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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
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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 – 14000 • EIA • SA- 8000 • Global compact
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