Rs. 1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs.75,000 (for EDI applications).

  • To further the EDI initiatives, exporters can now file Export Obligation Discharge Certificate (EODC) applications online as transmission of two key documents (shipping bill from Customs and e-BRC from Banks) relating to Advance Authorisation and EPCG Authorisations in secured electronic format to DGFT has been established. With online EODC, exporter can complete the formalities at DGFT online and may get quick clearances at the Customs on account of e-transmission of EODC from DGFT to Customs. System for Online issuance of Registration Certificate for export of Cotton, Cotton Yarn, Non-Basmati Rice, Wheat and Sugar has been introduced.

  • For EDI ports, with effect from December ’09, double verification of shipping bills by customs for any of the DGFT schemes has been dispensed with.


  • In cases, where the earlier authorisation has been cancelled and a new authorisation has been issued in lieu of the earlier authorisation, application fee paid already for the cancelled authorisation will now be adjusted against the application fee for the new authorisation subject to payment of minimum fee of Rs. 200.

  • An Inter-Ministerial Committee will be formed to redress/ resolve problems/issues of exporters.

  • An updated compilation of Standard Input Output Norms (SION) and ITC (HS) Classification of Export and Import Items has been published.

Directorate of Trade Remedy Measures

To enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments, a Directorate of Trade Remedy Measures shall be set up.

Foreign Trade (Development and Regulation) Act 1992

Foreign trade is constituted of two important components namely import and export. Exchanging goods and services between the two countries is foreign trade. The term “Import” stands for arrival of goods into the country in a legal way by crossing the international border. Countries seek import for those goods and services that are not produced or the production falls short of meeting the domestic need of the market.

Whereas, “Export” is a legal transportation of goods out of a country to meet the domestic requirements of other countries. Country exports those items that are produced in abundance and can be exported to other countries to cater the need of the foreign customers. In short, we can say that for foreign trade, the whole world is like a local market. Importing countries are those which indulge in buying goods from another country while the country which is involved in selling activity is known as exporting country.

The traders involved in such transactions are importers and exporters respectively. Foreign Trade (Development and Regulation) Act, 1992 regulates the import and export activity in India. Earlier to foreign trade act, 1992 the Imports and Exports (Control) Act, 1947 was exercised. The old act was replaced by this new act offering immense power in the hand of government for the growth and development of foreign trade.

The salient features of the Act are as follows:

  • According to this new act, the Central Government is given power for creating arrangements that ensures development and regulation of foreign trade. It also helps in supporting imports and expanding exports from India.

  • The Central Government is given the power to restrain, hinder, and regulate the goods for the purpose of export or imports. The government can also exempt duty and taxes on certain goods.

  • The act authorises the Central Government to formulate EXIM Policy and amend it for the betterment of the country from time to time.

  • This act also gives the power to Central Government for appointing a Director General of Foreign Trade. He/she is appointed by the Central Government for advising in the formulation and implementation of the policy.

  • According to this act the Act, every importer and exporter should have an ‘Importer-Exporter Code Number (IEC) assigned by Director General of Foreign Trade or from the authorised office.

  • The Director General has the authority to suspend or cancel a license issued for export or import of goods in accordance with the Act.

Foreign Exchange Management Act 1999

The Foreign Exchange Management Act (1999), also known as FEMA was implemented to replace earlier Foreign Exchange Regulation Act (FERA). FEMA became active on the 1st day of June, 2000. The objective of introducing Foreign Exchange Management Act (1999) was to consolidate and amend foreign exchange law with objective of facilitating external trade and payments.

The act also focuses on the promotion of the orderly development and maintenance of foreign exchange market in India. FEMA is accepted and followed all over India. The act is also applicable to all branches, offices, and agencies outside India owned or controlled by a person who is a resident of India.

Customs Act 1962

The Central Board of Excise and Customs is the nodal national agency, which is designed to manage the Customs, Central Excise, Service Tax, & Narcotics in India. It was established in the year 1855 by the then British Governor General of India. It is one of the oldest government departments of India. The department is responsible for implementing and exercising customs laws in India and also for the collection of import duties or land revenue.

This department comes under the Department of Revenue, Ministry of Finance. The department is headed by IRS officers. These officers are first appointed as Assistant Commissioners and later they are promoted to the post of Chief Commissioners. Only few of the senior most officers become Members of CBEC / CESTAT / Settlement Commission as well.

Export (Quality Control and Inspection) Act 1963

The Export (Quality Control and Inspection) Act, 1963 was launched to augment overseas trade of India by focusing on quality management and assessment. The Act is applicable and in exercise all across the India.

Powers under this act are discussed below:

  • Its task is to notify commodities that need to pass quality control or inspection or both before the export procedure.

  • This act also helps in identifying that what inspection procedure or quality control a specific commodity has to follow.

  • Under this act, one or more standard specification for a notified commodity are established, adopted, or recognised.

  • The act has the power to prohibit the export of notified commodities that has not received a certificate issued under section seven, supporting that the commodity matches the conditions relating to quality control, or it has applied to it a mark or seal recognised by the Central Government confirming that commodity abides to the standard specifications applicable to it under clause (c).

  • The act is designed and implemented to help the Indian foreign trade to make as well as maintain its position in the global market with its quality and standard.

Customs Tariff Act 1975

Customs Tariff Act 1975, defines the duty or taxes that would be levied on goods imported into India and goods exported out of India. The main purpose of this act is to decide the rate of customs duty. The act has the power to consolidate and amend the law of customs duties.

  • This Act may be called as the Customs Tariff Act, 1975.

  • It is active and implemented all over India.

  • In the first and second schedule of this act, the rates are specified for charging or collecting customs duty.

Central Excise Tariff Act 1985

The Central Excise Act, 1985 deals with various goods on which central excise duty is surcharged. The act also decides the surcharge rate on which taxes are levied. The basic duty of central excise tax is levied at rate set in the first schedule of Central Excise Tariff Act, 1985. Commodities such as Pan Masala, fall under the specific duty of excise and its tax structure is covered in Schedule II of the Central Excise Tariff.

Central Excise is levied based on the following which can be classified as 4 Ms:

  • Manufactured in India: It implies that central excise tariff is levied on the goods that are manufactured in India.

  • Moveable: It implies that central excise tariff is levied on the goods that can be easily transferred from one location to another.

  • Marketable: It implies that central excise tariff is levied on the goods that can be sold both in domestic market and to other countries and do not come in the list of restricted items.

  • Mentioned in the Tariff Act: It implies that duty should be levied on the goods that are mentioned in the Central Excise Tariff Act.

The Central Excise Duty is charged on the basis of following:

  • Specific Duty: It is calculated on the basis of the physical feature of a product.

  • Tariff Value: The government can decide the base for charging central excise on the products or services. The duty is charged on the value declared by the government and on the actual value of the goods.

  • Maximum Retail Price: It was introduced to control the malpractice of manufacturers. A new valuation method was introduced based on the MRP of the product.

  • Ad-Valorem Basis: The first three methods are applicable on limited goods. However in the case of large number of goods, the central excise duty is calculated on the basis of the value of the goods, known as assessable value.

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