Scope of Foreign Trade Policy 2024

Foreign Trade Policy 2015-20 was implemented to make India a major player in global trade by 2020. The government through the Foreign Trade Policy 2015-20 is focused on offering support to both manufacturing and services sectors.

Updated On - 14 Mar 2024

The integration of the domestic economy through trade and capital movements has greatly intensified over the last two decades. Due to this expansion, the Indian economy increased from Rs.32 trillion in 2004 to Rs.153 trillion in 2016.

India's per capita income increased significantly during the same time frame. The trade and external sector of India contributed significantly to the expansion of the GDP and per capita income.

What is Foreign Trade Policy?

Foreign Trade Policy is a set of guidelines and instructions governing both the import and the export of products in India.

Foreign Trade Policy Highlights 2024

To provide policy continuity and a flexible framework, the Foreign Trade Policy 2023 has been announced. The key highlights of the Foreign Trade policy 2023 are described in brief.

 Reduced Transaction Costs, Ease of Doing Business, and e-Initiatives

Online Approvals Made without Physical Interface

Automatic approval of various Foreign Trade Policy approvals based on technology deployment and procedure simplification. Applications submitted via the automatic approach will be processed more quickly and will be approved right away for exporters. 

User fee reductions for MSMEs under AA and EPCG

Application fees for the Advance Authorization and EPCG Schemes will be decreased. Will benefit 55–60% of MSMEs who export. The fee structures are mentioned below:

Origin e-Certificate

It is suggested to revamp the e-Certificate of Origin platform so that, when practical, CoOs can self-certify and receive automatic clearance. Plans call for electronic data interchange between partner nations and the CoO.

Export Obligation Discharge Applications Submitted Electronically

Paperless submission of all applications for authorization redemption This is in addition to the previously paperless application process for issuance. With this, the authorization's full lifecycle will be paperless.

Initiatives on Export Promotions

1. Rationalised Status Holder Export Thresholds - Rationalisation of the export performance requirement for the recognition of exporters as status holders. enabling more exporters to rise in status and lower export transaction costs.
2. Reform of merchanting trade - To increase merchanting activities from India: Subject to compliance with RBI guidelines, merchanting trade involving the shipment of goods from one foreign country to another foreign country without touching Indian ports is permitted, with the exception of goods/items on the CITES and SCOMET list.
3. Under FTP Schemes, rupee payments to be accepted - A successful step in the internationalisation of the rupee. According to an RBI circular published on July 11, 2022, FTP benefits are given for rupee realisations through special Vostro accounts set up. 

Initiative of Districts as Export Hubs

1. States and Districts as Export Promotion Partners - By decentralising export promotion, Districts as Export Hubs seeks to increase India's international trade. Identification of goods and services in each district. The creation of District Export Action Plans (DEAPs) describing the promotion strategy for chosen goods and services. Make States and Districts Valuable Participants and Active Stakeholders.
2. District level capacity building - The development of new exporters' capacities and the discovery of new markets. In collaboration with District Industries Centres, DGFT field offices offer outreach, training, and support programs. District-level outreach programs for promoting exports will concentrate on the branding, packaging, design, and marketing of specific goods and services.
3. Intervention in the Development of Infrastructure and Logistics - To overcome the export-hindering obstacles in infrastructure and logistics. The development of testing facilities, connection for exports, and other export-oriented ecosystems would be prioritised by districts. Combination of ongoing programs to assist these initiatives.

Exports of e-Commerce

1. e-Commerce Exports facilitation - Activities specifically geared on educating and assisting small e-commerce exporters assisting through partnerships with businesses and experts. The value threshold for exporting via courier has been raised to Rs.10,000,000.
2. e-Commerce Export Hub - To assist e-commerce aggregators with easy stocking, customs clearance, and returns processing, designated hubs with warehouse facilities will be notified. Last-mile processing activities including labelling, testing, and repackaging will be permitted.

Steps to Boost Manufacturing

The PM MITRA (Prime Minister Mega Integrated Textile Region and Apparel Parks) scheme has been included as an extra scheme eligible to receive benefits under the EPCG's CSP (Common Service Provider) Scheme. All varieties of battery electric vehicles (BEV), equipment for vertical farming, systems for treating and recycling wastewater, rainwater harvesting systems and rainwater filters, and green hydrogen have been added to the list of products that qualify for a reduction in the export obligation requirement under the EPCG Scheme. To enable the fast execution of export orders, the Special Advance Authorization Scheme was expanded to include exports of the apparel and clothing sector under paragraph 4.07 of the HBP on a self-declaration basis. Norms will be defined within a set time frame.

Special One-Time Amnesty Program for Export Obligation Defaults

To help exporters overcome their problems, the government is steadfastly devoted to lowering litigation and developing relationships based on trust. The government is implementing a special one-time Amnesty Scheme to address non-compliance in Export Obligations by Advance Authorization and EPCG authorization holders in keeping with the "Vivaad se Vishwaas" initiative, which intended to settle tax problems amicably. The authorization holder may regularise any outstanding instances of export obligation (EO) default for the aforementioned authorizations upon payment of all customs duties exempted in proportion to outstanding export obligation, with a maximum interest cap of 100% of such duties exempted. On the percentage of Additional Customs Duty and Special Additional Customs Duty, no interest is due.

Focus on Simplifying the SCOMET Licencing Process

Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) are the focus of FTP 2023. For simplicity of understanding and compliance by industry, the SCOMET policy for exporting dual-use goods has been centralised in one spot. The SCOMET policy places a strong emphasis on India's export control in accordance with its international obligations under different export control regimes (the Wassenaar arrangement, the Australia group, and the Missile Technology Control Regime) to regulate commerce in sensitive and dual-use goods, including software and technology.

Foreign Trade Policy 2015-2020

The Foreign Trade Policy 2015-20 was established with the aim of making India an important player in the global trade by the year 2020. It provides an important substructure to promote the export of goods and services, generate more employment scopes, and increase the value addition in the country. Through the Foreign Trade Policy 2015-20, the government is focusing to provide support to both the services and the manufacturing sectors, facilitating 'ease of doing business'.

Mid Term Review of the Foreign Trade Policy 2015-2020

On the 5th of December, 2017, the Mid Term Review of the Foreign Trade Policy 2015-2020 was announced. The main idea behind this policy was to prompt traditional and sunrise sectors which are associated with exports of goods and services. The Mid Term Review of the policy aimed at the facilitation of the 'Ease of Doing Business' by means of shifting the power of decision-making from the central government to the state government. This will simplify the procedure further. The important highlights from the Mid Term Review can be summed up as follows:

• The rates of Merchandise Exports from India Scheme (MEIS) for labour intensive sectors like carpet making, leather-work, marine, hand tools, medical products, and scientific products were increased by 2%. The same was implemented for certain labour intensive services like accountancy, legal, architecture, hotels and restaurants, education sector, etc.
• The Authorised Economic Operators (AEO) scheme enables customs clearance in both India and foreign countries. Hence, exporters are encouraged to apply for the above-mentioned scheme by the trust based system employed in granting Advance Authorisation for no norms cases of exporters who are registered as AEO. This also signifies the new beginning of dependence on trade.
• The Mid Term Review announced that the Agricultural Export Policy will be released with the view of doubling the income of the farmers by providing long-term stable and open exports.
• The review announced the creation of a new Logistics Division in the Department of Commerce.
• It also announced the decision to develop the National Logistics Information Portal for online logistic market players. This decision is aimed at reducing the logistics cost in India.
• The ambition of the National Logistics Information will be backed by the Trade Facilitation Agreement and e-Way Bill introduction as well.
• The review also implemented certain procedural simplifications. They are as follows:
  • The Importer Exporter Code (IEC) was replaced by Permanent Account Number (PAN).
  • The validity of scrips was extended from 18 months to 24 months.
  • The restriction on DTA sale on applicable import duty was removed.
  • The ARO facility was reintroduced for the supply against Advance Authorisation/EPCG/EOU.
  • The EPCG Authorisation was clubbed including instances where the export obligation period has expired.
  • The export obligation was extended including the block-wise export by the Regional

Salient features of the policy

The salient features of the Foreign Trade Policy can be summed up as follows:

• Facilitation of trade and ease of doing business: The Government has prioritised the trade facilitation with the primary aim of curtailing the cost and time required for making transactions. This will, in turn, will implement more competition in the Indian export market. The new measures which have been compiled in the Foreign Trade Policy for the betterment of trade facilitation are listed below:

General provisions pertaining to imports and exports The new provisions in relation to the management of import and export of goods and services are as follows:

Promotional schemes There are two schemes in the Foreign Trade Policy under Export from India Schemes. These schemes are:

• Merchandise Exports from India Scheme (MEIS)
• Service Exports from India Scheme (SEIS)

Status Holder

Business leaders who have made great deal of contributions to the foreign trade of the country through excellent performance in international trade, are eligible to be Status Holders. In order to be categorised as a status holder, an applicant has to achieve the following export performance during the current financial year and the previous three financial years:

The status recognition is dependent on the export performance which is calculated on the basis of FOB value of earnings from export in free foreign exchange.

Privileges of Status Holders A Status Holder will be eligible for the following privileges:

Duty Exemption or Remission Scheme

The Foreign Trade Policy (FTP) enables the exporters to import the inputs for export production. Replenishing inputs and remission of duty are included under the Duty Exemption Scheme.

The scheme consists of the following features:

• Duty-Free Import Authorisation (DFIA): It allows duty-free import of inputs and allows an exemption in terms of the payment of Basic Customs Duty. Additional Customs Duty or Excise Duty paid can be adjusted as CENVAT credit. A value addition of at least 20% has to be achieved.
• Advance Authorisation (AA) [including Advance Authorisation for Annual Requirement]: On the basis of Standard Input Output Norms (SION) or Self-Declaration, duty-free import of input used for physical incorporation in products of export will be duty-free. However, the minimum requirement in terms of value addition is 15% and the period of fulfillment of export obligation is 18 months. This period is considered from the date of issuance of the authorisation.

EPCG Scheme

The import of all kinds of capital goods required for the purpose of pre-production, post-production, or production of goods meant for export is exempted from customs duty under the EPCG Scheme. As per Trade Notice No. 11 dated 30.06.2017 under GST Regime, no exemption from payment of IGST and Compensation Cess would be available for imports under EPCG. However, as per Notification No. 33 dated 13 October 2017, Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable thereon up to 31 March 2018.

Deemed Exports

The kind of transactions where the supplied goods stay within the country, and the payment made for such supplies is received either in Free Foreign Exchange or in Indian Rupees, are called deemed exports. As per the provisions under Chapter 7 of the Trade Notice 11 dated 30.06.2017, the disadvantages would be limited to refunding the basic customs duty only. With respect to those items that are specified in Schedule 4 under the Central Excise Act of 1944, if the item is permitted for such supply then the refund shall be covered under the drawback.

Quality Complaints and Trade Disputes

A new chapter on 'Quality Complaints and Trade Disputes' has been incorporated in the Foreign Trade Policy (FTP) which is responsible to deal with and resolve the complaints in regards to quality and disputes pertaining to trade between exporters and importers. A Committee on Quality Complaints and Trade Disputes ('CQCTD') has been built in 22 offices having members from Export Promotion Council/FIEO/APEDA/EICs/RBI etc. to deal with such complaints and resolve the disputes at a faster rate. The enquiry and investigation of all kind of complaints related to quality and other complaints in relation to trade will be taken care of by the CQCTD. If certain complaints are liable to fall under the jurisdiction of the respective RAs, the CQCTD will be liable for the enquiry and resolution. The committee will take care of the grievances within 3 months from the date of receipt of the complaint. These grievances will include complaints from exporters, importers, and overseas buyers. However, the proceedings to be carried on by the CQCTD will be reconciliatory in nature. Hence, the aggrieved party can also choose to pursue any legal resource.

Main changes in FTP 2015-20 are as under

@Source: BankBazaar.com