FOREIGN TRADE POLICY 2023
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Context
- Union Minister of Commerce and Industry, Consumer Affairs, Food, and Public Distribution and Textiles, launched the Foreign Trade Policy 2023.
Background
- India's overall export [including services and merchandise exports] has already crossed US$ 750 Billion and is expected to cross US$ 760 Billion this year.
- Given the size of the Indian economy and manufacturing & service sector base, the potential for the country to grow is manifold.
- Every opportunity for export must be captured and utilized effectively.
- There should be a massive concentrated outreach with the world both sector-wise and country-wise.
Foreign Trade Policy 2023
About
- Foreign Trade Policy (2023) is a policy document which is based on continuity of time-tested schemes facilitating exports as well as a document which is nimble and responsive to the requirements of trade.
Pillars
The Key Approach to the policy is based on these 4 pillars:
- Incentive to Remission,
- Export promotion through collaboration - Exporters, States, Districts, Indian Missions.
- Ease of doing business, reduction in transaction cost and e-initiatives and
- Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy.
Principles
- It is based on principles of ‘trust’ and ‘partnership’ with exporters.
Aim
- The FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business for exporters.
- It also focuses on emerging areas like dual-use high-end technology items under SCOMET, facilitating e-commerce export, and collaborating with States and Districts for export promotion.
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SCOMET SCOMET item is an acronym for Special Chemicals, Organisms, Materials, Equipment, and Technologies, and these are dual-use items that can be used for both civilian and military applications. India’s Foreign Trade Policy regulates the export of items on the SCOMET List. The exporter must obtain a license from the Directorate General of Foreign Trade, Ministry of Commerce, to export SCOMET. SCOMET Items Categories The eight categories of SCOMET items are as follows: Category 0: Nuclear material, equipment, technology, and nuclear-related other materials Category 1: Toxic chemical agent and other chemicals. Category 2: Microorganisms and toxins. Category 3: Material, Materials Processing Equipments, and other material-related technologies. Category 4: Nuclear-related equipment, test, and production types of equipment; assemblies and components of nuclear; and related technology, not controlled under Category 0. Category 5: Aerospace system, equipment including productions and test types of equipment, related technology, and specially designed components and accessories. Category 6: Munitions List Category 7: Computers, electronic, and information technology, including information security. Category 8: Special Materials and Related Types of equipment, Electronics, Computers, Material Processing, Information Security, Sensors, Telecommunications and Lasers, Avionics, Marine, Aerospace Navigation, and Propulsion. Note: Each category contains an exhaustive list of items covered, and special conditions apply to each type. Key Pointers
Licensing Authority
Validity of SCOMET Export License The validity period of the export license is 24 months; it can be extended for six months and a full Upto one year through revalidation by DGFT regional office on the approval of DGFT Headquarters. |
Key Features of Foreign Trade Policy 2023
Process Re-Engineering and Automation
- Greater faith is being reposed on exporters through automated IT systems with risk management systems for various approvals in the new FTP.
- The policy emphasizes export promotion and development, moving away from an incentive regime to a regime that is facilitating, based on technology interface and principles of collaboration.
- Considering the effectiveness of some of the ongoing schemes like Advance Authorisation, EPCG etc. under FTP 2015-20, they will be continued along with substantial process re-engineering and technology enablement for facilitating the exporters.
- FTP 2023 codifies implementation mechanisms in a paperless, online environment, building on earlier 'ease-of-doing-business’ initiatives.
- Reduction in fee structures and IT-based schemes will make it easier for MSMEs and others to access export benefits.
- Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for a manual interface.
- During the FY23-24, all processes under the Advance and EPCG Schemes, including issue, re-validation, and EO extension, will be covered in a phased manner.
- Cases identified under the risk management framework will be scrutinized manually, while the majority of the applicants are expected to be covered under the 'automatic' route initially.
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What is Advance Authorisation Scheme? Advance Authorisation Scheme allows the duty-free import of inputs, which are physically incorporated in an export product. In addition to any inputs, packaging material, fuel, oil, and catalyst which is consumed/utilized in the process of production of export product, is also allowed. Only Exporter (either merchant or manufacturer) who holds an AEO Certification (Authorized Economic Operator) is eligible to opt for this scheme. The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions. Duty-free importable items under the scheme The following items can be imported without payment of duty under this scheme:
Eligibility for Advance Authorization The Advance Authorization Scheme is available to either a manufacturer exporter directly or a merchant exporter tied with a supporting manufacturer. The authorization is available for the following:
The validity of Advance Authorization Advance Authorization is valid for 12 months from the date of issue of such Authorization. In the case of deemed exports, the Authorization is linked to the contracted duration of project execution or 12 months from the date of issue of such Authorization, whichever is more. However, the export obligation may be fulfilled within 18 months from the date of issue of Authorization or as notified by the DGFT. Unless specified, the export proceeds should be realized in freely convertible currency. Grounds for issuing Advance Authorization Advance Authorization can be issued for inputs used in the product that is to be exported on the basis of the following:
What is Export Promotion Capital Goods (EPCG) Scheme? The objective of the Export Promotion Capital Goods (EPCG) Scheme is to facilitate the import of capital goods for producing quality goods and services and enhance India's manufacturing competitiveness. EPCG Scheme allows the import of capital goods for pre-production, production and post-production at zero customs duty. Capital goods for the purpose of the EPCG scheme shall include: - Capital Goods (as defined). - Computer systems and software that are a part of the Capital Goods. - Spares, moulds, dies, jigs, fixtures, tools & refractories. - Catalysts for initial charge plus one subsequent charge. EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s) and service providers. Under the EPCG scheme, exports failing to meet the export obligations can take advantage of schemes like Advance Authorisation, Drawback, Duty-Free Import Authorisation (DFIA), etc. along with reward schemes like Focus Product Scheme (FPS), Focus Market Scheme (FMS), Vishesh Krishi and Gram Udyog Yojana (VKGUY), etc. |
Towns of Export Excellence
- Four new towns, namely Faridabad, Mirzapur, Moradabad, and Varanasi, have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns.
- The TEEs will have priority access to export promotion funds under the MAI scheme.
- This addition is expected to boost the exports of handlooms, handicrafts, and carpets
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TOWNS OF EXPORT EXCELLENCE Towns of Export Excellence is a status provided to those towns which produce and export goods worth a minimum value in a specific sector. Sectors include handicraft, handloom, seafood, pharmaceutical, fisheries, apparel, coir, leather products, etc. Once a town is recognized as a TEE it helps in maximizing its potential and enables them to move higher in the value chain. According to the Ministry of Commerce and Industry, towns producing goods worth Rs 750 crore (US$ 98.7 million) or more can be recognized as Towns of Export Excellence. For certain sectors like handloom, handicraft, agriculture, and fisheries the threshold limit is set at Rs 150 crore (US$ 19.7 million). MAI SCHEME Market Access Initiative (MAI) Scheme was launched in 2013 is an Export Promotion Scheme envisaged to act as a catalyst to promote India's exports on a sustained basis. The scheme is formulated on focus product-focus country approach to evolve specific market and specific product through market studies/survey. Assistance would be provided to Export Promotion Organizations/Trade Promotion Organizations/National Level Institutions/ Research Institutions/Universities/Laboratories, Exporters etc., for enhancement of exports through accessing new markets or through increasing the share in the existing markets. The following activities are eligible for financial assistance under the Scheme:
Eligible Agencies
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Recognition of Exporters
- Exporter firms recognized with 'status' based on export performance will now be partners in capacity-building initiatives on a best-endeavour basis.
- Similar to the 'each one teach one' initiative, 2-star and above status holders would be encouraged to provide trade-related training based on a model curriculum to interested individuals.
- This will help India build a skilled manpower pool capable of servicing a $5 Trillion economy before 2030.
- Status recognition norms have been re-calibrated to enable more exporting firms to achieve 4 and 5-star ratings, leading to better branding opportunities in export markets.
Promoting export from the districts
- The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of the Grassroots Trade Ecosystem.
- Efforts to identify export-worthy products & services and resolve concerns at the district level will be made through an institutional mechanism – State Export Promotion Committee and District Export Promotion Committee at the State and District level, respectively.
- District-specific export action plans to be prepared for each district outlining the district-specific strategy to promote the export of identified products and services.
Read about ODOP-DEH Initiative: https://www.iasgyan.in/daily-current-affairs/odop-deh-initiative
Streamlining SCOMET Policy
- India is placing more emphasis on the "export control" regime as its integration with export control regime countries strengthens.
- There is a wider outreach and understanding of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders, and the policy regime is being made more robust to implement international treaties and agreements entered into by India.
- A robust export control system in India would provide access of dual-use High-end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.
Facilitating E-Commerce Exports
- E-commerce exports are a promising category that requires distinct policy interventions from traditional offline trade.
- Various estimates suggest e-commerce export potential in the range of $200 to $300 billion by 2030.
- FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, book-keeping, returns policy, and export entitlements.
- As a starting point, the consignment-wise cap on E-Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh in the FTP 2023. Depending on the feedback of exporters, this cap will be further revised or eventually removed.
- Integration of Courier and Postal exports with ICEGATE will enable exporters to claim benefits under FTP.
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ICEGATE ICEGATE stands for “Indian Customs Electronic Data Interchange Gateway” or the e-commerce portal of the Central Board of Excise & Customs. ICEGATE is an e-filing service portal for traders and cargo carriers. It includes the custom department and trade users. ICEGATE serves the purpose of Electronic Data Interchange and electronic communication requirements for the department. ICEGATE login is mandatory for e-filing any import or export of trades, cargo carriers, and other online trading. |
- The comprehensive e-commerce policy addressing the export/import ecosystem would be elaborated soon, based on the recommendations of the working committee on e-commerce exports and inter-ministerial deliberations.
- Extensive outreach and training activities will be taken up to build the capacity of artisans, weavers, garment manufacturers, gems and jewellery designers to onboard them on E-Commerce platforms and facilitate higher exports.
Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme
- The EPCG Scheme, which allows import of capital goods at zero Customs duty for export production, is being further rationalized. Some key changes being added are:
- Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under the CSP (Common Service Provider) Scheme of Export Promotion Capital Goods Scheme (EPCG).
- Dairy sector to be exempted from maintaining Average Export Obligation – to support the dairy sector to upgrade the technology.
- Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme.
Read about PM MITRA SCHEME: https://www.iasgyan.in/daily-current-affairs/pm-mitra-scheme
Facilitation under Advance authorization Scheme
- Advance authorisation Scheme accessed by DTA units provides duty-free import of raw materials for manufacturing export items and is placed at a similar footing to EOU and SEZ Scheme. However, the DTA unit has the flexibility to work both for domestic as well as export production. Based on interactions with industry and Export Promotion councils, certain facilitation provisions have been added in the present FTP such as
- Special Advance Authorisation Scheme extended to export of Apparel and Clothing sector on self-declaration basis to facilitate prompt execution of export orders – Norms would be fixed within fixed timeframe.
- Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorised Economic Operators at present.
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BACKGROUND: THE SOFTWARE TECHNOLOGY PARK (STP) SCHEME The STP Scheme is a 100% export-oriented scheme for the development and export of computer software, including export of professional services using communication links or physical media. As a unique scheme, it focuses on one sector, i.e. computer software. The scheme integrates the government concept of 100% Export Oriented Units (EOU) and Export Processing Zones (EPZ) and the concept of Science Parks/Technology Parks, as operating elsewhere in the world. The unique feature of the STP scheme is the provisioning of single-point contact services for member units, enabling them to conduct exports operations at a pace commensurate with international practices.
SCHEME BENEFITS & HIGHLIGHTS
What does Domestic Tariff Area (DTA) mean? The term DTA is normally used by the trade in exported goods, imported goods or locally procuring/manufacturing goods where in any kind of duty is involved. Each Software Technology Park (STP) unit has a Customs Bonded Warehouse which is treated as Customs Bonded Area. If one wants to move goods in or out of the said warehouse, permission from customs/excise is required. Such goods procured locally or imported attracts a duty amount. These units would have imported/procured such goods on the basis of export obligations with government. If a unit under STP fulfilled such export obligation and achieved value addition, the authorities may permit the unit to sell dutiable goods to local market. So once after completion of export obligation, STP units sell dutiable goods to Domestic Tariff Area by obtaining permission from the customs/excise authorities. If one obtains any goods under free of duty with government schemes, she can sell the final products to domestic tariff area, once after fulfilling her export obligation with the government licensing authority. |
Merchanting trade
- To develop India into a merchanting trade hub, the FTP 2023 has introduced provisions for merchanting trade.
- Merchanting trade of restricted and prohibited items under export policy would now be possible.
- Merchanting trade involves shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
- This will be subject to compliance with RBI guidelines, and won’t be applicable for goods/items classified in the CITES and SCOMET list.
- In course of time, this will allow Indian entrepreneurs to convert certain places like GIFT city etc. into major merchanting hubs as seen in places like Dubai, Singapore and Hong Kong.
Amnesty Scheme
- Finally, the government is strongly committed to reducing litigation and fostering trust-based relationships to help alleviate the issues faced by exporters.
- In line with "Vivaad se Vishwaas" initiative, which sought to settle tax disputes amicably, the Government is introducing a special one-time Amnesty Scheme under the FTP 2023 to address default on Export Obligations.
Read: https://www.iasgyan.in/daily-current-affairs/vivad-se-viswaas-scheme
- This one-time Amnesty Scheme is intended to provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations, and who are burdened by high duty and interest costs associated with pending cases.
- All pending cases of default in meeting the Export Obligation (EO) of authorizations mentioned can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation.
- The interest payable is capped at 100% of these exempted duties under this scheme.
- However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty and this is likely to provide relief to exporters as interest burden will come down substantially.
- It is hoped that this amnesty will give these exporters a fresh start and an opportunity to come into compliance.
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PRELIMS PRACTICE QUESTION Q. Which of the following statements are correct with reference to the provisions made in Foreign Trade Policy 2023? a. The consignment-wise cap on E-Commerce exports through courier has been raised from ₹10Lakh to ₹50 Lakh in the FTP 2023. b. The Merchanting trade of restricted and prohibited items under the export policy would now be possible. c. Four towns have been added to the Towns of Export Excellence List and towns producing goods worth Rs 1500 crore or more can be recognized as Towns of Export Excellence. d. Special Advance Authorisation Scheme has been extended to the export of Apparel and Clothing sector. 1. a and b 2. b and d 3. a, b and d 4. b, c and d Correct Answer: b |
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