Highlights of Foreign Trade Policy, 2009-2014

HIGHLIGHTS OF FOREIGN TRADE POLICY, 2009-2014

The Government has introduced the new Foreign Trade Policy, 2009-2014 on 27^th August 28, 2009. The highlights of the said policy are as under:-

Duty Entitlement Pass Book (DEPB) Scheme: -

v DEPB Scheme has been extended till 31^st December 2010.

v Where fuel is allowed as a consumable in Standard Input-Output Norms, the DEPB rate will also include factoring of custom duty component on fuel.

Advance Authorisation Scheme: -

v Value Addition under Advance Authorisation Scheme has been increased from Positive Value addition to minimum 15% on imported goods. However, this will not be available to items in Gems & Jewellery sector.

v For export of tea, minimum value addition under Advance Authorisation Scheme has been reduced from the existing 100% to 50%.

v For Pharmaceutical sector, Export Obligation Period for advance authorizations issued with 6-APA as input has been increased from the existing 6 months to 36 months, as is available for other products.

v Duty credit scrips can be used/ debited for payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation/DFIA/EPCG Authorisation.

v Imported goods are allowed to be dispatched directly from the Port to the site under Advance Authorisation scheme for deemed supplies. Earlier, duty free imported goods could be taken only to the manufacturing unit of Authorisation holder or its supporting manufacturer. This direct dispatch to site has been done to reduce transaction costs.

v The manufacturing wastes/scrap can be disposed of on payment of applicable excise duty, even before fulfillment of export obligation under Advance Authorisation and EPCG Scheme.

v The maximum fee for application for Advance Authorisation/DFIA has been reduced to Rs. 100,00 from Rs. 1,50,00(for manual applications) and Rs. 50,000 from the existing Rs. 75,000 (for EDI applications).

v In cases, where the earlier authorization has been cancelled and a new authorization has been issued in lieu of the earlier authorization, application fee paid already for the cancelled authorisation will now be adjusted against the application fee for the new authorisation subject to payment of minimum fee of Rs. 200.

Focus Market Scheme (FMS): -

v The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3% of FOB value of Exports. This will be available for Exports made from 27.08.09.

v Under FMS, 26 new markets have been added including 16 new markets in Latin America and 10 in Asia-Oceania.

v A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY.

Focus Product Scheme (FPS): -

v The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%. This will be available for Exports made from 27.08.09.

v A large number of products from various sectors have been included for benefits under FPS. These include, Engineering products (agricultural machinery, parts of trailers, sewing machines, hand tools, garden tools, musical instruments, clocks and watches, railway locomotives etc.), Plastic (value added products), Jute and Sisal products, Technical Textiles, Green Technology products (wind mills, wind turbines, electric operated vehicles etc.), Project goods, vegetable textiles and certain Electronic items. Thus, to enhance value added manufactured export, project exports have been covered alongwith a large number of manufactured goods.

v To simplify claims under FPS for Handloom Sector, the requirement of ‘Handloom Mark’ for availing benefits under FPS has been removed.

v Focus Product Scheme benefit extended for export of ‘green products’; and for exports of some products originating from the North East.

Market Linked Focus Product Scheme (MLFPS): -

v The Incentive available under Market Linked Focus Products Scrip (MLFPS) has been raised from 1.25% to 2% of FOB value of Exports.

v This Scheme has been greatly expanded by inclusion of products classified under as many as 153 ITC (HS) Codes at 4 digit level.

Some major products included are Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile made-ups, knitted and crocheted fabrics, glass products, certain iron and steel products and certain articles of aluminium among others.

Benefits to these products will be provided, if exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand).

v MLFPS benefits have also been extended for export to additional new markets for certain products. These products include auto components, motor cars, bicycle and its parts, and apparels among others.

v The Pharma Sector has been extensively covered under MLFPS for countries in Africa and Latin America; some countries in Oceania and Far East. These countries include Algeria, Brazil, Egypt, Kenya, Mexico, Nigeria, South Africa, Tanzania, Ukraine, Australia, New Zealand, Cambodia & Vietnam.

Higher allocation is being provided for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes.

Export Promotion Capital Goods Scheme (EPCG): -

v Zero duty EPCG scheme has been introduced with an Export Obligation equivalent to 6 times of Duty Saved on capital goods and which is to be fulfilled in 6 years from the date of issue of Authorization. This has been done to aid technological up-gradation of the export sector.

v This scheme will be in operation till 31.03.2011.

v The validity period for import of capital goods under 0% EPCG scheme is 9 months.

v Under this scheme, only One extension of 2 years in E.O. period shall be available, subject to conditions.

v All other provisions pertaining to 3% duty EPCG scheme under this Chapter to the extent they are not inconsistent with the above provisions of zero duty EPCG scheme, will apply to the zero duty EPCG scheme also.

v This Scheme will be available to following sectors: -

(i) Engineering & Electronic Products.

(ii) Basic Chemicals & Pharmaceuticals

(iii) Apparels & Textiles

(iv) Plastics

(v) Handicrafts

(vi) Chemicals & Allied Products

(vii) Leather & Leather Products

v However, the current beneficiaries under Technological Upgradation Fund Schemes (TUFS), administered by the Ministry of Textiles and beneficiaries of Status Holder Incentive Scheme in that particular year are excluded from availing the benefit of Zero duty EPCG Scheme.

v To increase the life of existing plant and machinery, export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced to 50% of the normal specific export obligation.

v Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14.

v Payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation / DFIA / EPCG Authorisation has been allowed by way of debit of Duty Credit scrips. Earlier the payment was allowed in cash only.

v Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty, even before fulfillment of export obligation under Advance Authorisation and EPCG Scheme.

v Acceding to the demand of trade & industry, the application and redemption forms under EPCG scheme have been simplified.

Status Holders Incentive Scrip: -

v Status Holders belonging to the specified sectors have been given the benefit of incentive scrip @ 1% of FOB value of exports made during 2009-2010 & 2010-2011, in the form of duty credit. This facility will be available upto 31.3.2011.

v The sectors to which this benefit will be available are as follows:

1. Leather Sector (excluding finished leather);

2. Textiles and Jute Sector;

3. Handicrafts;

4. Engineering Sector (excluding Iron & Steel, Nonferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships, Boats and Floating Structures;)

5. Plastics; and

6. Basic Chemicals (excluding Pharma Products).

This shall be over and above any duty credit scrip claimed/availed under chapter 3.

v Status Holders availing Technology Upgradation Fund Scheme (TUFS) benefits (under Ministry of Textiles) during a particular year shall not be eligible for Status Holders Incentive Scrip for exports of that year.

v The Status Holders Incentive Scrip shall be with Actual User Condition and shall be used for imports of capital goods (as defined in FTP) relating to the above sectors.

Agri Infrastructure Incentive Scrip: -

v For exports made during a particular year, all the Status Holders (having status recognition for the current year) who are exporting products covered under ITC HS Chapters 1 to 24, shall be given incentive in the form of duty credit scrip equal to 10% of FOB value of agricultural exports (including VKGUY benefits entitled under Policy). Provided that the total benefits for all status holders put together does not exceed Rs 100 Cr (i.e. Rs 50 Cr for each half year) and the conditions specified in Para 3.7.2 of HBPv1 are satisfied.

v The capital goods or equipments permitted for import under the “Agri Infrastructure Incentive Scrip” are as following: -

(i) Cold storage units (including Controlled Atmosphere (CA) and Modified Atmosphere (MA) Stores); Pre-cooling Units and Mother Storage Units for Onions, etc.;

(ii) Pack Houses (including facilities for handling, grading, sorting and packaging etc.);

(iii) Reefer Van / Containers; and

(iv) Other Capital Goods / Equipments as may be notified in Appendix 7F.

v The imported capital goods/equipment will be utilized for storage, packing etc. and transportation of agricultural products (including agro-processed perishable products).

v This additional benefit will be subject to actual user condition and is therefore, non-transferable.

v However, for import of Cold Chain Equipment this Incentive Scrip shall be freely transferable amongst Status holders.

Export Oriented Units (EOU): -

v DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%.

v EOUs have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale.

v To provide clarity to the customs field formations, DOR shall issue a clarification to enable procurement of spares beyond 5% by granite sector EOUs.

v EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

v During this period of downturn, Board of Approvals (BOA) is to consider the extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs.

v EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale.

v Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act has been extended for the financial year 2010-11 in the Budget 2009-10.

Other Key Points: -

v For EDI ports, with effect from December 2009, double verification of shipping bills by customs for any of the DGFT schemes will be dispensed with.

v The Directorate of Trade Remedy measures id to be set up to enable support to Indian industry and exporters, especially MSMEs, in availing their rights through trade remedy instruments.

v An Inter Ministerial Committee is being planned to be formed to redress/ resolve problems/issues of exporters.

v Electronic Message Exchange between Customs and DGFT in respect of incentive schemes under Chapter 3 will become operational by 31.12.2009. This will obviate the need for verification of scrips by Customs facilitating faster clearances.

v To further EDI initiatives, Export Promotion Councils/Commodity Boards have been advised to issue RCMC through a web based online system. It is expected that issuance of RCMC would become EDI enabled before the end of 2009.

v Import of restricted items, as replenishment, shall now be allowed against transferred DFIAs, in line with the erstwhile DFRC scheme.

v Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA.

v Export of tea has been covered under VKGUY Scheme benefits.

v Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty.

v To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

v Additional flexibility under Target Plus Scheme (TPS) /Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector.

v Interest subvention of 2% for pre-shipment credit for 7 specified sectors has been extended till 31.3.2010 in the Budget 2009-10.

v The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010.

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Highlights of Foreign Trade Policy, 2009-2014

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