FT Commercial Insight

ForeignForeign
TradeTrade
- Commercial Insight- Commercial Insight
OVERVIEW

Foreign Trade – Elements
Elements of Foreign Trade – Commercial Transaction
Foreign
Trade -
Commercial
Elements
Import
Export
Manufacturing
Logistics
Banking & Finance
Insurance
Statutory Compliances
Internatioanl Laws
Receipts & Payments

Foreign Trade – Stake Holders
Elements of Foreign Trade – Stake Holders & Agencies
Foreign Trade
Transactions
Company / Unit
Bank
Insurance Agency
Freight Forwarders
Liners / Shipping Co.
Customs House Agents
Credit / Rating Agencies
Inspection Agencies
& Certifying Bodies
Accredited Labs
& Testing Agencies
Customs
Excise
Export Promotion
Councils
Suppliers
Customers
DGFT / FTP

Foreign Trade - Regulations
Laws, Policies, Schemes applicable for Foreign Trade in India
ForeignTradePolicy IntellectualPropertyRightsRules
ForeignTradeDevelopment&RegulationAct FSSAIRegulations
CustomsLaw Food/PlantQuarantineImportRegulations
ForeignExchangeManagementAct Labeling&MarkingRulesforImports
RBIMasterCirculars Weights&MeasuresRules
CentralExciseLaw BISQualityStandards
ExportQuality&InspectionAct HazardousWastes/MetalScrapImport
ForeignTradeAgreements

Foreign Trade – Case Study
 Export Item is made of
Imported Stainless Steel
 It is one end threaded
 It is a connecting Rod of
the Engine
 The engine is a Diesel
Engine
 The engine is for a Car
 The Rod is drawn thru a
forging process
The item is exported to
NISSAN Auto - JAPAN

The Classification of Items are guided by the General Rules of Interpretation of
Customs and there 6 Rules of Guidance.
Finished Goods Classification
HS Classification
73181900
THREADED ARTICLES MADE OF STAINLESS
STEEL
73269060
FORGED ARTICLES (MACHINED
COMPONENTS)
84099949 OTHERS (PARTS OF DIESEL ENGINES)
87089900
OTHERS (PARTS AND ACCESSORIES OF
MOTOR VEHICLES)
ITCHS
CODE
ITC HS DESCRIPTION

Foreign Trade - Initiatives
W.e.f October 2011
W.e.f April 2015
Concessional Duty
Benefits
FOREIGN TRADE
PROMOTION
Duty Drawback (Ministry
of Finance)
When CENVAT Facility is
availed
When CENVAT Facility is not
availed
Foreign Trade Policy
2015-20 (Ministry of
Commerce)
Administered thru
DGFT - Regional
Authorities & Delhi
Export Promotion Measure -
Chapter 3 of FTP
Import for Export - Chapter 4 & 5
of the FTP
Merchandise Export India
Scheme 2% / 3% / 5%
Service Export India
Scheme 3% / 5%
+
+
EPCG License -
0%
Advance
Authorisation
Industry Specific
Customs Notification
(Ministry of Finance)
BilateralTrade
Agreements (Ministry of
Commerce)
Deemed Export
Drawback Scheme

Foreign Trade Agreements
Foreign Trade Agreements in Force
Agreement on South Asia Free Trade Area SAFTA
Asia Pacific Trade Agreement APTA
CECA between The Republic of India and the Republic of Singapore
Comprehensive Economic Cooperation Agreement between India and Malaysia
Global System of Trade Preferences GSTP
India Africa Trade Agreement
India Chile PTA
India Afghanistan PTA
India ASEAN Agreements
India Bhutan Trade Agreement
India Japan CEPA
India Korea CEPA
India MERCOSUR PTA
India Nepal Trade Treaty
India Sri Lanka FTA
SAARC Agreement on Trade in Services SATIS
Primary Condition for availing the
benefit:
The Importer need to
produce the Preferential
Rate of Certificate of Origin
issued by designated
Authority by the Export
Country

Duty Drawback (AIR)
 The Duty Draw Back scheme is effective from 1st Oct 2011, and is applicable
for all direct physical exports
 Two components in the duty drawback a) when Cenvat Credit availed b) When
Cenvat Credit not availed. DBK Code to be selected
 The drawback scheme is applicable irrespective of import / customs duty
content. Minimum All Industry Rate of 1.9% to 2.0%, certain items have value
cap based on UOM.
 The claim procedure is automated, with the generation of Drawback shipping bill
in the Customs, the EDI credits the bank account of the exporter thru RTGS.
 Exporters need to file half yearly returns to respective Customs Port – Negative
return.
 Exports under Advance Authorization is not eligible for Duty Drawback claim
 Drawback may be clubbed with EPCG and Chapter 3 Schemes
All Industry Rate Duty Drawback is a Duties & Taxes Compensating mechanism
on the inputs for exports, suffered indirectly having cascading impact

Promotional Schemes – FTP 09-14
Under the earlier FTP the following schemes were available for Direct
Exports:
 Focus Product Scheme – FPS
Focus Market Scheme – FMS
Market Linked Focus Product Scheme – MLFPS
Incremental Exports Scheme – 2013-14 (-) 2012-13 for Specified regions
(USA, Europe, ASEAN)
Status Holders Incentives Scrip – 12-13, 13-14 (For exporters holding EH
during the respective years, where no zero % EPCG was availed)
Served from India Scheme – 13-14,14-15 - @ 10%
Chapter 3: Export Incentives for Product and Services

Promotional Schemes – FTP 15-20Promotional Schemes – FTP 15-20
Under the new FTP the existing schemes are merged and
two new simple schemes are announced:
(i) Merchandise Exports from India Scheme (MEIS)(i) Merchandise Exports from India Scheme (MEIS)
(ii) Service Exports from India Scheme (SEIS)(ii) Service Exports from India Scheme (SEIS)
Chapter 3: Export Incentives for Product and Services

 The objective of MEIS is "to provide rewards to exporters for offsetting infrastructural
inefficiencies and associated costs involved in export of goods/products, which are
produced/ manufactured in India
 Under MEIS, exports of notiﬁed goods to notified markets will be eligible for rewards
in the form of duty credit scrip's
 2% or 3% or 5% of FOB value of notified goods exported to notified markets
[based on three distinct categories framed and covered in Appendix 3B].
 Category A: Traditional Markets (30) -European Union (28), USA, Canada.
 Category B: Emerging & Focus Markets (139)
 Category C: Other Markets (70)
MEIS EntitlementMEIS Entitlement
Merchandise Exports From India Scheme ('MEIS')Merchandise Exports From India Scheme ('MEIS')

 Only non free shipping bills are eligible i.e, Drawback/EPCG/AA/EOU
 Exports realization need to be in Foreign Currency or the INR credit
thru deposit in FC thru Nostro account outside the ACU region.
 SB to carry the declaration – ‘We intend to claim rewards under MEIS’
 Scheme Reward column to be selected as “YES” against each line
item
 E-BRC must have been uploaded by the bank for inward remittance
 The ITC HS Code and Description should exactly match with the MEIS
Table
 Proof of Landing is necessary when the incentive is not listed in for all
the country categories and is having different percentages.
 Delivery advice (b) tracking report (c’) Bill of entry attested by landing port etc.,
 The scrip may be utilized for payment of import duties / excise / service
and is freely transferable in the market
Key ObservationsKey Observations

EOUs/EHTPs/ BTPs/ STPs who are availing direct tax benefit /
exemption
Supplies made from DTA units to SEZ units
Deemed Exports
SEZ / EOU / EHTP / BPT / FTWZ products exported through DTA units
Service Export
Diamond Gold, Silver, Platinum, other precious metal in any form
including plain and studded jewellery and other precious and semiprecious
stones
Ores and concentrates of all types and in all formations
Cereals of all types
Few others as listed in FTP
Ineligible CategoriesIneligible Categories

The objective of SEIS is "to encourage export of notified Services from
India". Under - SEIS, Service providers of notified services will be eligible
for rewards in the form of duty credit scrips.
 The rates of reward under SEIS are 3% and 5% on the net foreign exchange
earned from notified services.
 SEIS shall apply to ‘Service Providers located in India
 The invoice description need to match with the notified services list
 Minimum net free foreign exchange earnings in the preceding year to be eligible
for Duty Credit Scrip:
• For Individual Service Providers and Sole Proprietorship - $ l0,000/-
• Other Service Providers-$ 15,000/-
 The scrip is issued on Net Foreign Exchange earned by the Unit:
Net Foreign Exchange = (Gross Earnings of Foreign Exchange relating to
service sector in the Financial year) minus (Total expenses / Payment /
remittances of Foreign Exchange by the IEC holder, relating to service
sector in the financial year).
Service Exports from India Scheme ('SEIS’)Service Exports from India Scheme ('SEIS’)

 Export turnover relating to services of units operating under SEZ / EOU /
EHTP / STPI / BTP Schemes or supplies of services made to such units
 Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI /
BTP units with turnover of DTA Service Providers
 Exports of Goods
 Service providers in Telecom Sector
 Others as per para 3.09 of FTP
As in the case of MEIS, the reward scrip's under SEIS will not carry any actual user
condition and will be freely transferable and usable for all types of goods and
services including for payment of Import Duties, Excise and Service Tax
Ineligible CategoriesIneligible Categories
Utilization of SEIS scrip's and transferabilityUtilization of SEIS scrip's and transferability

S.No Sectors Admissible
Rate
1 Business Services
A Professional services
Legal services, Accounting, auditing
and bookkeeping services, Taxation
services, Architectural services ,
Engineering services, Integrated
engineering services, Urban planning
and landscape architectural services,
Medical and dental services, Veterinary
services, Services provided by
midwives, nurses, physiotherapists and
paramedical personnel
5%

S.No Sectors Admissible
Rate
1 Business Services
D Other business services
Advertising services, Market research and public opinion
polling services Management consulting service,
Services related to management consulting, Technical
testing and analysis services, Services incidental to
agricultural, hunting and forestry, Services incidental to
fishing, Services incidental to mining, Services incidental
to manufacturing, Services incidental to energy
distribution, Placement and supply services of
personnel, Investigation and security, Related scientific
and technical consulting services, Maintenance and
repair of equipment (not including maritime vessels,
aircraft or other transport equipment), Building- cleaning
services, Photographic services, Packaging services,
Printing, publishing and Convention services
3%

Status holders are business leaders who have excelled in international
trade and have successfully contributed to country's foreign Trade.
Status Holders qualify for the Export House status Certificate under
the scheme
The export performance will be counted on the basis of FOB value of
export proceeds realized during current and previous two FY Category
Export Performance FOB / FOR Value
Status holderStatus holder

One Star Export House 3 Million US$
Two Star Export House 25 Million US$
Three Star Export House 100 Million US$
Four Star Export House 500 Million US$
Five Star Export I-Rinse 2000 Million US$
 For granting status, export performance is necessary in at least two out of three years.
 For deemed exports, FOR value of exports in Indian Rupees shall be converted into
US$.
a) The exports by IEC holders under the following categories shall be granted double
weightage for calculation of export performance for grant of status. (i) Micro, Small &
Medium Enterprises (MSME) as defined in Micro, Small & Medium Enterprises
Development (MSMED) Act 2006. (ii) Manufacturing units having ISO/BIS.
Grant of double weightageGrant of double weightage
Status categoryStatus category

a) Authorization and Customs Clearances for both imports and exports may
be granted on self-declaration basis;
b) Input-Output norms may be ﬁxed on priority within 60 days by the Norms
Committee;
c) Exemption from furnishing of Bank Guarantee for Schemes under FTP,
unless specified otherwise anywhere in FTP or HBP;
d) Exemption from compulsory negotiation of documents through banks.
Remittance / receipts, however, would be received through banking
channels
e) Two star and above Export houses shall be permitted to establish Export
Warehouses as per Department of Revenue guidelines
Privileges of Status HoldersPrivileges of Status Holders

(f) Three Star and above Export House shall be entitled to get beneﬁt of
Accredited Clients Programme (ACP)
(g) The status holders would be entitled to preferential treatment and priority in
handling of their consignments by the concerned agencies.
(h) Manufacturers who are also status holders (Three Star/Four Star/Five Star)
will be enabled to self—certify their manufactured goods (as per their
IEM/IL/LOI) as originating from India with a view to qualify for preferential
treatment under different Free Trade Agreements (FTAs),
(i) Manufacturer exporters who are also Status Holders shall be eligible to
self-certify their goods as originating from India as per Para 2.l08 (d) of
Hand Book of Procedures.
(j) Self Write off Bad Debts upto 10% of the previous FY Exports

Export Promotion Capital Goods (EPCG) Scheme
EPCG Scheme allows import of capital goods for pre-production, production
and post-production at Zero customs duty. Alternatively, the Authorization
holder may also procure Capital Goods from indigenous sources.
EPCG scheme shall include:
(i) Capital Goods including in CKD/SKD condition
(ii) Computer software systems;
(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories for initial
lining and spare refractories and Catalysts for initial charge
.
OverviewOverview

 Import of capital goods for Project Imports notified by Central Board of Excise
and Customs is also permitted under EPCG Scheme.
 Import under EPCG Scheme shall be subject to an export obligation equivalent
to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned
from date of issue of Authorization.
 Authorization shall be valid for import for 9 months from the date of issue.
Revalidation of EPCG Authorization shall not be permitted.
 Second hand capital goods shall not be permitted to be imported under EPCG
Scheme.
 EPCG scheme covers manufacturer exporters with or without supporting
manufacturer (s), merchant exporters tied to supporting manufacturer (s) and
service providers.

 Authorization holder shall produce, within six months from date of completion
of import, to the concerned RA, a certificate from the jurisdictional Central
Excise Authority or an independent Chartered Engineer, at the option of the
authorization holder, confirming installation of capital goods at factory/premises
of authorization holder or his supporting manufacturer(s)
 EPCG Authorization shall be issued with a single port of registration for
imports. However, exports can be made from any port

 EO under the scheme shall be, over and above, the average level of
exports achieved by the applicant in the preceding three licensing years for
the same and similar products within the overall EO period including
extended period.
 Such average would be the arithmetic mean of export performance in the
preceding three licensing years for same and similar products.
 In case of indigenous sourcing of Capital Goods, specific EO shall be 25%
less than the EO stipulated
 Shipments under Advance Authorization, DFIA, Drawback scheme or
reward schemes under Chapter 3 of FTP; would also count for fulfillment of
EO under EPCG Scheme.
Export Obligation (EO)Export Obligation (EO)

 For fulfillment of Export obligation, Export shall be physical export. However,
deemed exports as specified in paragraph 7.02 (a), (b), (e), (f) & (h) of FTP shall
also be counted towards fulfillment of export obligation, along with usual
benefits available under paragraph 7.03 of FTP.
 EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in
free foreign exchange.
 Royalty payments received by the Authorization holder in freely convertible currency
and foreign exchange received for R&D services shall also be counted for discharge
under EPCG.
 Payment received in rupee terms for such Services as notified in Appendix 3E shall
also be counted towards discharge of export obligation under the EPCG scheme.

 Only one extension of upto 2 years in export obligation on payment of
composition fee equal to 2% of proportionate duty saved amount on unfulfilled
export obligation
 Authorization holder shall apply for redemption to DGFT on fulfillment of EO
 RA concerned shall issue a certificate of discharge of export obligation to the
EPCG authorization holder and forward a copy to Customs Authorities with
whom BG/LUT has been executed.
 Customs Shall release the Bond or Cancel the Bank Guarantee as the case
may be.
 The unit needs to submit the cancelled BG copy to bank for release of BG / lien
Reliefs & RedemptionReliefs & Redemption

The scheme facilitates units to avail the benefit of Duty Saving under
EPCG License without being bound by the export obligation condition
 Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who
intend to import capital goods on full payment of applicable duties in cash
and choose to opt for this scheme.
 Basic Customs duty paid on Capital Goods shall be remitted in the form of
freely transferable duty credit scrip(s), similar to those issued under Chapter
3 of FTP.
 Specific EO shall be 85% of the applicable specific EO under the EPCG
Scheme. However, average EO shall remain unchanged.
 Duty remission shall be in proportion to the EO fulfilled
Post Export EPCG Duty Credit ScripPost Export EPCG Duty Credit Scrip

Govt Initiatives – FTP 15-20
The new Policy gives a boost to the
‘Make In India’
vision of the Government by reducing the
Export Obligation for domestic procurement
under the EPCG Scheme and prescribing a
reduction in the Specific Export Obligation
for domestic capital goods manufacturing
industry to 75% from the present 90%.

Duty Exemption / Remission Scheme
Schemes under this Chapter enable duty free import of inputs for export
production, including replenishment of input or duty remission
The Duty Exemption schemes consist of the following:
(a) Advance Authorization (AA) – Pre export
(b) Duty Free Import Authorization (DFIA) – Post Export for SION items
Advance Authorization is issued for inputs in relation to resultant product, on
the following basis
(i) As per Standard Input Output Norms (SION) or
(ii) On the basis of self declaration
ObjectiveObjective

 For AA minimum value addition is 15%
 For DFIA minimum value addition is 20%
 AA may be obtained for domestic importer for invalidation / ARO for
reduction in Import duty
 Obligation to fulfilled within a period of 18 / 24 months
 AA under Norms Committee is subject to fixation / revisions of norms by NC
 Obligation may be fulfilled against supplies to Deemed Exports / SEZ
 AIR Duty Drawback is not applicable against AA exports
 Shipping Bills to carry the AA No. and items consumed in relation to exports

Particulars CASE I CASE II
Selling Price (In Rs) 100 100
Import Content (In Rs.) 40 20
Customs Duty % 7.5% 7.5%
Savings by Adv License (In
Rs)
3.00 1.50
Duty Drawback - 2% (In Rs) 2.00 2.00
COMPARISON OF ADV LICENCE AS AGAINST DRAWBACKCOMPARISON OF ADV LICENCE AS AGAINST DRAWBACK

Deemed Exports
“Deemed Exports” refer to those transactions in which goods supplied do
not leave country, and payment for such supplies is received either in Indian
rupees or in free foreign exchange.
Supply of goods under following categories (a) to (d) by a manufacturer and
under categories (e) to (h) by main / sub-contractors shall be regarded as
“Deemed Exports”:
What is Deemed Exports ?What is Deemed Exports ?
Categories of SupplyCategories of Supply

Deemed Exports
(a) Supply of goods against Advance Authorization / Advance Authorization for
annual requirement / DFIA;
(b) Supply of goods to EOU / STP / EHTP / BTP;
(c) Supply of capital goods against EPCG Authorization;
(d) Supply of marine freight containers by 100% EOU
A. Supply by manufacturer:A. Supply by manufacturer:

Deemed Exports
 Supply of goods to projects financed by multilateral or bilateral Agencies / Funds
as notified by Department of Economic Affairs (DEA), MOF
 Supplies under International Competitive Bidding (ICB)
 Supply of goods to any project or for any purpose in respect of which the
Ministry of Finance, by Notification No. 12/2012 – Customs dated 17.3.2012,
permits import of such goods at zero customs duty. Benefits of deemed exports
shall be available only if the supply is made under procedure of ICB.
 Supply of goods required for setting up of any mega power project, as specified
in the list 32A, at Sl. No. 507 of Department of Revenue Notification No.
12/2012- Customs dated 17.03.2012
 Supply of goods to nuclear power projects / Drinking water projects
 Above supply conditions are governed by the FTP chapter 7
B. Supply by main / sub-contractor (s):B. Supply by main / sub-contractor (s):

Deemed Exports
Deemed exports shall be eligible for any / all of following benefits in
respect of manufacture and supply of goods.
(a) Advance Authorisation / Advance Authorisation for annual requirement /
DFIA.
(b) Deemed Export Drawback
(c) Refund of Terminal Excise Duty
Benefits for Deemed ExportsBenefits for Deemed Exports

Deemed Exports
(a) In case CENVAT credit / rebate has not been availed on the inputs / input
services, by the supplier of goods, then, benefit as per Column ‘A’ of All
Industry Rate of Duty Drawback Schedule shall be admissible.
(b) If CENVAT credit / rebate has been availed by the supplier of goods, on
inputs / input services, then, no Drawback shall be admissible as per
Column ‘B’ of All Industry Rate of Duty Drawback Schedule. However, in
such cases, Basic Customs Duty paid can be claimed as Brand Rate of
Duty Drawback based upon submission of documents evidencing actual
payment of duties
Conditions for refund of deemed export drawbackConditions for refund of deemed export drawback

Deemed Exports
(i) Supply of goods will be eligible for refund of terminal excise duty provided
recipient of goods does not avail CENVAT credit/rebate on such goods.
(ii) Supply of goods which are exempted ab-initio from payment of Terminal
Excise Duty would be ineligible to get refund of TED. Exemption from TED
is available to the following:
(a) Supplies under ICB;
(b) Supplies of intermediate goods, against invalidation letter, made by an
Advance Authorisation holder to another Advance Authorisation holder;
(c) Goods Procured by EOU / EHTP / STP / BTP unit from a unit in DTA
(d) Supply of goods to UN/International Organisation or project funded by it.
Conditions for refund of terminal excise dutyConditions for refund of terminal excise duty

Deemed Exports
Benefits on supplies, as given in Para 7.03 above, whichever is applicable.
Supply against
Para 7.03 (a)
Advance
Authorisation
Para 7.03(b)
Duty Drawback
Para 7.03 (c)
Terminal Excise Duty
Advance
Authorisation
Yes (for
intermediate
supplies against
an invalidation
letter)
Yes (against ARO
or Back to Back
letter of credit)
(i) Exemption, in case of Invalidation Letter
(ii) Refund, in case of ARO or back to back letter of
credit
(iii) No exemption/ refund against supply to DFIA
as CVD is not exempted
EOU/EHTP/STP/
BTP
Yes Yes
(i) Exemption, in case of Invalidation Letter
(ii) Refund, in case of ARO or back to back letter of
credit
(iii) No exemption/ refund against supply to DFIA
as CVD is not exempted
EPCG No Yes Refund
DEA/MOF
Project
Yes Yes Refund
MPP / Customs
Not 12/2012
Yes Yes Exemption

Deemed Exports
Normally, drawback may be allowed as per All Industry Rate fixed by DOR in
the Drawback Schedule. An application in ANF- 7A, along with documents
prescribed in ANF-7A & Appendix-7E, may be made to RA or DC
concerned, as the case may be, for fixation of brand rate.
Fixation of Brand RateFixation of Brand Rate

Industry Specific Customs Notifications
The units may examine the applicability of the specific Customs Notification
for exemptions or concessions subject to the conditions of the notifications.
Few such important notifications are listed below:
 Jumbo Notification No. 12/2012-Cus., dated 17-3-2012 - Effective rates of
basic and additional duty for specified goods falling under Chapters 1 to 98:
The Jumbo notification either provides an exemption or concession of Basic
Customs duty and SAD on the Imported inputs against the manufacture of
specific end product subject the conditions against the List No. The
concessions / exemptions vary for each S.No with conditions.
Few Important Customs Notifications for exemptions / concessionsFew Important Customs Notifications for exemptions / concessions

 Exemption to goods imported for execution of an export order for
jobbing Notification No. 32/97-Customs Dt 01-04-97
Goods are imported for execution of an export order placed on the importer
by the supplier of goods for jobbing exempted from the whole of the duty of
customs and whole of the additional duty of Customs
Provided:
• That the goods are imported for execution of an export order placed on the
importer by the supplier of goods for jobbing
• That the goods so imported have to be exported within six months from the
date of clearance.
• FOB value of the resultant products exported is at least 10% more than the
C.I.F. value of all goods imported

• Exemption to containers of durable nature: vide Notification No.
104/94-Cus., dated 16-3-1994
Containers which are of durable nature, when imported into India, whole of
the duty of customs and whole of the additional duty of Customs (SAD) is
exempt.
Provided:
a. Importer has to Furnish a Bond
b. Re-export the said containers within six months from the date of their
importation.

• Goods exported from India and Imported after being subjected to
specified processes Exempted vide Notification No. 43/96-Cus., dated
23-7-1996:
manufacturing process was undertaken in India and which were exported
out of India for carrying out further manufacturing process of coating,
electroplating or polishing or a combination of one or more of these
processes, when re-imported into India, after completion of the said
processes, exempted from the whole of the duty of customs and whole of
the additional duty
Provided
a. The identity of goods
b. that the goods are re-imported within a period of one year from the date of
their exportation from India for carrying out the said processes

• Exemption to goods imported for carrying out repairs, reconditioning
or reengineering Notification No. 134/94-Cus., dated 22-6-1994
When Goods mention in the above notification imported into India for
carrying out repairs, reconditioning, reengineering, testing, calibration
or maintenance (including service) exempted from the whole of the duty
of customs and whole of the additional duty
Provided:
a. The above repairs, reconditioning, reengineering, testing, calibration or
maintenance (including service) is undertaken in accordance with the
provisions of section 65 of the Customs Act, 1962
b. After the above activity CG/RM id to be exported.

• Nil duty or 5% duty on specified goods when imported into India for
use in the manufacture of the finished goods Notification No. 25/99-
Cus Dt 28-02-99 (Predominantly for manufacture of Electronics Products)
Goods mentioned in the List A and List B of the above notification imported
into India for use in the manufacture of the finished goods specified in the
corresponding entry of the said Table, exempted from that portion of the
duty of customs.
(a) Nil Duty in the case of the imported goods specified in List A; and
(b) 5% Duty ad valorem in the case of the imported goods specified in List B;

• Exemption to specified goods to Chapter 38, 84, 85 and 90 and all
goods for the manufacture thereof Notification No. 24/05 and 25/05-
Customs Dt 01-03-05 (Information Technology Agreement)
This Notification exempts the goods of the description manufactured as the
final product in the Table and falling under the heading, sub-heading or
tariff-item of the First Schedule to the Customs Tariff Act, 1975 when
imported into India, from the whole of the duty of custom duty.
Provided:
• Bond needs to be furnished
• Annexure III procedure to be followed

Trade Restrictions
• Exporters, while undertaking export of defence items, are required to first
refer to the list of military stores and then, SCOMET list of DGFT.
• If the items, proposed to be exported by the exporter, are listed in the list of
military stores attached to the DGFT notification (115 (RE-2013)/2009-
2014 dated 13.03.2015, the exporters are required to obtain a No
Objection Certificate (NOC) from Department of Defence Production.
However, if the items of export are listed in the SCOMET list of the DGFT,
the exporters would be required to obtain the NOC from the O/o DGFT as
per the rules and procedures of DGFT.
• Products for Exports may be Restricted or Prohibited. The respective
ministry NOC / License / Permit need to be obtained for Restricted items
exports
SCOMET List, Military Stores and Defense Supply restrictionsSCOMET List, Military Stores and Defense Supply restrictions

Trade & Facilitation & Ease of Doing Business
• Online filing of documents/ applications and
Paperless trade in 24x7 environment
• Online inter-ministerial consultations
• Simplification of procedures/processes,
digitization and e-governance
• DGFT is working on more forthcoming
e-Governance Initiatives

Foreign Trade
Foreign Trade Finance

• Trade Credits are credits extended either by an overseas bank to the
overseas supplier to import goods into India, or by an overseas bank to
importer’s bank for imports into India. Depending upon source of finance,
such trade credits are known as Suppliers credit or Short Term ECB.
• Trade credits are extended under RBI’s Automatic route for original maturity
of less than 3 years from date of shipment.
• Trade Credits are for Capital Goods and Non Capital Goods. The guide lines
are provided in the RBI Master Circular - 12/2015-16 dtd July 1st
2015
Short Term ECB /Buyers creditShort Term ECB /Buyers credit

• The PCFC Scheme enables exporters to avail Packing Credit
at international interest rates through Authorised Persons.
• The Scheme covers the cost of both domestic as well as
imported inputs of exported goods.
• All exporters having firm export orders / irrevocable L/Cs are
normally eligible for PCFC,
• As regards existing customers, PCFC can be carved out of
the the EPC limits available to them, subject to the
outstandings under both the Rupee & Forex facilities
(Converted at the prescribed notional rate) not exceeding the
limits sanctioned.
Packing Credit in Foreign CurrencyPacking Credit in Foreign Currency

• Pre-Shipment Finance, also referred to as
EPC(EXPORT PACKING CREDIT), is extended as WC
for purchase of RM, processing, packing, transportation,
warehousing, etc., of goods meant for exports.
• Post-Shipment Finance is extended after shipment to
bridge the time lag between the shipment of goods and
the realisation of proceeds.

Foreign Trade Promotion
• Market Development Assistance - MDA
• Market Access Initiative – MAI
• ECGC Coverage for Exports
• Sector specific Subsidy by the ministries
• Technology and Innovation funds / schemes
• DSIR / DSIT benefits for R&D and Scaling up for Commercial
Production
• Stand by line of credit for Project Exporters by EXIM Bank
• Trading exporters may import the goods to the Bonded Warehouse /
FTWZ without payment of duty and export directly from the
warehouse with the option of re-labeling / re-packing / re-branding.
• Authoirsed Economic Operator Program - Customs
Other Benefits - ExportsOther Benefits - Exports

 The Promoter Shri Shekar (BE Mechanical) is the proprietor of a unit – HI TECH
INDUSTRIES. After serving 25 years in various engineer companies for manufacture of
engineering / Automotive / Aerospace parts.
 He is registered with Central Excise, has an IEC and is in the MSME category
 With his personal contacts & skills, he received a confirmed PO from NISSAN – Auto
Japan, subject to the condition that he will install a brand new CNC VMC as per the spec
from either of the two vendors: HAAS USA or DOOSAN South. Korea.
 Both costs around Rs 100 lacs (1,42,000 USD) FOB price.
 HAAS is ready for LC at Sight Payment and DOOSAN for Usance LC with 180 days Credit.
 The Karnataka Bank Ltd is ready to sanction Term Loan and provide Working Capital
Limits.
 He has been exporting to an EOU unit: 12-13 = Rs 40 lacs, 13-14 = Rs 60 lacs, 15-16 Rs
50 lacs.
 The monthly export quantity schedule is 10000 PCS @ US$ 10 / PC
 The import CIF cost after considering 5% material wastage is US$ 6 / PC (with an option to
buy thru the local dealer)
HI TECH INDUSTRIES - BANGALORE

 Export Item is made of
Imported Stainless Steel
 It is one end threaded
 It is a connecting Rod of
the Engine
 The engine is a Diesel
Engine
 The engine is for a Car
 The Rod is drawn thru a
forging process
 It is machined in a
sophisticated Imported
Vertical Machining
Centre
 The item is exported to
NISSAN Auto - JAPAN

 What exemptions are applicable on Import of Machinery ?
 What concessions are available for Import of Material ?
 Any concession if purchased thru Dealer ?
 What export benefits are applicable for Direct Exports ?
 Any benefits for EOU Supplies ?
 What financing options are available for Import of Capital Goods ?
 Any working capital concessions for Import of Raw Material ?
 Further any subsidy is available for machinery purchased ?
Mr. Shekar’s Questions ?

The Classification of Items are guided by the General Rules of Interpretation of
Customs and there 6 Rules of Guidance.
Finished Goods Classification
HS Classification
73181900
THREADED ARTICLES MADE OF STAINLESS
STEEL
73269060
COMPONENTS)
84099949 OTHERS (PARTS OF DIESEL ENGINES)
87089900
OTHERS (PARTS AND ACCESSORIES OF
MOTOR VEHICLES)
ITCHS
CODE
ITC HS DESCRIPTION Imported Vertical Machining
Centre 84571020
Raw material - Stainless
Steel Rods 72221191

 The Unit can avail the EPCG License for import of Machinery with the below obligation. Rs
100 lacs X 27% (7.5 + 12.5 + 4) = 27.00 lacs (denominated in US$). Export obligation =27
lacs X 6 times = 162 lacs to be fulfilled in a period of six years. Further unit need to
maintain annual average exports of Rs 150 lacs. OR
 If imported from Doosan Korea, the unit can avail Basic Customs Duty Exemption of
7.50% against India S.Korea Foreign Trade Agreement, and pay and avail the CENVAT /
SAD input Credit OR
 The Unit can avail the Post Export EPCG License with the same conditions as Pre-Import
EPCG and claim the refund of Import Duty on fulfillment of Export Obligation in full /
prorate
Import of Capital Goods – Vertical Machining Centre - 84571020

 The Unit can avail the Zero % Advance Authorisation for Import of Raw Material (to be
imported within 12 months) with 15% minimum value addition to be exported within a
period of 18 months from date of License.
 If the Unit is buying thru a dealer, the unit can avail the AA with invalidation in favour of the
dealer, who can import back to back against an AA. This kind of supply by dealer falls
under the Deemed Export Category. The dealer is exempted from charging Excise duty ab-
intio.
 If the unit is importing from S.Korea, the BCD is 0.94% instead of 10% Basic Customs
Duty, if the Unit is importing from Japan the BCD is 0.80%.
Import of Raw Materials Goods – Stainless Steel Rod 72221191 HS Code

Export Incentives
A B C
DBK
Code DBK %
Value
Cap
DBK
Code DBK %
Value
Cap
73181900
THREADED ARTICLES MADE OF
STAINLESS STEEL
OTHER THREADED ARTICLES 2% 2% 0%
7318A 7% 11.5 7318B 2% 3.3
73269060
COMPONENTS)
Manufactrs Of Stnles Stl(Excl
Utnsils),Nes
2% 2% 0% 732603A 2% 13 732603B 2% 13
84099949
OTHERS (PARTS OF DIESEL
ENGINES)
Other Parts Of Diesel/Semi
Diesel Engines
3% 3% 0% 8409A 2% 13 8409B 2% 13
87089900
OTHERS (PARTS AND
ACCESSORIES OF MOTOR
VEHICLES)
Otr Prtsandaccssrs Of Vhcls Of
Hdg 8701-8705
3% 3% 3% 870899A 7% 36 870899B 2% 10
Value Cap / Kg
Drawback when Cenvat
facility has not beenITCHS
CODE
DESCRIPTION (MEIS)ITC HS DESCRIPTION
Drawback when Cenvat
facility has been availed
EXPORT INCENTIVES
APPLICABLE COUNTRIES

 The Unit can avail USANCE LC of 180 / 360 / 720 or 1081 days if the supplier
agrees for the credit period. The sublimit of LC is sanctioned under the Term
Loan OR
 If the supplier does not agree for USANCE LC, Mr.Shekar may opt for LC at
Sight with Short Term ECB / Buyers Credit, where in Canara Bank Baharin or
BOI Tokyo (or any other Bank) will fund the NOSTRO A/c of Karnataka Bank Ltd
for USD 1,42,000/- against the LOU issued by Karnataka Bank Ltd
 The rate of Interest is LIBOR + 90 BPS or below per annum with a Rollover
option of 180 days for period of total three years.
 The Unit is exposed to Foreign Exchange fluctuation risk
 Mr. Shekar may opt for forward contracts which is valid for six month / one year.
 Since there is a natural hedging, he may also consider partial booking of
Forward Contract or remain with open risk.
 The unit is eligible for 15% Credit Linked Capital Subsidy (Max of Rs 15.00 lacs)
Financing – Import of Capital Goods

 The Unit can avail maximum USANCE LC of 180 days if the supplier agrees for
the credit period. The sublimit of LC is sanctioned under the Working Capital as
Non Fund Based Limit OR
 If the supplier does not agree for USANCE LC, Mr.Shekar may opt for LC at
Sight with Short Term ECB / Buyers Credit, where in Canara Bank Baharin or
BOI Tokyo (or any other Bank) will fund the NOSTRO A/c of Karnataka Bank Ltd
for against the LOU issued by Karnataka Bank Ltd
 The rate of Interest is LIBOR + 90 BPS or below per annum with a maximum
period of 80 days.
 The Unit is exposed to Foreign Exchange fluctuation risk
 Mr. Shekar may opt for forward contracts which is valid for six month..
 Since there is a natural hedging, he may also consider partial booking of
Forward Contract or remain with open risk.
Financing – Import of Raw Materials

 The Unit is eligible for two types of export financing under the Working Capital:
a) Export Packing Credit in Rupees (OR / AND) – Rate of Interest is around
10.50% - 3% = 7% pa (concession under Interest equalization scheme)
b) Packing Credit in Foreign Currency (Pre- Shipment / Post Shipment) LIBOR +
400 BPS = (4.6% pa approx)
Financing – Exports

Foreign Trade Compliances
In Shipping Bills
 The type of Shipping bill is either Drawback or EPCG or Advance
Authorization or EOU / EHTP / BTP as the case may be under each line
item of export
 The export item HS Code and Description precisely matches with EPCG /
Advance Authorisation
 MEIS description is appearing as an extended description in the Brackets
 Consumption of inputs as per Advance Authorisation is stated in the
Shipping Bills
 MEIS declaration “We intend to claim rewards under the MEIS Scheme of
FTP 15-20
 Rewards column is selected as “YES”
 EP Copy is maintained by the Unit and is to be submitted only to DGFT
Please ensure the following compliances !

Foreign Trade Compliances
Others
• Installation Certificate is obtained from the CE (FTP 15-20) / Central
Excise within Six months.
• Half yearly Duty Drawback returns are filed to the respective ports
within two months from the end date
• e-BRC are regularly updated by the Bank
• Proof of landing is obtained for all the MEIS Shipping Bills atleast
once in a Quarter
• Amendment of EPCG before shifting of Machinery or change in Item
Please ensure the following compliances !

Any Questions / Clarifications ?
Portals for reference / updates
www.indiantradeportal.in
www.icegate.gov.in
www.dgft.gov.in
www.cbec.gov.in
www.rbi.org.in
FAQs on Free Trade Agreement & e-book – www.commerce.nic.in

Please return the updated Feed Back Form
No. 83 (Old No.24), 2nd Floor,
4th Main, Between 8th & 9th Cross,
Malleshwaram,
Bangalore – 560 003
Ph – 080 41281362
Email info@smenetwork.in
www.smenetwork.in

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