Foreign Trade and India

• • Ancient maritime trading nation Bay of Bengal was once known as CHOLA LAKE • • Exports touch $155 billion in 2007-08 India is among the top ten in services exports • The export basket

Laws to note

• • • • • • The foreign trade ( development and regulation ) Act The Foreign Trade Policy 2004-09 The FEMA 2000 RBI Regulations The Customs Act The Central excise Act

Steps in Exporting

• • • • • • • A business organization Manufacturer exporter Merchant exporter Agent/ intermediary Service provider Product selection Procurement of order

Essentials of export contract

• • • • • • • Product, standards & specification Quantity Inspection Value Terms of delivery Taxes, duties and charges Period of shipment

Export contract contd….

• • • • • • • Packing, labeling,marking Terms of payment- Amount.mode & currency Discounts and commissions Licences and Permits Insurance Documentary requirements Guarantee

Export contract contd……

• • • • Force majeure Remedies Arbitration The case of Dalmia & Arun Jain of Polaris

Incoterms

• • • • • • • • EXW – Ex works FCA--- Free Carrier FAS---- Free alongside ship FOB---- Free on board C&F----- Cost and freight CIF----- cost ,insurance and freight CPT – Carriage paid to CIP---- Carriage and insurance paid to

Incoterms contd------

• • • • • DAF – delivered at frontier DES--- delivered EX ship DDU--- delivered duty unpaid DDP---- delivered duty paid DEQ – delivered ex quay

Risks in International trade

• • • • • Credit risk Currency risk Carriage risk Country risk Voyage risk

Export registration

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

Export inspection

• • • • • • • IPQC – In process quality control ISI, AGMARK Fumigation ISO- 9000 & ISO EIA SA- 8000 Global compact – 14000

Currency management

• • • • • • Understanding currency fluctuations Invoicing currency Forward contract Hedging Repatriation EEFC

Reading FTP

• • • • • • • The policy The handbook of procedures The ITC- HSN classification Export licenses Import licenses OGL State Trading

Customs procedure- export

• • • • • • • Exporter Person in charge of conveyance Bill of lading Export general manifest Shipping bill, packing list,ARE etc Stuffing/ examination/ sealing Self- sealing/ self- certification

Customs procedure contd----

• • • • • Importance of ICD/CFS/ Customs bonded warehouse Green channel for exporters Assessment New concept of Transaction value

Customs import procedure

• • • • • • • Importer Person in charge of conveyance Bill of entry Import general manifest Assessment EDI RMS

Central excise export procedure

• • • • • • • • Exports are free of duty Bond clearances Rebate clearances ARE 1 ARE 2 UT1 Proof of export Sealing of container

Export promotion schemes

• • • • • • • Section 65 of customs Act Advance authorization / DFIAS Export promotion capital goods DEPB Drawback EOU SEZ

EOU

• • • • • • Minimum investment of INR 10 million 300 warehousing districts as location Nearly 3000 units in existence New or conversion from DTA Manufacturing & services covered Trading units are not permitted

EOU contd-------

• • • Widest definition of manufacture Single B – 17 Bond • • Duty-free import of raw materials and inputs and similar sourcing of inputs and capital items from DTA NFE= A – B = 0 + EO over 5 years

EOU contd-----

• • • Can subcontract part of production to DTA Can sell upto 50% of production in DTA Can sell to other EOU/ BTP/ EHTP/STP/SEZ and count against EO • Exempt from state trading and SSI reservation restrictions • 100% EEFC retention

EOU contd-----

• • • • • Clubbing of exports with exports of parent company for export house status CST exemption PC and CT3 procedure Self sealing Green channel clearance on import

Drawback

• • • • • Recouping of duties of customs and central excise and service taxes All industry rates Brand rate Special brand rate Post export documentation

EPCG

• • • • Import of capital goods at 5% concessional customs duty EO is 8 times the duty saved in 8 years 12 years for SSI holders and licenses for INR1000million Covers manufacturer exporters or merchant exporters with supporting manufacturers

EPCG contd-----

• Direct as well as third party exports allowed • Shipments under Advance authorization DFIAS , DEPB & draw back will count for fulfillment of EO • Physical exports required but certain deemed exports allowed • Clubbing of licenses allowed

Advance authorization

• • • • • • Duty free import of inputs Fuel, oil and energy are also allowed to be imported SION norms Ad hoc SION permitted Positive value addition Issued for annual requirement also

Advance authorization contd--

• • • • Advance release order/ Invalidation Supplies to SEZ counted Actual user condition Disposal of imported items after meeting EO • License transferable after meeting EO and with the permission of DGFT

DEPB

• • • • • • • Duty free post export remission scheme SION norms Ad hoc SION norms permitted Schedule of rates Can be used to pay for import duties Transferable scrip Scheme valid upto March 2009

SEZ

• • • • • • Exclusive geography Duty free enclave Sales to DTA permitted Special concessions for promoters Positive EO is required Customs duty, excise duty, service tax and VAT & CST are exempt on supplies to SEZ units

High Tech products promotion scheme • • • • • Appendix 37E goods Duty free scrip equal to 10% incremental export growth Ceiling of INR 150 million Some exports not counted Scrip freely transferable

Focus products scheme

• • • Goods notified in appendix 37D Some exports not counted Duty credit scrip equal to 1.25% of FOB value of exports for each year • Scrip transferable

Focus markets scheme

• • • • Notified as per Appendix 37C Duty credit scrip of 2.5% on the FOB value of exports achieved Certain exports not allowed Scrip transferable

Deemed Exports

• • • • • • The concept of deemed exports Covers supply of goods against: Advance authorization/ DFIAS EOU/ STP/EHTP/BTP EPCG Projects under International competitive bidding procedure

Deemed exports contd-----

• • • Projects approved by ministry of finance Supplies of capital stock to fertilizer plants Supplies of goods to Refineries and power projects • • Supplies of goods to UN- funded projects Supplies of goods to Nuclear power projects thro competitive bidding

Benefits to deemed exports

• • • Advance authorization / DFIAS Deemed duty drawback Exemption from terminal excise duty if supplies are against International competitive bidding • In other cases refund of terminal excise duty paid will be given

Served from India scheme

• • • To promote served from India image Appendix 10 Minimum previous year exports of INR1 million • • 10% duty credit scrip Scrip transferable within corporate group and not otherwise

Status Holders under the FTP

• • • • • • Export House Rs 20 crores Star export House Rs 100 crores Trading House Rs 500 crores Star Trading House Rs 2500 crores Premier Trading House Rs 10000 crores Benefits allowed to status holders

Excise export concessions

• • • Export without payment of duty Export under claim for duty Procurement of excisable goods for export production without payment of duty • • Drawback Concessional notifications

Service tax concessions • • • • • • Drawback Its limitations ASTR 1 ASTR 2 Clearances to SEZ exempt Refund of service tax paid on export related input services

WTO/ GATT

• • • • • • • International Treaty Governing Principles MFN Non discrimination National treatment Reduction of tariffs Elimination of Non tariff barriers

Free Trade Agreements

• • • • • • • NAFTA EU MECOSUR ASEAN SAFTA Indian agreements with Sri Lanka, Thailand and Singapore Implications of FTAs

Importance of Ports in International Trade • • • 70% of international trade is over the seas For India, it is 90% Trade through Air is comparatively very expensive and cannot become a common preference, and is unsuited for heavy, large cargo • Many coastal states possess a number of ports

Ports in India

• India has 12 major ports and more than 180 lesser ones • • India has a coastline of nearly 6000 KMs All ports of India together handled 519 million tons of cargo during the fiscal year ended March 2008 • Growth rate of 12%

Problems of Indian Ports

• • • • • Limited land area Industries located in hinterland Low channel draft Too many players Inadequate deployment of skill and technology • Lack of coordinated approach

Requirements of modern World class port • • • • • • Skill – Intensive Technology driven, minimal paper work Port is the best when its an industrial complex by itself Quay cranes Crane productivity Fully automated terminals with good quay length

Port stake holders in India

• • • • • • • Customs Port Trusts Port Health Organization Plant Quarantine Immigration Terminal operator Vessel operating agent

continued

• • • • • • • Steamer agent / Mainline operator Container operating agent ( NVOCC, VOCC ) Stevedore CHA / Exporters / Importers Transport operators CFS / ICD Security agencies / External players

A comparison

• Factor JNPT SINGAPORE PORT • • Terminals 3 4 Vessels per terminal 9 41 • • Quay length 600 m 11,754 m Total area 133 ha 425 ha

continued

• Factor JNPT SINGAPORE • Total no of quay cranes 8 131 • Crane moves per hour 20 – 25 25 -30 • Crane rate per hour 60 -70 100

continued

• • • • • All Indian ports in 2005 -06 together handled cargo of 423.3 million tons Singapore port in the same period handled 423 million tons of cargo Transaction costs at Indian ports are 10 % Transaction costs in leading ports are 6 % The transaction costs at Indian ports are in money terms - $ 12 billion per annum

Dwell time at Indian ports as on 2005 - 06 • Cargo type As on 2005-06 expected export import exp imp • • • Dry bulk 3.57 3.23 1.7 1.6

Break Bulk 6.6 5.62 3.3 1.5

Containers 3.78 1.88 1.5 1.00