Topic: 1_EXPORT TRADE CONTROL

https://en.wikipedia.org/wiki/Export_control

Export control is legislation that regulates the export of goods, software and technology. Some items
could potentially be useful for purposes that are contrary to the interest of the exporting country.
These items are considered to be controlled.

The export of controlled item is regulated to restrict the harmful use of those items. Many
governments implement export controls.

Typically, legislation lists and classifies the controlled items, classifies the destinations, and requires
exporters to apply for a licence to a local government department.

A wide range of goods have been subject to export control in different jurisdictions, including arms,
goods with a military potential, cryptography, currency, and precious stones or metals.

Some countries prohibit the export of uranium, endangered animals, national artefacts, and goods in
short supply in the country, such as medicines.

History

The United States has had export controls since the American Revolution, although the modern export
control regimes can be traced back to the Trading with the Enemy Act of 1917. A significant piece of
legislation was the Export Control Act of 1940 which inter alia aimed to restrict shipments of material
to pre-war Japan. In the United Kingdom, the Import, Export and Customs Power (Defence) Act of
1939 was the main legislation prior to World War II.

Post WWII, the Coordinating Committee for Multilateral Export Controls (CoCom) was founded in
1948, and continued until 1994. It was an early multilateral export control regime.

Principles

In most export control regimes, legislation lists the items which are deemed 'controlled', and lists the
destinations to which exports are restricted in some way. The lists of what is controlled often arise
from some harmonised regime.

Classification

Goods may be classified using a various classification systems. The United States uses the Export
Control Classification Number (ECCN), India uses the Special Chemicals, Organisms, Materials,
Equipment and Technologies (SCOMET) list and Japan uses Ministry of Economy, Trade and
Industry (METI) lists.
Some items may be categorised as "designed or modified for military use", some as dual use, and
some will not be export controlled. Dual use means that the device has both a civilian and a military
purpose.

In several jurisdictions, classifications distinguish between goods, equipment, materials, software and
technology; the last two being often considered intangible. Classifications may also be by destination
purpose, including cryptography, laser, sonar and torture equipment.

Destination

An exporting country will consider the impact of its export control policy on its relationships with other
countries. Sometimes countries will have trade agreements or arrangements with a group of other
countries, which may specify that licences are not required for certain goods.

For example, within the EU, licences are not required for shipping civilian goods to other member
states, however, licences are required for restricted, military goods.

The exporting country's legislation will demand certain handling for goods in different classifications
to destination countries. This could include:

The destination is subject to sanctions, perhaps economic sanctions. Exports of that class of goods will
not be permitted.

Shipping the goods may require licences from the government. These licences may require record
keeping, so the exporter has to log the items and destinations. Where records are kept, there may be
an audit, or there may be some requirement to report the transactions periodically.

Some have no restrictions and that class of goods can be shipped without impediment from export
control legislation.

The end user of the goods or some broker will typically be declared, and similar restrictions apply as
to countries.

Some individuals or entities may be listed, so that even if the item could normally be exported to the
country without a licence, additional restrictions apply for that individual or entity.
Licence

For any given item being exported, the categorisations will typically lead to different treatments for a
given destination, e.g. 'No Licence Required' (NLR) or 'Licence Required'.

If a licence is required for the item, to the destination, the licence issuer will require information as
part of the licence application, typically including:

 Name, address, business number (e.g. EORI) of the exporter

 Technical details of the exported item, possibly including product documentation, part
numbers and likely uses

 Value of the item and quantity to be shipped. This can be difficult to assess with intangibles
(i.e. software or technology)

 Actual purpose of the item, often with a declaration to this effect from the intended recipient,
and assurances that the items will not be used elsewhere.

 Shipment route, consignee addresses, brokers, agents and other involved third parties.

The declaration from end user could be an End User Undertaking (EUU), an End User Statement (EUS)
or an End-user certificate. These EUUs will typically include intended use, and make assurances as to
the applications for the goods, e.g. not to be used within missiles.

Licences can subsequently be obtained from the appropriate government department in the
exporter's jurisdiction.

A licence will usually have some terms, such as:

 Obtain and keep EUUs from every destination organisation. (Applies to open-type
licences; standard-type licences may require submission of the EUU at the time of licence
application.)

 Include the licence number with the shipping documentation

 Include some text with the documentation accompanying the item

 Notify some authorities and make the item available for inspection prior to shipment

 Keep a records of the shipment, and allow a potential audit

 Report the shipments made to some authority within some period.

Administration and enforcement

The process of classification, assessment, licensing, and then confirming the compliance with the
licence terms is typically handled by government agency in the exporting country.

These include BAFA (The Federal Office of Economics and Export Control) in Germany, BIS (and E2C2)
in US, ECJU in UK.

Topic: 2_DIFFERENT CATEGORIES OF EXPORTERS

https://howtoexportimport.com/Different-categories-of-exporters-4569.aspx

On the basis of direct and indirect methods of exporting, export market organisations in India are
classified into the following categories:

(a) Manufacturer Exporters:

Manufacturer exporters are the manufacturers who export goods directly to foreign buyers without
any intervention from intermediaries. The manufacturer may also appoint agents abroad for selling
products. They enjoy several advantages:

 First-hand information about foreign markets.

 Exercise a direct control over marketing activities.

 Enjoy full benefit of export incentives.

 Enjoy greater profits and goodwill in the market.

(b) Merchant Exporters:

Merchant exporters are the exporters who purchase goods from the domestic market and sell them
in foreign countries. They enjoy several advantages:

 Limited capital.

 Specialization in marketing.

 Large market share.

(c) Status Holders:

The Government of India introduced the concept of status holders in the in the year 1960. Export
House (EH) was the first category introduced by the Government with the objective of promoting
exports by providing assistance for building marketing infrastructure and expertise required for export
promotion.
Thereafter in the year 1981, Trading Houses were introduced in order to develop new products and
new markets, particularly for the products of SSls and Cottage industries.

The categorisation, their eligibility and nomenclatures have changed since then. As per the new
Foreign Trade Policy 2009-2014, status holders have been categorised as follows on the basis of their
export performance:

(d) Service Export House:

Considering the increasing share of services in the total export from India, the government introduced
the concept of Service Export House in the EXIM policy 2002-07.

As per this policy, the service providers who have achieved a stipulated level of export performance
are eligible for recognition of status holder. Accordingly they are eligible for all the facilities and
incentives, hitherto given to the export and trading houses.

These facilities include import of capital goods under EPCG scheme, passenger baggage, import of
restricted items, etc. The above categorisation also applies to the service providers.

(e) Canalising Agencies:

Canalisation of import and export means import and export of commodities through specified
government agencies such as State Trading Corporation of India (STC), Metals and Minerals
Corporation (MMTC). The items specified in the canalised list can be canalised only through specified
canalising agency.

(f) Export Consortia:

In this case, a number of economically independent manufacturers, voluntarily or under the direction
of the government, set up a joint organisation for co-ordination of their export activities. This has
several advantages, such as;

 Price stabilisation

 Saves unproductive expenditures such as advertising

 Economies of scale
Topic: 3_EXPORT LICENSING PROCEDURES AND FORMALITIES

https://www.dripcapital.com/resources/blog/export-licence

Export License
The Indian Trade Clarification (ITC) which is based on the Harmonized System of
Nomenclature (HSN) of coding, classifies goods in India for the purpose of import and export.
The eight-digit code used by Indian customs is also based on ITC-HS. For the export of any goods
classified as 'restricted goods' in this ITC-HS list, an Export License is required.

The Foreign Trade Policy (FTP) considers all goods as freely exportable except those that are
restricted or prohibited. In the case of prohibited goods, an Export License is not given, while restricted
goods can be exported by businesses granted an Export License.
Some items that typically need an Export License are live birds and animals, endangered species of
plants and animals, sandalwood, sand and soil, silkworm and silk cocoons, etc.

Schedule II of the ITC-HS code provides the rules and regulations related to export policies.
The 97 chapters of the Export Policy Schedule II of the ITC-HS code provide detailed guidelines related
to the export of various products. The Directorate General of Foreign Trade (DGFT) is the governing
body that brings about amendments to these guidelines.
These chapters indicate the Export Policy classification of the products under each of them.
For example, chapter 50 of the ITC-HS under Schedule II of the Export Policy is ‘Silk’. It includes items
fitting the description – pure races of silkworms, silkworm seeds, and silkworm cocoons. The Export
Policy for silk is ‘restricted’ and thus export of silk from India is permitted only under an Export License.
Documents required to be attached with the application for Export License
 ‘Profile of Exporter and Importer’ in ANF-1 form and application form for the Export License
of restricted items in ANF-2N form.
 Copy of purchase order/import order from the foreign purchaser, or a contract agreement
between the two.
 Proof of online payment of the application fee.
 Copy of PAN Card
 Copy of Identity Proof
 Address Proof
 Bank Certificate / Cancelled Cheque
 NOC - in case of rental property
The standard procedure followed at the end
 The mail, which includes the application and the supporting documents, is processed by the
export cell.
 A pre-screening of the application is made, following which it is forwarded to the concerned
ministry/department within three working days if everything checks out fine.
 If any anomaly is noted in the application, a deficiency letter is sent to the exporter within
three working days.
 The applicant exporter is expected to respond within three days of receipt of the deficiency
letter and provide the necessary information/documents.
 On the other hand, if forwarded to the ministry/department, the concerned officials are
expected to provide their NOC/comments/views on the application at the earliest and within
30 days of receipt of the application from the DGFT.
 Once the DGFT receives the response from the concerned ministry/department, all such
applications awaiting approval are presented to the EXIM facilitation committee (EFC), which
meets once a month.
 Upon approval from the EFC, the export cell at the DGFT headquarters prepares an
authorization letter and sends it to the exporter. Another copy is shared with the jurisdictional
Regional Authority (RA) of the DGFT instructing them to issue the Export License.
 Once the exporter receives the permission, they have to approach the RA with a copy of the
permission letter, application, and the supporting documents.
 The RA is supposed to issue the Export License to the exporter within three working days. The
entire process should thus ideally be completed within 30-45 days.
Additional Information
 The administrative ministries and departments can ask for specific documents while
processing the application and before giving their MOC/comment/recommendation. These
documents vary from item to item and have to be submitted along with the application.
 The Export License or permission/certificate/authorization, as it may also be called, is
generally valid for a specific period defined by the RA.
 The license may also be subject to terms and conditions such as the quantity and description
of the items, value addition, minimum export/import price, and export obligation.
 The export will, therefore, be carried out in accordance with the provisions of the Export
License issued against it or any DGFT public notice relevant to it.
Export is a very wide concept and lot of preparations is required by an exporter before starting an
export business. https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,25,44
To start export business, the following steps may be followed:
1) Establishing an Organisation
To start the export business, first a sole Proprietary concern/ Partnership firm/Company has to be set
up as per procedure with an attractive name and logo.
2) Opening a Bank Account
A current account with a Bank authorized to deal in Foreign Exchange should be opened.
3) Obtaining Permanent Account Number (PAN)
It is necessary for every exporter and importer to obtain a PAN from the Income Tax Department.
4) Obtaining Importer-Exporter Code (IEC) Number
As per the Foreign Trade Policy, it is mandatory to obtain IEC for export/import from India. Para 2.05
of the FTP, 2015-20 lays down the procedure to be followed for obtaining an IEC, which is PAN based.
An application for IEC is filed online at www.dgft.gov.in as per ANF 2A, online payment of application
fee of Rs. 500/- through net Banking or credit/debit card is made along with requisite documents as
mentioned in the application form.
5) Registration cum membership certificate (RCMC)
For availing authorization to import/ export or any other benefit or concession under FTP 2015- 20, as
also to avail the services/ guidance, exporters are required to obtain RCMC granted by the concerned
Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.
6) Selection of product
All items are freely exportable except few items appearing in prohibited/ restricted list. After studying
the trends of export of different products from India proper selection of the product(s) to be exported
may be made.
7) Selection of Markets
An overseas market should be selected after research covering market size, competition, quality
requirements, payment terms etc. Exporters can also evaluate the markets based on the export
benefits available for few countries under the FTP. Export promotion agencies, Indian Missions
abroad, colleagues, friends, and relatives might be helpful in gathering information.
8) Finding Buyers
Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web browsing are an effective
tool to find buyers. EPC’s, Indian Missions abroad, overseas chambers of commerce can also be
helpful. Creating multilingual Website with product catalogue, price, payment terms and other related
information would also help.
9) Sampling
Providing customized samples as per the demands of foreign buyers help in getting export orders. As
per FTP 2015-2020, exports of bonafide trade and technical samples of freely exportable items shall
be allowed without any limit.
10) Pricing/Costing
Product pricing is crucial in getting buyers’ attention and promoting sales in view of international
competition. The price should be worked out taking into consideration all expenses from sampling to
realization of export proceeds on the basis of terms of sale i.e.
Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of establishing
export costing should be to sell maximum quantity at competitive price with maximum profit margin.
Preparing an export costing sheet for every export product is advisable.
11) Negotiation with Buyers
After determining the buyer’s interest in the product, future prospects and continuity in business,
demand for giving reasonable allowance/discount in price may be considered.
12) Covering Risks through ECGC
International trade involves payment risks due to buyer/ Country insolvency. These risks can be
covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd (ECGC).
Where the buyer is placing order without making advance payment or opening letter of Credit, it is
advisable to procure credit limit on the foreign buyer from ECGC to protect against risk of non-
payment.
Topic: 4_ROLE OF ECGC IN EXPORT PROMOTION
https://commerce.gov.in/about-us/public-sector-undertakings/export-credit-guarantee-corporation-of-india-
limited/#:~:text=ECGC%20is%20essentially%20an%20export,commercial%20banks%20extending%20export%20credit

https://cleartax.in/s/ecgc
ECGC Ltd. (Formerly known as Export Credit Guarantee Corporation of India Ltd.)
It is wholly owned by Government of India, was set up in 1957 with the objective of promoting exports
from the country by providing credit risk insurance and related services for exports. Over the years it
has designed different export credit risk insurance products to suit the requirements of Indian
exporters.
 ECGC is essentially an export promotion organization, seeking to improve the
competitiveness of the Indian exports by providing them with credit insurance covers.
 The Corporation has introduced various export credit insurance schemes to meet the
requirements of commercial banks extending export credit.
 The insurance covers enable the banks to extend timely and adequate export credit facilities
to the exporters. ECGC keeps its premium rates at the optimal level.
ECGC provides
1) A range of insurance covers to Indian exporters against the risk of non – realization of export
proceeds due to commercial or political risks
2) Different types of credit insurance covers to banks and other financial institutions to enable
them to extend credit facilities to exporters and
3) Export Factoring facility for MSME sector which is a package of financial products consisting
of working capital financing, credit risk protection, maintenance of sales ledger and collection
of export receivables from the buyer located in overseas country.
4) It offers an array of credit risk insurance covers to the Indian exporters against the loss with
respect to the export of their goods and services.
5) It provides Export Credit Insurance covers to the banks and other financial institutions for
enabling exporters to find better services from them.
6) It offers Overseas Investment Insurance to the Indian companies investing in Joint Ventures
(JVs) abroad in the form of loans or equity.
Facilitation Provided by ECGC to Exporters
ECGC provides insurance protection to Indian exporters against payment risks. It helps the exporters
in a number of ways which include:
 Guiding export-related activities
 Making information available with respect to various countries with its credit ratings
 Making it easy to get export finance from the banks and other financial institutions
 Helping Indian exporters recover bad debts
 Providing information on the credit worthiness of foreign buyers ECGC further ensures
exporter’s credit risks against both political as well as commercial conditions and guarantees
the payment to exporters.
ECGC offers several types of insurance covers and these could be classified into the following groups:
 Standard policies that protect Indian exporters against overseas credit risks
 Construction works and services policies
 Financial Guarantees
Special policies ECGC offers the following types of guarantees to the exporters:
 Export finance guarantee
 Packing credit guarantee
 Post-shipment export credit guarantee
 Export production finance guarantee
  Transfer guarantee
 Export performance guarantee
Over the years the Export Credit Guarantee Corporation of India has proved to be useful to Indian
exporters. It pays 80 to 90% of the loss incurred by Indian exporters. The remaining 10 to 20% of the
loss alone has to be borne by the exporters.
ECGC doesn’t cover the risks mentioned below:
 Exchange loss due to fluctuations in exchange rates
 Failure on the part of the buyer abroad to obtain the import authorization or exchange
 A default of the exporter or his agent
 Any loss which arises due to dispute in quality
 Risk which is inherent in the nature of goods
Topic: 5_DEEMED EXPORT AND ITS BENEFITS
https://www.dripcapital.com/en-in/resources/blog/deemed-exports-meaning-eligibility-benefits
The objective of the deemed export scheme is to extend the benefits or incentives enjoyed by
exporters to suppliers who either contribute to exports indirectly (for example, a supplier who
supplies his goods to an export-oriented unit) or suppliers who contribute to specified infrastructure
projects. The policy aims to empower India’s domestic industry against the import of goods by
providing duty-free inputs and benefits or exemptions on taxes or duties paid in India.

Deemed Exports - Meaning

The Export and Import (EXIM) Policy (1997-2002) defines ‘Deemed Exports’ as the goods (and not
services) manufactured in India and transported locally i.e. they do not leave India. Deemed export
basically means that the supplier may receive the payment for this transaction in either Indian Rupees
or convertible Forex.
Difference between Export, Deemed Export, and Merchant export
Export: An export refers to a trade transaction wherein the goods are produced locally and then it is
shipped to a foreign country.
Deemed Export: Goods classified as deemed export may not ship out of the country.
For example, when a Kerala based manufacturer supplies goods to an Export oriented Unit in
Maharashtra, who further ships the product to its customer in the UAE - the first part of the
transaction is classified as deemed export while the second transaction is considered an export.
Deemed Export Example
Merchant Export: Merchant export is the process of procuring the goods locally and then exporting
them under their label. A merchant exporter is someone who buys the goods locally and then exports
it globally under his name.
Eligibility criteria for qualifying under Deemed Exports
 Following are the conditions defined in FTP for any transaction to qualify as “deemed export”
 Only goods can qualify as Deemed Export. Services do not qualify.
 The production of goods must take place in India.
 The goods should not transport outside India.
 The goods must be notified by the Central Government as deemed exports under Section 147
of the Central Goods and Services Tax Act, 2017 (CGST Act)
 The transaction can be in Indian Rupees or any other convertible foreign exchange.
 The goods supplied as Deemed Export cannot be processed under a Letter of Undertaking
(LUT) or a bond.
 The GST levied on the goods should be paid at the time of supply. A full refund on this tax can
be claimed.
In addition to these conditions, the supply of goods to the following is treated as Deemed Export:-
 If the goods are supplied to a party that has an Advance Authorisation (AA)/ Advance License,
such a transaction qualifies as a deemed export.
 If a person registered under GST supplies goods to an Export Oriented Unit (EOU)/ Electronic
Hardware Technology Park Unit (EHTP) / Software Technology Park Unit (STP) / Bio-
Technology Park Unit (BTP).
 Transactions made against Duty-Free Import Authorisation (DFIA).
 If capital goods are supplied to a recipient who is a holder of an Export Promotion Capital
Goods Authorisation (EPCG scheme), the transaction qualifies as deemed export.
 Goods that are supplied for UN projects as well as nuclear power projects. Goods that are
supplied for projects that are funded by bilateral or multilateral agencies.
Benefits of Deemed Exports Scheme
 The goods that are eligible for being considered as deemed exports receive the following
benefits:
 The supplier receives an Advance License for intermediate supply/ deemed export/DFRC/
DFRC for intermediate supplies/special imprest license.
 Deemed exports are exempted from the terminal excise duty or the duty is fully refundable.
 The manufacturers are eligible for a Special Import License at the rate of 6 percent of the
Freight On Board (FOB) value.
 If the goods have been supplied against an Advance Release Order or Back to Back Letter of
Credit, the supplier can avail of the benefits of the Deemed Export Drawback scheme, Refund
of terminal excise duty, and Special Imprest License.
 In the case of the supply of goods to a recipient who holds an EPCG license, the supplier can
avail of all the above benefits except for the Special Imprest License or the Deemed Export
Drawback Scheme. This applies to the cases where the supplies are made to a zero duty EPCG
license holder.
Deemed Export Under GST
Exports i.e. the goods that are transported out of India are zero-rated under GST. This means that no
GST rate is levied on deemed exports for goods as such. However, deemed exports are not zero-rated,
and hence GST is levied on the goods that qualify as deemed exports. The supplier can avail of a full
refund of this tax.
The central government has notified a wide range of transactions that can qualify as deemed export
under the Central Government Notification No. 48/2017- Central Tax. Since these transactions are not
zero-rated, the supplier or the receiver has to pay tax on the supply of deemed exports. However,
these taxes also qualify for refund for deemed export under GST.