FOREIGN TRADE POLICY, 2023

[Mr. M. GOVINDARAJAN]

Introduction

Foreign Trade Policy is a set of guidelines and instructions established by the Director General of Foreign Trade in matters related to the import and export of goods in India. The Government of India, Ministry of Commerce and Industry announces Export Import Policy every five years.  The main objective of the policy is to provide the development and regulation of foreign trade by facilitating imports into and augmenting exports from India.  Foreign trade policy aims to make Indian exports more globally competitive by reducing transaction costs and time. It helps businesses take advantage of global market possibilities and boost the economy. It includes both imports and exports.

Foreign Trade Policy, 2023

Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, launched the Foreign Trade Policy 2023 on 31.03.2023. The said policy was notified vide Notification No. 01/2023, dated 31.03.2023. The said trade policy comes into effect from 01.04.2023. Previous policy has the tenure of 5 years. But this policy has no tenure. The new Foreign Trade Policy shall provide policy continuity and a responsive policy framework for promoting India's Exports of Goods and Services.  Subsequent revision(s) in the Foreign Trade Policy shall be done as and when required and shall not link to any date. Continuous feedback from Trade and Industry to streamline processes will be got and update Policy & procedures.

Approach of New policy

The new approach of Foreign Trade Policy, 2023 are-

• From Incentives to Tax Remission;
• Greater Trade facilitation through technology, automation, and continuous process re-engineering;
• Export promotion through collaboration: Exporters, States, Districts;
• Focus on Emerging Areas – E-Commerce Exports, Developing Districts as Export Hubs, Streamlining SCOMET policy et al.

Ease of doing business

The policy paves the way for ease of doing business. All the approvals will be done only online basis.

• Automatic approval of various permissions under Foreign Trade Policy based on process simplification and technology implementation.
• Reduction in processing time and immediate approval of applications under automatic route for exporters as detailed in the table below-

Permission type	Current processing time	Automatic processing time
Advance authorization issuance	3 to 7 days	1 day
EPCG issuance	3 to 7 days	1 day
Revalidation of authorizations	3 days to 1 month	1 day
Extension of Export Obligation period	3 days to 1 month	1 day

Further the application fee is reduced for Advance Authorization and EPCG Schemes. By this 55 - 60% of exporters of MSMEs will be benefited by the reduction of fee. The fee structure is shown in the following table-

Licence Value in Rupees	User charges for non- MSMEs	Reduced User charges for MSMEs
Up to Rs.1 crore	Re. 1 per 1000	Rs.100/-
Rs. 1 crore to Rs.10 crores	Re. 1 per 1000	Rs.5000/-
Above Rs.10 crores	Cap at 1,00,000	Rs.5000/-

Revamp of the e-Certificate of Origin platform proposed will provide for self certification of Certificate of origin as well as automatic approval of Certificate of Origin, where feasible.  Initiatives for electronic exchange of Certificate of Origin data with partner countries will be envisaged.

All authorization redemption applications will be paperless. With this, the entire lifecycle of the authorization shall become paperless.

Export promotion initiatives

This policy rationalizes the Export performance threshold for recognition of Exporters as Status Holders. This will enable more exporters to achieve higher status and reduced transaction cost for exports.

The following table will show the existing performance threshold and revised performance threshold-

Status House category	Existing Export performance threshold	Revised Export Performance Threshold
One Star	3	3
Two Star	25	15
Three Star	100	50
Four Star	500	200
Five Star	2000	800

Reform in merchant trading

Merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary is allowed subject to compliance with RBI guidelines, except for goods/items in the CITES and SCOMET.

Rupee payment

Under this policy effective steps will be taken towards internationalization of Rupee. The Foreign Trade Policy benefits extended for rupee realizations through special ‘Vostro’ accounts setup as per RBI circular issued on 11.07.2022.

Towns of Export Excellence

As on date 39 towns of export excellence are there. Now four new towns of Export Excellence are added which are-

• Faridabad - Apparel;
• Moradabad - Handicrafts;
• Mirzapur - Handmade carpet and Dari;
• Varanasi - Handloom and Handicrafts.

Recognition to these industrial clusters is granted with a view to maximize their potential and enable them to move up the value chain and to tap new markets. The following are the benefits under Towns of Export Excellence-

• Recognition-

• Helps in getting recognition/credibility attached to industrial units of the region/town while exploring/expanding into newer markets.
• Puts such industrial units/town on the global stage.

• Market Access Initiative Scheme-

• Recognized associations of units are provided financial assistance under Market Access Initiative Scheme on priority basis, for export promotion projects for marketing, capacity building and technological services.
• Through this scheme such units can get financial assistance to visit various trade exhibitions/fairs for exploring more marketing avenues.

• Common Service Provider Facility-

• Common Service Providers in Towns of Export Excellence are entitled for Authorization under EPCG Scheme which can help in increasing the competitiveness of the cluster and provide enabling environment.
• This arrangement gives facility to exporters to not own the entire infrastructure for conversion from inputs to final export products.

Districts as Export Hubs

• The Districts as Export Hubs aims to boost India's foreign trade by decentralizing export promotion.
• It will bring a greater level of awareness and commitment regarding exports at the district level.
• It will identify the products/services in all the districts.
• It will create institutional mechanisms at the State and District level to strategize exports (State Export Promotion Committee & District Export Promotion Committee).
• It will be helpful for preparation of District Export Action Plans outlining the action plan to promote identified products and services.
• It will make States and Districts meaningful stakeholders and active participants.

Capacity building at District level

• Capacity building to create new exporters and identification of new markets.
• Training, handholding, and outreach programs by DGFT field offices in coordination with District Industries Centers.
• Regional Authorities of DGFT working with the States/UTs to prepare District specific Export Plans.
• Export promotion outreach programs in districts to focus on branding, packaging, design and marketing of identified product & services.

Infrastructure and Logistics Development Intervention

• To address Infrastructure and Logistics bottlenecks impeding exports.
• Districts to focus on development of logistics, testing facilities, connectivity for exports and other export-oriented ecosystem.
• Convergence of ongoing schemes to support these initiatives.

E-Commerce Exports

All Foreign Trade Policy benefits will be extended to e-Commerce exports. Necessary enablement of IT systems in Department of Commerce, Post, CBIC will be undertaken within six months. To streamline e-Commerce export facilitation Guidelines are formulated in consultation with other ministries to facilitate further exports under e-Commerce. The Value limit for exports through courier is increased to Rs.10,00,000/- per consignment.

Dak Ghar Niryat Kendras shall be operationalised throughout the country to work in a hub-and-spoke model with Foreign Post Offices to facilitate cross-border e-Commerce and to enable artisans, weavers, craftsmen, MSMEs in the hinterland and land-locked regions to reach international markets.

The designated hubs with warehousing facility will be notified, to help e-commerce aggregators for easy stocking, customs clearance and returns processing. The processing facility will be allowed for last mile activities such as labelling, testing, repackaging etc.

Boosting the manufacture

The following steps will be taken under this policy to boost manufacturing in India-

•  Prime Minister Mega Integrated Textile Region and Apparel Parks scheme has been added as an additional scheme eligible to claim benefits under Common Service Provider Scheme of Export Promotion capital Goods Scheme.
• Dairy sector to be exempted from maintaining Average Export Obligation – to support dairy sector to upgrade the technology.
• Battery Electric Vehicles 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 Special Advance Authorization Scheme extended to export of Apparel and Clothing sector under para 4.07 of HBP on self-declaration basis to facilitate prompt execution of export orders – Norms would be fixed within fixed time-frame.
• Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorized Economic Operators at present.
• Fruits and Vegetables exporters are being included for double weightage for counting export performance under eligibility criteria for Status House certification. This is in addition to existing MSME sector that also get double weightage.

Amnesty Scheme

The Government is strongly committed to reducing litigation and fostering trust based relationships to help alleviate issues faced by exporters. In line with the ‘Vivaad se Vishwaas’ initiative, which sought to settle tax disputes amicably, Government is introducing a special one-time Amnesty Scheme to address non-compliance in Export Obligations by Advance Authorization and EPCG authorization holders.

All pending cases of default in Export Obligation of authorizations mentioned can be regularized by the authorization holder on payment of all customs duties exempted in proportion to unfulfilled Export Obligation and maximum interest is capped at 100% of such duties exempted. No interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty.        

Amnesty scheme shall be available for a limited period, up to 30.09.2023. Cases under investigation for fraud and diversion are not eligible for this scheme.

SCOMET policy

SCOMET policy emphasizes India’s export control in line with its International commitments under various export control regimes (Wassenaar arrangement, Australia group and Missile Technology Control Regime) to control trade in sensitive and dual use items including software and technology. The recent policy changes introduced such as general authorizations for export of certain SCOMET items to streamline licensing of these items to make export of SCOMET items globally competitive. It will be focused to simplify policies to facilitate export of dual-use high-end goods/technology such as UAV/Drones, Cryogenic Tanks, Certain chemicals etc.

Conclusion

The new FTP is expected to-

• be dynamic and responsive to the emerging trade scenario;
• engage with States and Districts to promote exports from the grassroots;
• focus on e-Commerce exports to streamline processes and make it easier for exports to grow in e-commerce space;
• achieve the goal of one trillion-dollar merchandise exports and one trillion-dollar services exports by 2030;
•  resolve issues of trade and Industry by consultative mechanism;
• work towards making Indian Rupees a global currency and facilitating International Trade settlement in INR;
• restructure the Department of Commerce to make it future ready.

Source:

https://www.dgft.gov.in/CP/