Foreign Trade Policy & Procedures – Economic, Business and Commercial Laws Important Questions

Foreign Trade Policy & Procedures – Economic, Business and Commercial Laws Important Questions

Question 1.
Write a short note on Privileges of Star Export House [June 2010 (3 Marks)]
Answer:
Privileges to Status Holders: A Status Holder shall be eligible for privileges as under:
1. Authorization and Customs Clearances for imports and exports may be granted on a self-declaration basis.

2. Input-Output norms may be fixed on priority within 60 days by the Norms Committee.

3. Exemption from the furnishing of Bank Guarantee for Schemes under FTP, unless specified otherwise anywhere in FTP or HBP.

4. Exemption from compulsory negotiation of documents through banks. The remittance, however, would be received through banking channels.

5. Two-star and above Export houses shall be permitted to establish Export Warehouses as per Department of Revenue guidelines.

6. Three Star and above Export House shall be entitled to get the benefit of the Accredited Clients Programme (ACP) as per the guidelines of CBEC.

7. The status holders would be entitled to preferential treatment and priority in handling their consignments by the concerned agencies.

8. Manufacturers who are also status holders will be enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different preferential trading agreements, Free Trade Agreements, Comprehensive Economic Co-operation Agreements & Comprehensive Economic Partnership Agreements. Subsequently, the scheme may be extended to remaining Status Holders.

9. Manufacturer exporters who are also Status Holders shall be eligible to self-certify their goods as originating from India as per of Hand Book of Procedures.

10. Status holders shall be entitled to export freely exportable items on a free of cost basis for export promotion subject to an annual limit of ₹ 10 lakhs or 296 of average annual export realization during the preceding three licensing years whichever is higher.

Question 2.
Write a short note on Board of Trade under the Foreign Trade (Development & Regulation) Act, 1992 [June 2014 (5 Marks)]
Answer:
The Board of Trade has been given a clear and dynamic role in advising the Government on relevant issues connected with FTP. A process of continuous interaction between the Board of Trade and the Government has been put in place in order to achieve the desired objective of boosting India’s exports. The terms of reference of the Board of Trade include:
1. Advising the Government on policy measures for preparation and implementation of both short and long-term plans for increasing exports in the light of emerging national and international economic scenarios.

2. Reviewing the export performance of various sectors, identify constraints, and suggest industry-specific measures to optimize export earnings.

3. Examining the existing institutional framework for imports & exports and suggest practical measures for further streamlining to achieve the desired objectives.

4. Reviewing the policy instruments and procedures for imports & exports and suggest steps to rationalize and channelize such schemes for optimum use.

5. Examining issues that are considered relevant for the promotion of India’s foreign trade, and to strengthen the international competitiveness of Indian goods and services.

6. Commissioning studies for the furtherance of the above objectives. Composition: The Government has been empowered to nominate an eminent person or expert on trade policy to be President of the Board of Trade and 25 persons as members, of whom at least ten to be experts in trade policy. In addition, Chairmen of recognized Export Promotion Councils and President or Secretaries-General of National Chambers of Commerce to be ex-officio members.

Meetings: The Board is required to meet at least once every quarter and make recommendations to the Government on issues pertaining to its terms of reference. The Board of Trade has been empowered to set up sub-committees and to co-opt experts to make recommendations on specific sectors and objectives

Question 3.
Write a short note on the Advance Authorization Scheme [June 2014 (5 Marks)]
Answer:
Under the Advance Authorization Scheme, the exporter can import raw materials and related inputs by claiming a 100% duty exemption from import duty on the condition that the final product made by using such imported raw material or input is exported.

Advance Authorization:
1. Advance Authorization is issued to allow duty-free import of input, which is physically incorporated in export products (making normal allowance for wastage). In addition, fuel, oil, the catalyst which is consumed/utilized in the process of production of export product, may also be allowed.

2. Advance Authorization is issued for inputs in relation to the resultant product, on the following basis:

  1. As per Standard Input Output Norms (SION) notified
  2. On the basis of self-declaration as per Handbook of Procedures. Eligible Applicant/Export/Supply:

3. Advance Authorization can be issued to:

  1. Manufacturer Exporter or
  2. Merchant Exporter tied to Supporting Manufacturer.

4. Advance Authorization for pharmaceutical products manufactured shall be issued to manufacturer exporter only.

5. Advance Authorization shall be issued for:

  • Physical export (including export to SEZ).
  • Intermediate supply
  • Supply under Deemed Exports.
  • Supply of ‘stores’ on board of foreign-going vessel or aircraft. Advance Authorization for Annual Requirement:

6. Advance Authorization for Annual Requirement shall be issued for the items for which Standard Input Output Norms (SION) are notified.

7. Advance Authorization for Annual Requirement shall not be available in the case of ad hoc norms under FTP.
Eligibility condition to obtain Advance Authorization for Annual Requirement:

8. Exporters having past export performance (in at least the preceding 2 financial years) shall be entitled to Advance Authorization for Annual requirement.

9. Entitlement in terms of CIF value of imports shall be up to 300% of the FOB value of physical export and/or FOR value of deemed export in preceding financial year or ? 1 Crore, whichever is higher.

Question 4.
What are the short-term and long-term objectives of India’s foreign trade policy? [Dec. 2016 (5 Marks)]
Answer:
The FTP is formulated for 5 years time. It may be reviewed every year. The Foreign Trade Policy seeks to achieve the following short term and long term objectives:

  1. Sustainable Policy: To provide a stable and sustainable policy environment for foreign trade in merchandise and services;
  2. Other Initiatives: To link rules, procedures, and incentives for exports and imports with other initiatives such as “Make in India”, “Digital India” and “Skills India” to create an “Export Promotion Mission for India”;
  3. Promote Export: To promote the diversification of India’s export basket by helping various sectors of the Indian economy to gain global competitiveness with a view to promoting exports;
  4. Make in India initiative: To create an architecture for India’s global trade engagement with a view to expanding its markets and better integrating with major regions, thereby increasing the demand for India’s products and contributing to the government’s flagship “Make in India” initiative;
  5. Reduce trade imbalance: To provide a mechanism for regular appraisal in order to rationalize imports and reduce the trade imbalance.

Question 5.
Describe the privileges of Export and Trading House Status Holders in pursuance of the foreign trade policy. [June 2017 (5 Marks)]
Answer:
Privileges to Status Holders: A Status Holder shall be eligible for privileges as under:
1. Authorization and Customs Clearances for imports and exports may be granted on a self-declaration basis.

2. Input-Output norms may be fixed on priority within 60 days by the Norms Committee.

3. Exemption from the furnishing of Bank Guarantee for Schemes under FTP, unless specified otherwise anywhere in FTP or HBP.

4. Exemption from compulsory negotiation of documents through banks. The remittance, however, would be received through banking channels.

5. Two-star and above Export houses shall be permitted to establish Export Warehouses as per Department of Revenue guidelines.

6. Three Star and above Export House shall be entitled to get the benefit of the Accredited Clients Programme (ACP) as per the guidelines of CBEC.

7. The status holders would be entitled to preferential treatment and priority in handling their consignments by the concerned agencies.

8. Manufacturers who are also status holders will be enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different preferential trading agreements, Free Trade Agreements, Comprehensive Economic Co-operation Agreements & Comprehensive Economic Partnership Agreements. Subsequently, the scheme may be extended to remaining Status Holders.

9. Manufacturer exporters who are also Status Holders shall be eligible to self-certify their goods as originating from India as per of Hand Book of Procedures.

10. Status holders shall be entitled to export freely exportable items on a free of cost basis for export promotion subject to an annual limit of ₹ 10 lakhs or 296 of average annual export realization during the preceding three licensing years whichever is higher.

Question 6.
What is meant by ‘Service Export from India Scheme’ (SEIS)? Which services shall be eligible under service export from the India scheme? [Dec. 2017 (5 Marks)]
Answer:
Served from India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS).

Objective: The objective of the Service Exports from India Scheme is to encourage the export of notified Services from India.

Eligibility:
1. Service Providers of notified services, located in India, shall be rewarded under SEIS, subject to conditions as may be notified.

2. Such service providers should have minimum net free foreign exchange earnings of US$ 15,000 in the preceding financial year to be eligible for Duty Credit Scrip. For Individual Service Providers and a sole proprietorship, such minimum net free foreign exchange earnings criteria would be US$ 10,000 in the preceding financial year.

3. Net Foreign exchange earnings for the scheme are defined as under Net Foreign Exchange = Gross Earnings of Foreign Exchange minus Total expenses/payment/remittances of foreign exchange by the IEC holder, relating to the service sector in the financial year.

4. If the IEC holder is a manufacturer of goods as well as a service provider, then the foreign exchange earnings and Total expenses/payment/ remittances shall be taken into account for the service sector only.

5. In order to claim reward under the scheme, the Service provider shall have to have an active IEC at the time of rendering such services for which rewards are claimed.

Question 7.
Distinguish between ‘Capital Goods’ and ‘Consumer Goods’ under the Foreign Trade Policy of the Government of India. [June 2018 (5 Marks)]
Answer:
“Capital Goods” means any plant, machinery, equipment, or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernization, technological up-gradation, or expansion. It also includes packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for an initial charge, equipment and instruments for testing, research and development, quality, and pollution control.

Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, and viticulture as well as for use in the services sector.

“Consumer Goods” means any consumer goods, which can directly satisfy human needs without further processing and includes consumer durables and accessories thereof.

Question 8.
Capital goods and spares that have become obsolete/surplus may be exported, transferred to another Special Economic Zone unit but the law does not permit to dispose of in the Domestic Tariff Area on payment of applicable duties. Comment. [Dec. 2018 (5 Marks)]
Answer:
Capital goods and spares that have become obsolete/surplus, may either be exported, transferred to another EOU/EHTP/STP/BTP/SEZ unit, or disposed of in DTA on payment of applicable duties.

The benefit of depreciation, as applicable, will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreciation allowed. No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/waste/ remnants/ rejects are destroyed within the unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities.

Destruction, as stated above, shall not apply to gold, silver, platinum, diamond, precious and semi-precious stones. Thus, it is incorrect to say that capital goods and spares that become obsolete/surplus cannot be disposed of in the Domestic Tariff Area.

Question 9.
What is the object of service export from the India Scheme and what are the eligibility conditions of obtaining benefits of the same under Foreign Trade Policy 2015-2020? [Dec. 2018 (4 Marks)]
Answer:
Served from India Scheme (SFIS) has been replaced with Service §; Exports from India Scheme (SEIS).

Objective: The objective of the Service Exports from India Scheme is to encourage 21 export of notified Services from India.

Eligibility:
1. Service Providers of notified services, located in India, shall be rewarded under SEIS, subject to conditions as may be notified.

2. Such service providers should have minimum net free foreign exchange earnings of US$ 15,000 in the preceding financial year to be eligible for Duty Credit Scrip. For Individual Service Providers and a sole proprietorship, such minimum net free foreign exchange earnings criteria would be US$ 10,000 in the preceding financial year.

3. Net Foreign exchange earnings for the scheme are defined as under:
Net Foreign Exchange = Gross Earnings of Foreign Exchange minus Total expenses/payment/remittances of foreign exchange by the IEC holder, relating to the service sector in the financial year.

4. If the IEC holder is a manufacturer of goods as well as a service provider, then the foreign exchange earnings and Total expenses/payment/ remittances shall be taken into account for the service sector only.

5. In order to claim reward under the scheme, the Service provider shall have to have an active IEC at the time of rendering such services for which rewards are claimed.

Question 10.
Explain the objectives of ‘Foreign Trade Policy under the Foreign Trade Policy for 2015-2020. [June 2019 (4 Marks)]
Answer:
The FTP is formulated for 5 years time. It may be reviewed every year. The Foreign Trade Policy seeks to achieve the following short term and long term objectives:

  1. Sustainable Policy: To provide a stable and sustainable policy environment for foreign trade in merchandise and services;
  2. Other Initiatives: To link rules, procedures, and incentives for exports and imports with other initiatives such as “Make in India”, “Digital India” and “Skills India” to create an “Export Promotion Mission for India”;
  3. Promote Export: To promote the diversification of India’s export basket by helping various sectors of the Indian economy to gain global competitiveness with a view to promoting exports;
  4. Make in India initiative: To create an architecture for India’s global trade engagement with a view to expanding its markets and better integrating with major regions, thereby increasing the demand for India’s products and contributing to the government’s flagship “Make in India” initiative;
  5. Reduce trade imbalance: To provide a mechanism for regular appraisal in order to rationalize imports and reduce the trade imbalance.

Question 11.
What are the privileges of “Status Holders” under the Foreign Trade Policy and Procedure of India enumerated under the Foreign Trade Policy 2015-20? [Dec. 2019(4 Marks)]
Answer:
Privileges to Status Holders: A Status Holder shall be eligible for privileges as under:
1. Authorization and Customs Clearances for imports and exports may be granted on a self-declaration basis.

2. Input-Output norms may be fixed on priority within 60 days by the Norms Committee.

3. Exemption from the furnishing of Bank Guarantee for Schemes under FTP, unless specified otherwise anywhere in FTP or HBP.

4. Exemption from compulsory negotiation of documents through banks. The remittance, however, would be received through banking channels.

5. Two-star and above Export houses shall be permitted to establish Export Warehouses as per Department of Revenue guidelines.

6. Three Star and above Export House shall be entitled to get the benefit of the Accredited Clients Programme (ACP) as per the guidelines of CBEC.

7. The status holders would be entitled to preferential treatment and priority in handling their consignments by the concerned agencies.

8. Manufacturers who are also status holders will be enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different preferential trading agreements, Free Trade Agreements, Comprehensive Economic Co-operation Agreements & Comprehensive Economic Partnership Agreements. Subsequently, the scheme may be extended to remaining Status Holders.

9. Manufacturer exporters who are also Status Holders shall be eligible to self-certify their goods as originating from India as per of Hand Book of Procedures.

10. Status holders shall be entitled to export freely exportable items on a free of cost basis for export promotion subject to an annual limit of ₹ 10 lakhs or 296 of average annual export realization during the preceding three licensing years whichever is higher.

Economic, Business and Commercial Laws Questions and Answers

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