Understanding Foreign Trade Policy (FTP)

Foreign Trade Policy (FTP)

• FTP consists of guidelines and regulations
• FTP are established by a government
• FTP manages the flow of goods and services between a nation and other countries
• FTP optimizes economic benefits through export promotion, import controls, and trade agreements

Key Points of FTP

• Balances payments by encouraging exports and regulating imports
• Supports growth and development
• Details export incentives, duty structures, import restrictions, special economic zones and trade agreements
• Implementation is managed by government agencies like the Directorate General of Foreign Trade (DGFT) in India
• Facilitates policy implementation and compliance
• Can attract foreign investment
• Boosts domestic industries
• Creates employment opportunities
• Enhances global competitiveness

Important Aspects

• Export promotion identifies and supports key export sectors
• Provides exporters with incentives, like tax breaks and subsidies
• Improves market access
• Import restrictions implement tariffs, quotas, to protect domestic industries from unfair foreign competition
• Trade agreements involve negotiating bilateral or multilateral agreements
• These provide preferential market access and reduce trade barriers

Special Economic Zones (SEZs)

• Designated areas with favorable tax and regulatory environments
• Attracts foreign investment
• Promotes export-oriented industries

Salient Features of India's FTP

• Promotion exports
• Facilitates trade
• Developing manufacturing sector

Export Promotion Strategies

• Districts as Export Hubs (DEH) involves partnering with state governments to promote exports at the district level
• Export Promotion Capital Goods (EPCG) allows duty-free import of capital goods for export purposes
• Duty credit scrip schemes encourage exports of specific goods and services

Trade Facilitation

• Reduces the time and cost of transactions
• Aims to increase competition in the export market
• Simplifies the process of doing business

Promoting the Manufacturing Sector

• Improves the manufacturing industry's competitiveness in the international market
• Increases foreign exchange and capital flow through Foreign Direct Investment (FDI)

Additional FTP Features

• Identifies export worthy products and services
• Addresses concerns at the district level
• Prepares district specific export action plans
• Exempts EOUs and SEZ units from taxes
• Introduces the concept of deemed exports

Administration of FTP

• Responsibility of the Directorate General of Foreign Trade (DGFT)
• Operates under the Ministry of Commerce and Industry
• Involves setting guidelines
• Regulating import and export activities
• Implementing promotional schemes
• Ensuring trade policy compliance
• Focuses on boosting exports and promoting economic growth

Key Aspects of FTP Administration

• Policy Formulation: The government, drafts the FTP, outlining objectives, target sectors, export promotion, and import restrictions
• Implementation and Monitoring: The DGFT enforces the FTP and tracks compliance
• Export Promotion Schemes: The FTP includes incentives like duty drawback and export promotion capital goods (EPCG) schemes
• Trade Facilitation Measures: The policy simplifies customs procedures, streamlines documentation, and promotes digital platforms
• Market Access Initiatives: The government negotiates with other countries for favorable market access
• Review and Amendments: The FTP is regularly reviewed and updated to adapt to new technologies and market trends

Key Players in FTP Administration

• Directorate General of Foreign Trade (DGFT) is responsible for administering the FTP, issuing licenses, and monitoring compliance
• Customs Authorities enforce import and export regulations and collect duties
• Export Promotion Councils (EPCs) are sector specific organizations that support exporters with information and market intelligence
• State Governments collaborate with the central government to promote exports by identifying export clusters

Important Aspects of FTP

• Classification of Goods includes categorizing goods as "free", "restricted", or "prohibited"
• Export Incentives consists of schemes to incentivize exports
• Import Restrictions use measures like import duties and licensing requirements
• Special Economic Zones (SEZs) are areas with tax benefits to promote export-oriented manufacturing

Contents of India's FTP 2023

• Provisions for trade facilitation, export promotion, and ease of doing business
• Aims to make India a global trade hub and the rupee a global currency

Key Provisions of FTP 2023

• Streamlining SCOMET policies
• Developing districts as export hubs
• Digitization and faster processing of applications
• Boosting manufacturing
• Extending the Advance Authorization Scheme to apparel and clothing
• Raising the value limit for exports through courier service
• Reducing transaction costs through e-initiatives

Emerging Areas

• Includes e-commerce exports
• Developing districts as export hubs

Other Provisions

• Amnesty scheme for export obligation shortfalls
• Process re-engineering and automation

Policy Approach

• Based on trust and partnership with exporters
• Responsive to trade requirements with scheduled revisions

Policy Goals

• Ensure continuity and responsiveness
• Aims to establish India as a global trade hub
• Aims to establish the rupee as a global currency

Scope of Foreign Trade Policy

• Guidelines and strategies to regulate and promote export/import, achieve economic goals, enhance global trade competitiveness
• Consists of market access facilitation and streamlining customs procedures

Key Aspects of Scope

• Export promotion involves identifying and supporting key sectors and providing incentives
• Import management involves regulating imports through tariffs and quotas to protect domestic industries
• Trade facilitation involves simplifying customs procedures and promoting digital platforms
• Special economic zones (SEZs) consist of designated areas with favorable environments to attract foreign investment
• Market diversification encourages exports to a wider range of markets
• Technology and innovation fosters research and development activities
• Sustainability considerations promote environmentally friendly practices
• Collaboration with stakeholders engages industry associations and state governments

Important Elements of FTP

• Export Promotion Schemes provides financial incentives like duty credit scrips and subsidies
• Import Restrictions imposes tariffs, quotas, or bans to protect domestic industries
• Export Promotion Councils establishes specialized bodies to promote specific commodities
• Trade Agreements consists of negotiating bilateral or multilateral trade agreements to gain preferential market access

Trade Facilitation and Ease of Doing Business

• Initiatives to make trade and business operations efficient and cost-effective
• Trade facilitation involves the WTO's Trade Facilitation Agreement (TFA)
• Aims to reduce trade costs and speed up the movement of goods
• Includes measures to simplify customs procedures and improve cooperation
• Includes technical assistance and capacity building

Ease of Doing Business

• The World Bank Group's Ease of Doing Business (EoDB) index ranks countries
• Higher EoDB ranking indicates simpler regulations and stronger property rights protections

Initiatives to Improve Ease of Doing Business

• Simplifying procedures for application, renewal, and inspection,
• Repealing or amending redundant laws
• Creating online interfaces to eliminate manual forms
• TFA and EoDB aims to reduce costs and improve business operations

Miscellaneous Provisions in FTP

• Additional rules and regulations for overall trade compliance
• Includes dispute resolution, district-level promotion, quality control, and ethical practices

Key Points of Miscellaneous Provisions

• District-level focus encourages export promotion at the local level and aligns with initiatives like "Make in India"
• Dispute resolution mechanisms resolve trade disputes between exporters/importers
• Quality control ensures standards of exported goods
• Ethical trade practices addresses unethical commercial dealing
• Collaboration involves coordination between DGFT and other government agencies

Examples Under Miscellaneous Provisions

• Merchanting trade allows Indian companies to facilitate trade between foreign countries
• Reporting requirements mandate specific reporting procedures
• Special provisions for certain sectors consist of rules regarding sensitive goods

General Provisions Regarding Imports and Exports

• Exports and imports are free unless regulated by specific policies or laws
• Exporting/importing entities must comply with the Foreign Trade (Development and Regulation) Act, 1992
• Imported goods are subject to local laws and technical specifications
• Export/import of rough diamonds requires a Kimberley Process (KP) Certificate

Procedure

• The DGFT specifies procedures for exporters and importers

Exemption

• The DGFT can grant relaxation in procedures for legitimate reasons and public interest

Restriction Principles

• The DGFT can enforce restrictions for protecting public morals and health
• The DGFT can enforce restrictions to protect intellectual property and prevent deceptive practices
• The DGFT can enforce restrictions to prevent prison labor and protect national resources

Other Restriction Principles

• Can be used to conserve exhaustible natural resources
• Can be used to protect trade of radioactive materials
• Can be used to prevent trafficked arms and ammunition

Restricted Goods

• Importing and exporting restricted goods requires a license and public notice

Terms and Conditions for Obtaining a License or Certificate

• Requires specifying quantity, description, and value,
• Details actual user condition
• Includes export obligation, value addition, and minimum export price

Penalty

• Violation of any condition results to action based on the Act and relevant regulations

Permission

• The DGFT or licensing authority can refuse to grant or renew a license
• Import on export basis allows importing capital goods and components for export without license
• Requires execution of Legal Undertaking or Bank Guarantee with Customs Authorities
• The item must be freely exportable with any conditionality