• The Ministry of Commerce has again deferred the launch of its new foreign trade policy (FTP) as it felt the need to have wider consultation with industry.
• Current FTP is in force since 2015-20 but extended thereafter till March 2023.
• The new foreign trade policy must clear the clutter in laws and regulation for the export community’s benefit.

Foreign Trade Policy (FTP)

• It is a policy document that spells out the objectives and strategies to boost exports.
• It is also an important document that interprets rules, regulations, and procedures in international trade transactions.
• These transactions are critical in facilitating in export-import operations and making the export sector more competitive.

Operational Challenges of FTP

Operational issues are recurring in nature and can be handled throughout the year.  There are four major operational challenges that deserve utmost attention:

Issues related to Remission of Duties and Taxes on Export Products (RoDTEP)

• RoDTEP scheme is aimed at neutralising the taxes at the State and local levels not otherwise refunded under any other mechanism.
• RoDTEP is a refund of duties and taxes (electricity duties, petroleum taxes, stamp duty etc.). It is embedded in manufactured products for exports.
• It does not include “cess and levies,” which has emerged as a potent instrument in recent years, to collect funds for designated purposes.
• It benefits are confined to limited sectors and a number of important sectors such as pharmaceuticals, chemicals and steel are out of its purview.
• Under the current policy, RoDTEP benefits are not available to advance authorisation holders and EOU’s.
• Exemption granted under the advance authorization/EPCG (Export Promotion Capital Goods) scheme/EOU (Export Oriented Units) is primarily from customs duties and IGST and not from embedded taxes like electricity duty, diesel/petrol taxes etc.

Long List of Pending Cases

• There is long list of pending cases of redemption with respect to Advance Authorization scheme due to pre-import conditions.
• Advance Authorisation Scheme allows duty free import of inputs, which are physically incorporated in an export product.
• The pre-import conditions based on the licensing period is challenging for industries.

Methodological and transparency issue

• The government had introduced Manufacture and Other Operations in Customs Warehouse (MOOWR) in 2019.
• It is to facilitate duty free imports for exports under the Customs bonded warehouse.
• This scheme is similar to Export Oriented Units (EOU) of the FTP.
• The EOU scheme has dual monitoring, one by Development Commissioner and another by customs.
• It is being difficult for industries to conversion of existing units under EOU scheme into MOOWR scheme.
• There is a lack of transparency in different operations and provisions.

Issue with imports regulations

• Imports are subject to compliance with domestic laws as outlined in the Para 2.03 of the FTP.
• It provides a generic guideline and actual regulations are multiple and not available at a single point.

Suggestions

• The RoDTEP benefits needs to be extended to Advance Authorization holders and EOU’s on priority basis.
• +These taxes and duties are also applicable on excluded sectors and therefore need to be refunded to all sectors.
• The list of long pending cases needs to be sorted out immediately by withdrawing the pre-import condition retrospectively.
• The examination of pre-import condition should be limited to the actual violation based on actual import with respect to export.
• It should not be based on the licensing period.
• The government should take into account the details of imports and against each authorisation on individual merits and help redeem such cases.
• To achieve the $1,000 billion exports target by 2030, it is important to resolve pending cases in a justified and time-bound manner
• This will help exporters to focus on boosting exports rather than grappling with their existing cases.
• it is better to bring about a simple methodology for conversion of existing units under EOU scheme into MOOWR scheme.
• There are significant ambiguities on the scope of operations, depreciation provisions relating to capital goods etc, which need to be addressed for greater transparency.
• There is need to provide greater clarity and explanation of laws, rules, orders, regulations and technical specifications stipulated in the existing FTP.
• There is a need to separate appendix in the Handbook of Procedures covering all compliances under various domestic laws is required.

Directorate General of Foreign Trade (DGFT) must ensure that the new FTP focusses more on addressing operational issues of Export-Import Bank of India (EXIM) operations as they reduce not only the cost of doing operations but also improves firm level export competitiveness.