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
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