DEVELOPMENT AND REGULATIONS OF FOREIGN TRADE

INTRODUCTION
The Policy has been praised for going micro. For, beyond setting the impressive export target of
$150 billion each for merchandise and servicesby the end of the decade, the policy aims to
broadbase export effort by co-opting small exporters. By this the Government has recognised
'that an export drive cannot be meaningful unlessthe policy reachesout to the smallest of business
houses.The new Policy should be appreciated for its efforts to further build upon the initiatives
of the past to boost the exports of our traditional items like handlooms and handicrafts, and
agricultural products. Servicesexports have also received attention of the policy

"Merely extending the trade policy benefits to small exporters cannot be effective unless
accmpanied by a simplifili!ation of procedures. The new Policy has tried to address this' with
measures to prune procedural requirements and teduce transaction costs. The delegation of
powers to zonal and regional offices of the Directorate-Generalof Foreign Trade to speed up
electronic data interchange is also to be welcomed."

Our disadvantageasrisingfrom the stateof infrastructurep,owertariffs, interest rates,taxationcture

Structure etc. are well known. The initiatives taken in the past to tackle some them are sought
To be further carried forward by the present Policy. However, they are not at all adequate to and
stand India in good stead in comparison with better performing nation. Further, the serious issue
of industrialrelationsis not all addressed to. This,of course,isa largerissuewith macro
ramifications.
The policy, ambitiously, proposes setting up free-trade warehousing zones to facilitate the
emergence of India as a global trading- hub. Similarly, allowing 100 per cent foreign direct
investmentin free-trade zones looks an attractive idea, but its implementation will depend on
various operationalconditions,importantly labourrelations.TheForeignTrade Policy hasnothing
much to say on this."
The Policy will not be able to produce the desired results unless we radically deviate from
the'businessas usual approach'.
THE FOREIGN TRADE(DEVELOPMENT AND REGULATION)
ACT,1992

This Act Which replaced the Imports and Exports (Control) Act, 1947, came into
force on 19th June 1992.
No export or import shall be made by any person except in accordance with
the provis-;Dns of this Act, the orders and rules made under this ,Act and the
export and import policy.
Objective
The objective of the Act is to provide for the development and regulation of
foreign trade by facilitating imports into, and augmenting exports from India
and for matters connected there with or incidental thereto.
Main Provisions
The main provisions of the FTDR {\ct are the following.
1. Development and regulation:- The FTDRA empowers the Central
Government to make provision for the development and regulation of
foreign trade by facilitating imports and increaRing exports.
2. Prohibition and restriction. The Act also empowers the Central
Government to make provision for prohibiting restricting or otherwise

MAIN PROVISIONS

The main provisions of the FTDR Act are the following.

1. Development and Regulation: The FTDRAempowers the Central Government to make
provisionfor the development and regulation of foreigntrade by facilitatingimports and
increasing
exports.
2. Prohibition and Restriction: The Act also empowers the Central Government to make
provisionfor prohibiting, restricting or otherwise regulating the import or export of goods as and
when required. All goods which are so regulated under this sub-section shall be deemed to be'
goods the import or export of which has been prohibited under section 11 of the Customs Act,
1962, and all the provisions of that Act shall hav~ effect accordingly.
It may be noted that it is according to this sub-clausethat the Government has providedior
negative lists of exports and imports in the Exim policy.
3. Exim Policy: The Act lays down that the Central Government may, from time to time,
formulate and announce the export and import policy'and may also amend that policy.
4. Director General of foreign Trade: The Act provides for the appointment by the Central
government, of a Director General of Foreign Tradefor the purpose of this Act. The DGFTshall
advise the Cenltal Government in the formulation of the export and import policy and shall be
responsible for carrying out that policy. [The corresponding authority under the Imports and
Exports(Control Act), 1947, was called the Chief Controller of Imports and Exports (CCIE)]
5. Importer - Exporter Code Number: The Act lays down that no person shall make any
import or export except under an Importer-ExporterCode (lEC)Numbers granted by the DGFT
or the Officer authorised by him in his behalf.
The DirectorGeneral is empowered to suspendor cancel the Importer- ExporterCode
Number grantedto anyperson if there is validreasonto do so, likecontraventionof law relating
to Central excise or customs or foreign exchange or having conducted import/export in a
mCJnnpr gravelyprejudicial to the trade relations of India with any foreign country or in a way
detrimental
' to the interests of the country.
6. Issueand Suspension/Cancel1ationof licence: The Director General or any other Officer
authorisedunderthis Act is empowered to suspendor cancela licenceissued for export or import
of goodinaccordancewith this Act for good and sufficientreasol']s,after giving the licence holder
a reasonable opportunity of being heard.
7. Search, Inspection and Seizure: Whereanycontraventionof any condition of the licence
of authorityunder whichany goods are importedis suspectedor made, any person authorised
by the Central Government may search, inspect and .seize such goods, documents, things and
conveyances subject to such requirements and conditions as may be prescribed.
8. Penaltyfor Contravention: Where any person makes or abets or attempts to makeany
export or import in contravention of any provisions of this Act or any rules or orders made under
this Act or the Exim policy, he shall be liable to a penalty not exceeding one thousand rupees
or five times the value of the goods involved, whichever is more.
FOREIGN TRADE POLICY
TheForeignTradePolicy, 2004-09, effective from September1, 2004, lays down that exports
and imports shall be free, except in caseswhere they are regulatedby the provisions of this Policy
or any other law for the time being in force. Restrictionsare called when necessary for protection
of public morals; protection of human, animal or plant life or health; protection, of patents

trademarksand copyrights and the prevention of deceptive practices; prevention of use of prison
labour; protection of national treasuresof artistic, historic or archaeological value; conservation
of exhaustible natural resources; protection of tradeof fissionable material or material from
which
they are derived; and prevention of traffic in arms, ammunition and implements of war. The
Policy also envisages that exporters, businessand industry as partners of Government in the
achievement of its stated objectives and goals. Prolonged and unnecessary litigation vitiates the
premise of partnership

EXPORT PROMOTION

Governmentof India, like almost all other nations,hasbeen endeavouring to develop exports.
Export development is important to the firm and to the economy as a whole. Government
measures aim, normally, at the general improvement of the export performance of the nation for
the general benefit of the economy. Such measureshelp exporting firms in several ways.

The benefits of exports to the economy are many.

When the domestic market is small, foreign market provides opportunities to a~hieve
economiesof scale and growth. Secondly, the supply of many commodities, as in the case of a
numberof agricultural products in India, is more than the domestic demand. Thirdly, exports
enablecertain countries to achieve export-led growth. Fourthly, export markets may help
mitigate
the effectsof domestic recession. Fifthly, a country may need to boost its exports to earn enough
foreign exchange to finance its imports and service its foreign debt. It may be noted that many
countriesare suffering from trade deficit and foreign debt. Lastly, even in the case of countries
with trade surplus, export promotion may be required to maintain its position against the
international competition and the level of domestic economic activity.

The principal objectives of export promotion measuresin India have been to:
• Compensatethe exporters for the high domestic cost of production.
• Provide necessary assistance to the new and infant exporters to develop the export
business.
• Increase the relative profitability of the export business via-a-vis the domestic business

ORGANISATIONAL SET UP

Government has established or sponsored a number of organisations to provide different

types of assistanceto the exporters. Apartfrom the organisations established exclusively for
export
promotion, there are also a number of other institutions which assist the export sector. An outline
of the important organisations which help to promote exports is given below.

Ministry of Commerce
The Ministry of Commerce, Governmentof India, is the most important organ concerned
with the promotion and regulaUonof the foreign trade of the country. The ministry haselaborate
organisational arrangement to look after various aspects of trade regulation and promotion. The
Department of Commerce in the Ministry of Commerce is assigned a very important role in
different matters concerned with foreign trade of the country including commercial relation with
other countries, promotion and regulation of foreign trade, state trading etc. Matters relatedto
foreign trade are dealt with by eight divisions in the Department of Commerce, namely,
(i) Administrative and General Division, (ii) Finance Division, (iii) Economic Division, (iv)
Trade
Policy Division, (v) Foreign Trade Territorial Division, (vi) Exports Products Division, (vii)
Services
Division, and (viii) Industries Qivision.
Autonomous Bodies
1. Export Inspection Council: The ExportInspection Council, a statutory body, is
responsible for the enforcementof qualitycontrolandcompulsory preshipmentinspectionof various
exportable commodities.

2. Indian Institute of Foreign Trade:The Indian Institute of Foreign Trade,

registeredunder
the Societies RegistrationAct, is engagedin activities like training of personnelin modem
techniques of international trade; organisation of research in problems of foreign trade;
organisation of marketing research,areasurveys, commodity surveys and marketsurveys;
and dissemination of information arising .fr-em-it-s-aGti-v.i.tiesrelating to researchand,
market studies. '
3. Indian Institute of Packaging:The Indian Institute of Packaging is registeredunderthe
Societies Registration Act. The main aims of the Institute are to undertake researchon
raw materials for the packagingindustry, to organise training programmeson packaging
technology, to stimulate consciousnessof the need for goods packagingtechnology,to
stimulate consciousness of the need for good packaging, etc.
4. Export Promotion Councils, Commodity Boards and Authorities: There are a
numberof
Export Promot~on Councils under the administrative control of Ministry of Commerce.
These Councils are registeredas non-profit organisations under the CompaniesAct. The
Councils perform both advisory and executive functions. These Councils are also the
registering authorities underthe Import Policy for Registered Exporters.Forsomeproducts,
instead of the EPCsthere Commodity Boards responsible-for production, development
and export (like Spices Board, Coir Board, Tea Board). For some other products,the
concerned export promotion organization is Export Development Authority. The Marine
Products Export Development Authority (MPEDA) is responsibJe for developmentof the
marine products industry with specialreference to exports. The Agricultural and Processed
Food Products Export DevelopmentAuthority, set up in 1986, servesas the focal point
for agricultural exports,particularlythe marketing of processedfoods in value added
forms.
5. Federation of Indian Export Organisations:The Federation of Indian Export
Organisations is an apex body of various export promotion organisations and institutions. It also
functions as a primary servicing agency to provide integratedassistanceto Government
recognised Export Houses and as a central coordinating agency in respect of export
promotion efforts in the field of consultancy services In the country.
6. Indian Council of Arbitration: The Indian Council of Arbitration, set up under the
Societies
RegistrationAct, promotes arbitration as a means of settling commercial disputes and
popularises arbitration among the traders, particularly those engaged in international
trade.
7. India Trade Promotion Organisation: The ITPO was bought into being in 1992 by
merging together the erstwhile Trade Fair Authority of India (TFAI) and the erstwhile
Trade Development Authority of India (TDA). The functions of the ITPO are to :
(a) Develop and promote exports, imports and upgrade technology through fairs in
India and abroad
(b) Compile and disseminate trade related. information
(c) Undertake publicity through the print and electronic media
(d) Organise visit of foreign buyers and trade delegations to industry and trade
establishmentsin India with a view to promoting trade contracts
(e) Assist Indian companies in trade development
(f) Organiseexport development programmes, buyer-sellermeets;and conduct promotion
programmes and integrated marketing promotion programmes for the trade and
industryin India. .
Public Sector Undertakings
The following trading/service corporations are functioning under the administrative control
of the. Ministry of Commerce.
(i) The StateTrading Corporation of India and its subsidiaries
(ij). The Minerals and Metals Trading Corporation of India and its subsidiary, viz., Mica
Trading Corporation
(iii) The spices Trading Corporation
(iv) The Export Credit Guarantee Corporation
Advisory, Body
Central Advisory Council on Trade: The Central Advisory Council on Trade, consisting of
-representatives from different organisations and individuals with businessstanding and expertise
in the field of trade and commerce, advise Government on matters relating to :
(i) Export and import policy programme
(ii) Operation of import and export trade controls
(iii) Organisation and development of commercial services
(iv) Export Credit Guarantee Corporation

The Commerce Minister is the Chairman of this Council

Attached and Subordinate Offices

1. Office of the DirectorGeneralof ForeignTrade(DGFT):The DeFT is responsibleforthe
execution of the export and import policies of the Government Import and Export
Licensing of iron and steel and ferro alloys is also looked after by this Organisation.The
DeFT with the head officeat New Delhi has subordinate offices located at differentparts
of the country. Earlier the office of the DeFT was known as the Chief Controllerof
Imports and Exports (CCIE).
2. Directorate General of Commercial Intelligence and Statistics: This Directorateis the
primary Government agencyfor the collection, compilation and publicationof the
foreign, inland and ancillary trade statistics and dissemination of various types of
.commercialinformation.TheDirectoratebringsout a number of publications, particularly
on trade statistics which are utilised in framing economic policies, formulatingtrade
agreements with foreign countries and monitoring these agreements. These publications
are also used by the trading public and research scholars. The Directorate conducts
studies on various topics relating to promotion of trade. It also helps in the settlement
of commercial disputes and provides Indian businessmen going abroad with letters of
introduction to Indian Commercialrepresentatives concerned. It maintains Commercial
Library which is widely used by the exporters, importers, research scholars and others.
3. Offices of Development Commissioners:Foreach of the export processingzone/exclusive
economic zone in the country, there is an office of the Development Commissioner
 responsible for the administrationof the zone

INCENTIVES

Export incentives are a widely employed strategy of export promotion. The main aim of
these incentives is to increase the profitability of export business. Important export incentives in
India include rebate of duties, cash compensatory support, income tax concession, interest
subsidies,
freight subsidy etc. It has been common to describe these as incentives. However, as the Abid
Hussain Committee has observed, they are more a compensation for the compensation of the
comparative
Disadvantage faced by the Indian exporter than incentives. We give below a very brief account
of these
'incentives' which serve the first rational of export promotion mentioned earlier in this section,
viz., to compensate the exporters for the high domestic costs

DUTY EXEMPTION /DRAWBACK

The scheme of duty exemption is designed to avoid the incidence of commoditytaxes like
excise duty and customs duties on the exports so as to make the exports more price competitive.
"This is a world-wide practice and the rationale is straight forward. Customs duties and excise
duties on inputs raise the cost of production in export industries and thereby affect the
competitiveness of exports. Therefore, exporters need to be compensated for the escalation in
their costs attributable to such custom~;md Excise duties.
Duty exemption as an export promotion measure had its origin in India during the Second
Plan. Over the years the scheme has been enlarged and modified.
The exporters are either exemptedfrom the payment of duty while procuring inputs like raw
materialsand intermediates or, in caseswhere the duty is paid on the inputs, the duty is refunded~
Thus, under the duty drawback systemthe exporters are reimbursed for tariff paid on the
imported
raw materials and intermediates and central excise duties on domestically produced inputs which
enter into export production.
Becauseof a series of modifications to the import policy for registered exporters, particularly
the introduction of the advance licensing system, exporterscan now make most of the import of
inputs without payment of customs duty.
Eligible exportersare entitled to interest-freebank credit againstthe duty drawback applicable
To them up to a period of 90 days or up to the time they realise the drawback, whichever js
earlier. Similarly, with the application of MODVAT, a large number of products, covered by the
MODVAT, can be exported in bond and in that event, the duty relief in the form of drawback
would be restricted only to basic customs and auxiliary duties suffered, if any, by the inputs.
There are two types of drawback rates, viz., all industry rate appl icable to a group of
products and brand rate applicable to individu~1 products not covered by the industry rate.
The all industry drawback rates are derived from estimatesof average quantity of value of
materialsused in the manufacture of exports, the averageamount of duties paid on imported
mlaterials or excisable materials used in the manufactureof these goods, and the average amount
of duties paid on the materials wasted in the manufacturingprocess. Such average industry rates
are fixed by the Drawback Directorate in the Ministry of Finance.

AWARDS
A number of awards have been instituted to encourageexports and to recognise excellence
in exports. There are separateawards for different categoriesof exporters. Awards are given on
the basisof certain specified criteria such as developme'ntof market for products w~ich have not
beenexported previously, substantial increase in exports,successfulintroduction of new
products, .
product development, successful break-through in foreign markets where conditions have been
especially difficult etc. References to some other incentives are made in the sub-section on
"Marketing Assistance.
"Other Incentives
Some important incentives were terminated consequentto certain measures taken as part of
'" the economic liberalisation.
The Cash Compensatory Support (c.c.S.) was a cash subsidy scheme designed to compensate
the exportersfor unrebated indirect taxesand to provide resourcesfor product/market
development.
The CCSenabled the exporters to increase the profit or to reduce the price to the extent of the
subsidy without incurring a loss. With the devaluation of the Rupee in July 1991, the CCSwas
abolished.
Another important incentive was the system of Import Replenishment (REP) licenses,
which were related to the f.o~b. value of pxports. The REPwas, for the most part, a facility in
so far as it enabled exporters to import inputs whprl' the domestic substitutes were not adequate
in terms of price, -quatity -or delivery rates; it was also an incentive in safar as there was a
premium on REPlicences which were transferable. Thenew trade policy announced in July 1991
which renamedthe Rep as Exim Scrip significantly modified the scheme. The Exim Scrip
Scheme
was, however, abolished with the introduction of the partial convertibility of Rupee since April
1992.
The International Price Reimbursemcnt Scheme (IPRS)was designed to make available
specified inputs to exporters at international prices. The scheme which was initially available to
steel was later extended to aluminium also and there was a proposal to extend to other items.
The IPRShas been replaced by Engineering Products Exports(Replenishment of Iron and Steel
Intermediates)Scheme

PRODUCTION ASSISTANCE /FACILITIES

PRODUCTION ASSISTANCE / FACILITIES
Exports depend, inter alia.,' on exportable surplus and the quality and price of the
goods. Government have, therefore, taken a number of measures to enlarge and strengthen
the production base, to improve the productive efficiency and quality of productsand to make
the products more cost effective.'Measures in these directions include making available raw
materials and other inputs of required quality of reasonable prices; facilities to establishand
expand productive capacity, including import of capital goods and technology; facilities to
modernise production facilities provision of infrastructure for the growth of export oriented
industries etc.
MARKETING ASSISTANCE
A number of steps have been taken to assistthe exporters in their marketingeffort. These
include conducting, sponsoring or otherwise assisting market surveys and research;collection,
storage and dissemination of marketing information, organising and facilitating participation in
international trade fairs and exhibition~;credit and insurance facilities; releaseof foreign
exchange
for export marketing activities; assistancein export procedures; quality control and pre-shipment
inspection; identifying marketsand products with export potential; helping buyer-
sellerinteraction,
etc. Some of the schemes and facilities which assist export marketing are mentioned below.
Market Development Assistance
An important export promotion measure taken by the Government is institution of the
Market Development Assistance(MDA). Assistanceunder the MDA is available for market and
commodity researches;trade delegationsand studyteams; participation in trade
fairsandexhibitions;
establishmentof offices and branchesin foreigncountries; and grants-in-aidto EPCsand other
approved organisations for export promotion.
Market Access Initiative
In 2001, Government had also announced the launching of the Market Access Initiative
Scheme for undertaking marketingpromotion efforts abroad on country-product focus approach
basis.This Scheme is in line with marketpromotion and development schemesbeing implemented
by many other countries. The Exim Policy, 2002-07, has proposed to further broadenthe scope
of this scheme to include activities considered necessary for focussed market promotion efforts.
Trade Fairs and Exhibitions
As trade fairs and exhibitions areeffective media of promoting products, facilitiesare provided
for enabling and encouraging participating of Indian exporters/man~factures in such events.As
mentioned earlier, foreign exchangeis released for such purpose,' the cost of participation is
subsidised and the ITPQ plays an important role in organising and facilitating participation in
trade fairs/exhibitions. -
Besides the ITPO, some other promotional agencies also organise trade fairs. Forexample,
the MPEDA organises seafood trade fair, in India, in every 2nd year, which attractsa number of
foreign buyers and others connectedwith the seafood industry.
Export Risk Insurance
As international businessin fraught with different types of risks, measureshave been taken
to provide insurance covers againstsuch risks. The Export Credit Guarantee Corporation(ECGC)
has policies covering different political and commercial risks associated with export marketing,
certain types of risks associatedwith overseasinvestments and risks arising out of exchangerate
fluctuations. Further,ECGCextends the export credit riskscover to the commercial banks. Marine
insurance is provided by the General Insurance Corporation and its subsidiaries.
The Export-Import Bank and commercial banks and certain other financial institutions like
specified cooperative banks provide pre-shipment and postshipmentfinance to exports. Some of
these institutions also provide suppliers' credit, including line of credit, to promote Indian
exports.
Export creditsgenerallycarry concessionalinterestrates.
quality Control and Preshipment Inspection
A numberof stepshavebeentaken by the Govt.to improvethe quality of exports and to
ensure that only goods of appropriate quality are exported from the country. The Export (Quality
control and Inspection) Act empowers the Government to make necessary regulations in this
respect
institutionalAssistance
Asmentionedearlier,exportmarketingisassistedin differentwaysbya numberof organisations
like the ITPO, EPCS,Commodity Boards, Export DevelopmentAuthorities like the MPEDA and
APEDA, 11FT,Indian Missions abroad etc.
india Brand Equity Fund
Government of India initiated steps to establishan India BrancJEquity Fundwith the objective
of promoting the made in India image abroad. It was also proposedto set up a Brand Acquisition
fun dto help Indian corporate to acquire big international brandsput up for sale and build them
up as Indian br.andsin the international markets.

EPZs, EOUs, TPs & SEZs ~ .

As a part of the export promotion drive, Government have, from time to time, introduced
several schemesto promote units primarily devoted to exports.These include Export processing
Zones(EPZs),Hundred Per cent Export-Oriented Industrial Units (EGUs),and different categories
.of TechnologyParks(TPs).In 2000, a schemeof SpecialEconomicZones (SEZs)was also
I introduced.
Export Processing Zones I EOUs
ExportProcessingZones(EPZs)are industrial estateswhich form enclaves from the national
customsterritory of a country and are usually situated near seaports or airports. The entire
production of such a zone is normally intended for exports. Such zones are provided with well
developed infrastructuralfacilities. Industrial plots/shedsarenormallymadeavailable at
concessional
rates. Units in these Zones are allowed foreign equity even up to 100 per cent. EPZ units can
import capital goods, raw materials etc., for export production without payment of duty.
Domestically procured items are also eligible for duty exemption.
A Free TradeZone (FTZ)is different from an EPZ.Goodsimported to a free trade zone may
be re-exported without any processing in the sameform. But, goods exported by units in an EPZ
are expected to have undergone some value addition by manufacturing or other processing. A
Free Port is one in to which imports and from which exportsare free from trade barriers. A FTZ
may be a part of or adjacent to a port; the rest of the port being subject to the national customs
regulation

The main objectives of an EPZare:

1. To earn foreign exchange
2. To generate employment opportunities
3, To facilitate transfer of technology by foreign investment and other means
.. 4. To contribute to the overalldevelopmentof the economy
The KandlaFreeTradeZone(KAHZL set up in 1965, is India'sfirstEPZ( itwasa misnomer
to call it a free trade zone). Thismulti-productzone is located 10 kms away fromthe KandlaPort,
Gujarat State. The second one is the Santa Cruz Electronics Export ProcessingZone (SEEPZ) set
up in 1974. This exclusive zone ( for electronic goods) is situated near the Santa Cruz Airport,
Mumbai. Four more free trade zones were set up later in the country at Chennai, Cochin, Noida
(U.P.)and Falta (W. Bengal)and they commencedexports during the SeventhPlan (1985~86).
Later, another EPZ was developed in Vizag (AP.).
Government also introducedschemes for Electronic Hardware TechnologyPark(EHTP)units
and SoftwareTechnologyPark(STP)units.
Hundred per cent export-orientedunit (EaU) refers to an industrial unit which offers for
exports its entire production, excludingpermitted levels of rejects. EGUs were allowedin
industries
in respect of which the export potentialand export targets were considered by the relevantExport
Promotion Council. EGUs were not normallyencouraged in respect of productssubject to export
control quota ceilings which can be reached by existing units in the industry.Thus, the scheme
of 100 per cent export oriented units had ,been designed to create additional export capacity;
units which result in mere substitutionfor the existing units' production were not to be pennitted.
Being outside the EPZs,the EGUs did not get the benefits of the built in facilitiesof the
Zones. EOUs enjoyed most other facilities and incentives as were available to the EPZunits.
An EPZ/EOU unit had to be a net foreign exchange earner. The level of foreign exchange
earning as a percentage of exports(NFEP)was calculated annually and cumulativelyfor a period
of 5 years since the commencement of commercial production. The NFEPrequirement for
different products varied from 10 per cent for plain gold jewellery to 60 per cent for computer
soft ware and tissue culture plants. However, electronic hardware units were allowed to be set
up without stipulation of a positive NFEP.' ,
The following supplies were also allowed to be counted towards fulfilment of the export
obligation:
1. Supplies effected in domestic tariff area (DTA - all parts of the country where the
national tariff laws are applicable) which are eligible to be regarded as deemed exports.
2. Supplies effected in OTAagainst payment in foreign exchange.
3. Supplies, with the permissionof the Development Commissioner,to-et-ReffGUslEPZI
EHTP/STPunits, as per the Policy.
(a) The entire production of EGUlEPZlEHTP/STPunits was required to be exported,
except:
(b) Rejects up to 5% or such percentage approved by the DevelopmentCommissioner
in consultation with the local customs authority. Rejects could be sold in the DTA,
subject Lo payment of appropriate duties.
(c) 25% of the production in value terms was allowed to be sold in the OTAsubject
to the fulfilment of NFEPand payment of applicable duties. No OTAsale was
permissible in respect of certain items Iike motor cars and alcoholic liquor
(d) However, units in agriculture and relatedfields were permitted to sell upto 50% of
the production in value term.s in the OTA subject to positive NFE earnings. .
(e) Electronics hardware products could be sold in the DTA subject to the conditions
laid down in the Policy.
An EOUlEPZlEHTP/STPunit could export goods manufactured by it through an Export
houseffrading House/Star Trading House/SuperstarTrading House recognised under the Exim
policy or any other EOU/EPZlEHTP/STPunit. This permission is extended only to the marketing
of the goods by the above category of exporters. The manufacture of the goods shall be done in
the EOUlEPZ units.

SEZs
While announcing the Exim Policy for" 2000-01, the Commerce Minister stated that India
would develop Special Economic Zones to boost the countrY'sexports. Any State Government or
corporatebody may set up a 5EZ. The only laws wh,ichwill operate in these Zones will be the
labour and banking laws. The SEZs are different from the EPZs: in the SEZs there will not be
any inspector raj and once commodities go in, nobody will ask any questions until they come
out clarified the Minister. Units in the 5EZsmay also do domestic sales by paying all relevant
duties.However, they have to be net foreign exchangeearners.
"While EPZs are industrial estates, SEZsare virtually industrial townships that provide
,ppropriate infrastructure such as housing, roads, ports and telecommunication. The scope of
ictivities that can be undertaken in the SEZsis much wider, their linkages with the domestic
economyare stronger. Resultantly they have a diversifiedindustrial base. Their role is not
transient
like the EPZs,as they intended to be instrumentsof regional development as well as export
promotion. As such, SEZscan have tremendous impact on exports, inflow of foreign investment
and employment generation."l
Proposalshave already come up for establishmentof many SEZs in different Statesalso.
It was also announced that all the existing EPZswill be converted into SEZs.
The move to develop SEZswas inspired by the successof the SEZsin China which contribute
about 40 per cent of her exports. The Indian EPZs have contributed little to
the country's exports. The SEZs are expected to bring about a major breakthrough. It is pointed
out that one important reason for the successof the Chinese SEZsis the absence of trade union
rights there. A democratic country like India cannot think of denying the labour rights. Yet, the
big push of development envisaged by the SEZsshould be expected to have a very significant
impact.

EXPORT HQUSES
From the beginning of the Second Five-YearPlan, thefuleigll exchange problem began to
assumeserious proportions, and the Government began to realise the need for vigorous export
promotion. It was very clear the concentrated efforts should be made for the promotion of the
export of non-traditional items. It was also realisedthat unless positive. steps were taken to build
up a number of merchant houses, concentrating almost exclusively on exports and capable of
undertakingtrade on a sustained basis, it would be impossibleto compete successfully againstthe
highly experiencedand resourceful trading housesof other countries. The importance of
promoting
merchant houseswas further underlined by the needfor providing channels for the export of the
products of the small-scale sector.
An export house is defined as a registeredexporter holding a valid Export House Certificate
issued by the Director General of Foreign Trade
The scheme of export houseshas been modified a number of times.
The objective of the schemewasto recognise established exporters as ExportHouse,Trading
House,Star Trading HouseandSuperstarTrading House with a view to build
marketinginfrastructure
and experti se required for promotion. Such Houses had to operate as highly professionaland
dynamic institutions and act as important instruments of export growth.
In the past, different categoriesof export house like Export House, Trading House, Star
Trading House or Superstar Trading House were recognised on the basisof foreign exchange
earnings.
The current Foreign TradePolicy classifies Export Houses into five categories- one star to
five star Export Houses.
Merchant as well as ManufacturerExporters, Service Providers, Export Oriented Units (EGUs)
and Units located in Special EconomicZones (SEZs),Agri Export Zone
(AEZ's),ElectronicHardware
Technology Parks (EHTPs),SoftwareTechnology Parks (STPs) and Bio TechnologyParks
(BTPs)
shall be eligible for applying for statusas Export Houses. Recognition will be granteddepending
on the exporter's total FOB/FORexport performance during the current plus the previous three
years as laid down below

CATORIES OF EXPORT HOUSE

CATEGORY PERFORMANCE(IN RUPEES)
One star export house 15 crore
Two star export house 100crore
Three star export house 500crore
Four star export house 1500crore
Five star export house 5000crore

Export houses enjoy certain facilities/incentives which increase as the grade increases.
A Star Export House shall be eligible for several facilities like fast track clearance procedures,
exemption from furnishing of bank guarantee,entitlement for consideration under the TargetPlus
Scheme etc

EVALUATION
The success of export promotion measuresshould be judged by the growth of exports and
the dynamism of the export sector.
No doubt, India's total exportshave been growing and the export sectorhasachievedsome
diversification and sophistication.However,the achievements have been far below the
requirements
and potentials and have beenvery poor in comparison with those of severaldeveloping countries.
Thus, export development measuresin India have not been successful in producing the needed
results. The infrastructure for international marketing is not efficient enough.'
An effective export promotion should compensate for the disadvantagesof the national
exporters and should make the export business profitable enough to lure entrepreneursto this
sector and achieve the ultimate objective of boosting the exports.
The general feeling is that the export promotion regime in India has not succeeded in
achieving these objective
It has also been pointed out that one of the drawbacks of the exports incentives regime in
India is that it is largely transparent in character.
"While foreign buyers have sharp eyes for them, these constitute an eye sore for the
governments particularly of the industrialised importingcountries. The importer try to grab these
incentives almost in their entirely on the pretext of growing competition, thus depriving the
Indian exporters of the benefits of the promotionalmeasures. In fact these tend to create an
. insatiableurge for more and more incentivesin extentand magnitude. On the other hand, the
governments of the developed countries viewingthese as subsidies invoke the provisions of the
anti-dumping and counter veiling duty laws. The effectiveness and purposiveness of incentives
thus lie in their non-transparent character. This could be possible only by devising a policy
framework with inherent and inbuilt, albeit latent, promotional incentives"2
A major factor necessitating large incentivesis the structural weakness and high cost of
the Indian economy. It, is, therefore, necessaryto remove these handicaps to reduce the needs
for the exogenous incentives. Further, the institutionalinadequacies and procedural complexities
and delays need to be urgently attended to. Absence/lack of dynamism and innovativeness in
policies, procedures, product development and marketing continue to hamper India's export
development.

SUMMARY
The export-import (Exim)policy and regulationcan have significant impact on the business
environment on the economy in general and the import competing, import dependent and export
oriented industries in particular.
The foreign trade of India is regulated mostly by the Foreign Trade (Development and
Regulation Act), 1992 (FTDRA,which replacedthe erstwhile Imports and Exports (Control)Act,
1947. Besides the FTDRAct, there are some laws which control the trade in certain items. For
instance, the export of antiquities is regulatedunder the Antiquities and Art Treasures Act 1972;
export of coffee is regulated by the CoffeeBoardunder the Indian Coffee Act 1942; export of tea
is regulated under Tea Act, 1953, etc.
Theobjectiveof the FTDRAct is to providefor the development and regulationof foreign
trade by facilitatingimpQrts rnto, and augmentingexports from India and for matters connected
therewith or incidental thereto.
No export or import shallbe madebyanypersonexcept in accordance with the provisions
of this Act, the orders and rules made underthis Act and the export and import policy. .
The FTDRAempowers the Central Governmentto make provision for the development and
regulation of foreign trade by facilitating importsand increasing exports. Accordi~h~ Central
Government may make provision for prohibiting,restricting or otherwise regulating the import
or export of goods as and when required.
The Act provides for the appointment by the Central Government, of a Director General of
Foreign Trade for the purpose of this Act.The DGFTshall advise the Central Government in the
formulation of the export and import policyand shall be responsible for carrying out that policy.
[The corresponding authority under the Importsand Exports (Control Act), 1947, was called the
Chief Controller of Imports and Exports (CClE)]
The Act lays down that the Central Government may, from time to time, formulate and
announce the export and import policy and may also amend that policy
Although a number of measures have beentaken by the Government from' time to time to
promote exports, they have not been successfulin producing the needed results.