Foreign Trade Policy 2015-2020 by RSA Legal Solutions

Foreign Trade Policy: 2015-2020

2Foreign Trade Policy 2015-2020

Anomaly in Deemed Exports

Changes in Reward Scheme

I

II

III

General Overview

IV

Changes in Export Promotion Capital Goods

SchemeV

Changes in EOUs, EHTP and STPsVI

Other Key and Procedural ChangesVII

Quality Complaints and Trade DisputesVIII

Changes in Advance Authorisation/Duty Free Import

Authorisation Scheme

3Foreign Trade Policy 2015-2020

IX Forthcoming E-governance initiatives

I-General Overview 4

Foreign Trade Policy-General Overview 5

The Foreign Trade Policy, 2015-2020 (FTP) notified by Central Government in exercise of the powers conferred under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992.

FTP, 2015-2020, incorporating provisions relating to export and import of goods and services, shall come into force with effect from the date of notification and shall remain in force up to 31st March, 2020, unless otherwise specified.

Directorate General of Foreign Trade (DGFT) has in place a Citizens Charter, giving time schedules for providing various services to clients.

DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporter on the intricacies of foreign trade through counselling, training and outreach programmes.

Reward Schemes simplified and expanded.

Online filing of documents introduced with respect to various schemes of FTP to reduce paper burden.

Concept of Deemed Export introduced in chapter 7 erstwhile it was mentioned in chapter 8.

OBJECTIVE OF FTP

Trade facilitation is a priority of the Government for cutting down the transaction cost and time, thereby rendering Indian exports more competitive. The various provisions of FTP and measures taken by the Government in the direction of trade

facilitation are consolidated under this chapter for the benefit of stakeholders of import and export trade.

II-Changes in Reward Schemes 6

Foreign Trade Policy-Reward Schemes (Contd.) 7

Service Export from India Scheme (SEIS)

Served from India Scheme (SFIS) has been replaced with SEIS scheme.

SEIS will apply to Service Providers located in India instead of Indian Service Providers

SEIS provides for rewards to all service providers of notified services who are providing services from India regardless of constitution or profile of the service provider

Rate of reward under SEIS would be based on net foreign exchange earned.

Scrip issued would no longer be with actual user condition but be freely transferable

Scrip not restricted for usage of specified types of goods but can be used for all types of goods and services tax debits on procurement of services/ goods.

Debits would be eligible for CENVAT credit or drawback.

Benefits can be availed by unit located in SEZ also. Earlier, benefits were not allowed to SEZ.


Whether SEZ units can avail the benefits of the SEIS schemes mentioned under Chapter 3?

SEZ taking

benefit of

SEIS

scheme is

still a

question?

In para 3 of highlights of FTP, it is mentioned that SEZ units are now eligible for MEIS and SEIS

benefits. However, if we look into the policy the para 3.09 of FTP which deals with SEIS schemes

have still placed SEZ in the category of Ineligible categories.

Foreign Trade Policy-Reward Schemes 9

Five different schemes viz. Focus Product scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive scrip, VKGUY have been merged into a single scheme namely MEIS and there would no

conditionality attached to the scrips issued under the scheme.

Rewards for export of notified goods to notified markets under MEIS shall be payable as percentage of realised FOB value.

Debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment as duty drawback.

Benefits can be availed by unit located in Special Economic Zone (SEZ). However, trading units are not allowed to obtain such benefits.

Scrips issued under MEIS would be fully transferable

Higher level of rewards under MEIS for export items with high domestic content and value addition

Merchandise Export from India Scheme (MEIS)

SEZ unit were not allowed earlier to avail such

benefits.


Wherever the reward under MEIS is available to all countries, proof of landing shall not be required to be submitted for claiming the reward

If application is filed for exports made through EDI ports then hard copies such as application to DGFT, EDI shipping bills, e-BRC and RCMC not required.

Application for obtaining MEIS shall be filed within period of: 12 months from the date of Let export order date or; 3 months form the date of :

- Uploading of EDI shipping bills onto DGFT server by customs

- Printing/ release of shipping bills for Non-EDI shipping bills

Whichever is later, in respect of shipments for which claim is being filed

Duty Credit Scrip shall be valid for period of 18 months form the date of issue and must be valid on the date on which actualdebit is made.

Declaration of intent mandatory for 01 June 2015 even for export shipments under chapter 4, 5 or chapter 6 of FTP.

Merchandise Export from India Scheme (MEIS) (contd.)


Export of goods through courier or foreign post using e-commerce of FOB value upto Rs. 25000 perconsignment shall be entitled for rewards under MEIS.

If the value of exports using e-commerce platform is more than Rs. 25000/- per consignment then MEIS reward would be limited to FOB value of Rs. 25000 only.

Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai.

Export of such goods under courier regulations shall be allowed manually on pilot basis through airports at Delhi, Mumbai and Chennai.


Export of goods through

courier or foreign post

using e-commerce


The following exports categories shall be ineligible for duty credit scrip entitlement under MEIS: EOU/EHTP/STPs/BTPs who are availing direct tax benefits/exemption Supplies made from DTA units to SEZ units Deemed exports Exports through trans-shipment SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units Service export Exports made by units in FTWZ Items which are restricted or prohibited for export under schedule-2 of Export Policy in ITC

(HS)

Export products which are subject to minimum export price or export duty Some eatable items such as cereals, sugar, milk and milk prodocuts, meat and meat products

etc.


Ineligible categories under

MEIS


Merchandise Exports from

India Scheme

Focus Product Scheme

Focus Market

Scheme

Market Linked Focus

Product Scheme

Agri. Infrastructure

Incentive Scrip

VKGUY

Foreign Trade Policy-Other Changes under Chapter 3 14

Other Key Changes

Scrips issued under Export from India Schemes can be used for the following:

Payment of customs duty for import of inputs including capital goods

Payment of excise duty on domestic procurement of inputs or goods including capital goods

Payment of Service tax on procurement of Services

Utility of Scrips

Status certificate issued under earlier FTP to an IEC holder shall remain valid till 30 June2015 or till the issuance of status certificate to such IEC holder under this policy, whichever

is earlierValidity of status holder


Other Key Changes (Contd.)

Application Fee for Duty

Credit Scrip Application for duty credit scrip under rewards/ incentive scheme would be Rs. 1000 now.

Schemes removed under

new policy

Market Access Initiatives, Market Development Assistance & Incremental ExportsIncentivisation schemes are removed now in new FTP

Now double weightage benefits shall be available for grant of one star export housestatus category only.Grant of Double weightage


Other Key Changes (Contd.)

Self-certification by status

holders

Manufacturer who are status holders will be enabled to self-certify their manufacturedgoods as originating from India with a view to qualify as preferential treatment under

different Preferential Trading Agreements, Free Trade Agreements, Comprehensive

Economic Cooperation Agreements and Comprehensive Economic Partnerships

Agreements which are in operation.

The nomenclature of Export House, Star Export House, Trading House, Star TradingHouse, Premier Trading House certificate has been changed to One, Two, Three, Four, five

star Export Houses.

Nomenclature of Export

house

Foreign Trade Policy-Other Changes under Chapter 3 (Contd.) 17

Star Export Houses

Sr. No Status Category Export Performance FOB/FOR in US$ million during

current and previous two years

1 One Star Export House 3

2 Two Star Export House 25

3 Three Star Export House 100

4 Four Star Export House 500

5 Five Star Export House 2000

III-Foreign Trade Policy-Anomaly in Deemed Exports (Chapter 7) 18

Foreign Trade Policy-Anomaly in Deemed Exports (Chapter 7) 19

Goods supplied to JBIC/JICA

Goods supplied to a project funded by JBIC/JICA have been taken out from the eligible list of deemed exports in the New

FTP. Would it mean that the goods supplied to JBIC / JICA project prior to 31.03.2015 would be eligible as deemed exports

but the goods supplied to the same project after 01.04.2015 will not qualify as deemed export?

Goods supplied to an AA

The goods supplied to an Advance Licence Holder against the invalidation letter shall not be eligible for refund of TED asupfront exemption is available under Notification No. 44/2001-CE (NT).

Goods supplied by AA Holder to EOUs or supplied as other deemed exports are not covered under Notification No.44/2001-CE (NT). Goods supplied to DFIA holder are not covered under 44/2001. What about TED in such cases?

Goods supplied by EOU

Whether the goods supplied by an EOU to the eligible projects under ICB be eligible for refund of TED as the exemption

from excise duty on the goods supplied under ICB is not applicable to an EOU?

Foreign Trade Policy-Anomaly in Deemed Exports (Chapter 7) (Contd.) 20

Goods supplied by Manufacturer

The goods supplied by a manufacturer as deemed export are eligible for deemed export drawback at all industries rates of duty drawback if no Cenvat credit is taken but it is not eligible for customs portion of duty drawback at all industries rates if Cenvat credit is taken. Why this discrimination?

Bill to ship to model

Goods supplied by a manufacturer directly to the eligible categories of deemed export are entitled for deemed exportbenefits but in case the same are supplied directly from the factory by the manufacturer to the eligible category butthrough a third party (on bill to ship to model) the benefits are not available. Why?

All these anomalies are contrary to the spirit of Make in India concept announced in Foreign Trade Policy, 2015-2020.

IV-Changes in Advance Authorisation/ Duty Free Import authorisation Schemes 21

Foreign Trade Policy-Advance Authorisation Scheme/Duty Free Import Authorisation Scheme 22

Now validity period for import of advance authorisation shall be 12 months from the date of issue of authorisation

Validity Period for Import

under Advance

Authorisation

Normal export obligation period under advance authorization i.e. 18 months remains the same.

However, export obligation period for export items falling in the category of defence, military store, aerospace and nuclear energy shall be 24 months from the date of

issue of authorization

Export Obligation Period

Duty Free Import Authorisation shall be exempted only from Basic Customs DutyExemption from BCD under

DFIA Scheme

V-Changes in Export Promotion Capital Goods Schemes (EPCG) 23

Foreign Trade Policy-EPCG Scheme 24

Capital goods procured

from indigenous

manufacturer

Chartered Engineer

dispensed

Records to be maintained At present, the EPCG Authorisation holders are required to maintain records for 3

years after redemption of Authorisations. Now the EPCG Authorization Holders shall

be required to maintain records for a period of 2 years only.

In case capital goods are procured from indigenous manufacturers, which is currently 90% of the normal export obligation (6 times at the duty saved amount) has been

reduced to 75%, in order to promote domestic capital goods manufacturing industry.

Under EPCG scheme, obtaining and submitting a certificate from an independentChartered Engineer, confirming the use of spares, tools, refractory and catalysts

imported for final redemption of EPCG authorizations has been dispensed with.

Foreign Trade Policy-EPCG Scheme 25

In order to encourage manufacturing of capital goods in India, import under EPCGAuthorisation Scheme shall not be eligible for exemption from payment of anti-

dumping duty, safeguard duty and transitional product specific safeguard duty.

Anti-dumping duty not

exempted

VI-Changes in EOUs, EHTP & STPs 26

Foreign Trade Policy-Changes in EOUs, EHTPs and STPs 27

EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among themselves. This will enable units to utilize their infrastructural facilities in an optimum

way and avoid duplication of efforts and cost to create separate infrastructural

facilities in different units.

Sharing of Infrastructural

Facilities

Inter-unit transfer of Goods

& Services

Inter unit transfer of goods and services have been allowed among EOUs, EHTPs,STPs, and BTPs. This will facilitate group of those units which source inputs centrally

in order to obtain bulk discount. This will reduce cost of transportation, other logistic

costs and result in maintaining effective supply chain.

Setting up warehouse near

port of Export EOUs have been allowed facility to set up Warehouses near the port of export. This

will help in reducing lead time for delivery of goods and will also address the issue of

unpredictability of supply orders. .

Foreign Trade Policy-Changes in EOUs, EHTPs and STPs (Contd.) 28

STP units, EHTP units, software EOUs have been allowed the facility to use all duty free equipment/goods for training purposes.

Duty Free Goods for

training purposes

Extension of 1 year in case

of adverse situation

At present, in a period of 5 years EOU units have to achieve Positive Net ForeignExchange Earning (NEE) cumulatively. Because of adverse market condition or any

ground of genuine hardship, then such period of 5 years for NFE completion can be

extended by one year

Supply of spares/

components

100% EOU units have been allowed facility of supply of spares/ components upto 2%of the value of the manufactured articles to a buyer in domestic market for the purpose

of after sale services.

Foreign Trade Policy-Changes in EOUs, EHTPs and STPs (Contd.) 29

Letter of Permission (LOP) will have an initial validity of 2 yeas to enable the unit to construct the plant and install the machinery. Further, extension can be granted by the

development commissioner upto one year.

Extension beyond 3 years of the validity of LOP can be granted in case unit has completed 2/3rd of activities including the construction activities.

Validity of Letter of

Permission

Fast track clearance

EOUs having physical export turnover of Rs. 10 crore and above, have been allowedthe facility of fast track clearances of import and domestic procurement.

Fast track clearance will be made on the basis of pre-authenticated procurementcertificate issued by customs/ central excise authorities

They will not have to seek procurement certificate for every import consignment

CST Reimbursement Now CST reimbursement will be allowed irrespective of fact that goods procured from

DTA, EOU & SEZ.

Earlier, the said benefit was available only in case when goods are procured from DTA

VII-Other Key & Procedural Changes 30

Foreign Trade Policy-Other Key & Procedural Changes 31

Online filing of application available with respect to various application filed underchapter 3. However, certain documents like Certificates issued by Chartered

Accountants/ Company Secretary / Cost Accountant etc. have to be filed in physical

forms only.

In order to move further towards paperless processing of reward schemes, it has beendecided to develop an online procedure to upload digitally signed documents by

Chartered Accountant / Company Secretary / Cost Accountant.

In the new system, it will be possible to upload online documents like annexureattached to ANF 3B, ANF 3C and ANF 3D, which are at present signed by these

signatories and submitted physically.

Online Facility

Landing Documents

Landing documents of export consignment as proofs for notified market can be digitallyuploaded in the following manner:-

(i) Any exporter may upload the scanned copy of Bill of Entry under his digital

signature.

(ii) Status holders falling in the category of Three Star, Four Star or Five Star Export

House may upload scanned copies of documents.

Foreign Trade Policy-Other Key & Procedural Changes (Contd.) 32

Facility has been created to upload documents in Exporter/Importer Profile. There will be no need to submit copies of permanent records/ documents (e.g. IEC,

Manufacturing licence, RCMC, PAN etc.) repeatedly with each application, once

uploaded.

Exporter-Importer Profile

TED refunds Online filing of application for refund of TED is being 11 introduced for which a newANF has been created.

Communication with

Exporters/ Importers

Certain information, like mobile number, e-mail address etc. has been added asmandatory fields, in IEC data base. This information once provided by exporters,

would help in better communication with exporters. SMS/ email would be sent to

exporters to inform them about issuance of authorisations or status of their

applications

Foreign Trade Policy-Other Key & Procedural Changes (Contd.) 33

Goods falling in the category of handloom products, books / periodicals, leatherfootwear, toys and customized fashion garments, having FOB value up to Rs.25000

per consignment (finalized using e Commerce platform) shall be eligible for benefits

under FTP. Such goods can be exported in manual mode through Foreign Post Offices

at New Delhi, Mumbai and Chennai.

E-Commerce Exports

Only one IEC shall be issued against a single PAN. Multiple IECs against a single PANstands deactivated

One Pan One IEC

One per thousand or part thereof subject to minimum of Rs. 500 and maximum ofRupees one lakh on CIF value/ duty saved amount of authorisation/ permission.

Earlier, maximum of rupees fifty thousand on CIF value/ duty saved amount ofauthorisation was permitted

Application for Advance

Authorisation/DFIA/EPCG

scheme

VIII-Quality Complaints & Trade Disputes 34

Foreign Trade Policy-Quality Complaints & Trade Disputes 35

General

New Chapter introduced under FTP i.e. Chapter 8 which deals with Quality Complaints and Trade Disputes. Earlier Chapter 8 deals with deemed export which is

now chapter 7.

Earlier there were no separate chapter or mechanism with regard to QualityComplaints and Trade Disputes

Objective

Exporters need to project a good image of the country abroad to promote exports.Maintaining an enduring relationship with foreign buyers is of utmost importance, and

complaints or trade disputes, whenever they arise, need to be settled amicably as

soon as possible. Importers too may have grievances as well.

In an endeavour to resolve such complaints or trade disputes and to createconfidence in the business environment of the country, a mechanism is being laid

down to address such complaints and disputes in an amicable way.

Disputes to be addressed

Complaints received from foreign buyers in respect of poor quality of the productssupplied by exporters from India;

Complaints of importers against foreign suppliers in respect of quality of the productssupplied; and

Foreign Trade Policy-Quality Complaints & Trade Disputes (Contd.) 36

Disputes to be addressed

Complaints of unethical commercial dealings categorized mainly as non-supply/partial supply of goods after confirmation of order; supplying goods other than the ones

as agreed upon; non-payment; non adherence to delivery schedules, etc.

Quality complaints and

Trade Disputes Committee

To deal effectively with the increasing number of complaints and disputes, aCommittee on Quality Complaints and Trade Disputes (CQCTD) will be constituted inthe 22 offices of the RAs of DGFT.

Action against Importer/

Exporter

Following actions can be taken against importer/exporter as the case may be:

Suspend or cancel Importer Exporter Code Number (IEC)

refuse to grant or renew a license, certificate, scrip or any other instrumentbestowing financial or fiscal benefit granted under the FTDRA

suspend or cancel any License, certificate, scrip or any instrument bestowingfinancial or fiscal benefit Act.

fiscal penalty in cases where a person makes or abets or attempts to make anyimport or export in contravention of any provision of the Act, any Rules or Orders

made there under or the Foreign Trade Policy.

IX-Forthcoming e-Governance Initiatives 37

Foreign Trade Policy-Forthcoming e-Governance Initiatives 38

DGFT is currently working on the following EDI initiatives:

Message exchange for transmission of export reward scrips from DGFT to Customs.

Message exchange for transmission of Bills of Entry (import details) from Customs to DGFT.

Online issuance of Export Obligation Discharge Certificate (EODC).

Message exchange with Ministry of Corporate Affairs for CIN & DIN.

Message exchange with CBDT for PAN.

Facility to pay application fee using debit card / credit card.

Mobile applications for FTP

Thank You

RSA Legal Solutions(Attorneys in Customs, Excise, Service tax,

Foreign Trade Policy, SEZ etc.)

A: 417, Paras Trade Centre,

Gwal Pahari, Faridabad Road,

Gurgaon-122 003

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