The Central Government notifies the Export and Import Policy for a five year period in exercise of the powers conferred under section 5 of the Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992). <FTDR_ACT>.

The Export and Import Policy contains the licensing policy for foreign trade, i.e., with respect to import and export from the country, and more especially export promotion measures, policies and procedure.

1 Importability

1.1 Free list

Imports are free, except to the extent they are regulated by the provisions of the Policy or any other law for the time being in force. The item wise export and import policy is specified in the title "ITC(HS) Classification of Import and Export Items" published and notified by Director General of Foreign Trade, as amended from time to time. As of now, the number of restricted in the list is less than 700 in the 12,000 or so lines in the HS based eight digit classification system.

The restrictions are based on grounds of security, environment, public health, morals and other grounds as permissible under the GATT 1994. The 2700 or so tariff lines on which quantity restrictions were based on account of balance of payments (Bop) problems were fully withdrawn on 1 April 2001. The movement from the restricted to the free list is given in the table below:

1.2 Restricted Goods

These are listed in ITC(HS) book may be exported or imported only in accordance with a licence issued in this behalf <RIL>. Each licence is valid for the period specified in the licence and is subject to such terms and conditions as may be specified by the licensing authority which may include:

(a) The quantity, description and value of the goods

(b) Actual User condition;

(c ) Export obligation;

(d) The value addition to be achieved and

(e) The minimum export price.

Actual User Condition

Capital goods, raw materials, intermediates, components, consumables, spares, parts, accessories, instruments and other goods, which are importable without any restriction, may be imported by any person. However, if such imports require a licence, the Actual User alone may import such goods unless the Actual User condition is specifically dispensed with by the licensing authority. <ACTUAL_USER>.

Principles of Restriction

Under para 2.6 of the Exim policy, DGFT may,  through a notification, adopt and enforce any measure necessary for:

(a) Protection of public morals.

(b) Protection of human, animal or plant life or health.

(c) Protection of patents, trade marks and copyrights and the prevention of deceptive practices.

(d) Prevention of prison labour.

(e) Protection of national treasures of artistic, historic or archeological value.

(f) Conservation of exhaustible natural resources.

(g) Protection of trade of fissionable material or material from which they are derived; and

(h) Prevention of traffic in arms, ammunition and implements of war.

No person may claim a licence/certificate/permission as a right and the Director General of Foreign Trade or the licensing authority shall have the power to refuse to grant or renew a licence/certificate/permission in accordance with the provisions of the Act and the Rules made thereunder.

1.3 State Trading

Bulk commodities like cereals, crude petroleum and petroleum products, and fertilisers are under "State Trading" <STE>. The State enterprises are required to honour the indents of importers under normal commercial principles without any direction from the Government as such on the how the trade in the sensitive items is to be conducted.

Any good, the import or export of which is governed through exclusive or special privileges granted to State Trading Enterprises, may be imported or exported by the State Trading Enterprises as specified in the ITC(HS) Classification of Export and Import Item Book  subject to the conditions specified therein. The Director General of Foreign Trade may, however, grant a licence/certificate/permission to any other person to import or export any of these goods.

In respect of goods the import or export of which is governed through exclusive or special privileges granted to State Trading Enterprises, the State Trading Enterprises must make any such purchases or sales involving imports or exports solely in accordance with commercial considerations, including price, quality, availability, marketability, transportation and other conditions of purchase or sale. These enterprises are required to act in a non discriminatory manner and they must afford the enterprises of other countries adequate opportunity, in accordance with customary business practices, to compete for participation in such purchases or sales.

The goods already imported/ shipped/ arrived, in advance, but not cleared from Customs may also be cleared against the licence issued subsequently.

1.4 Prohibited goods

The "Prohibited category" covers specially sensitive goods like beef or parts of animals covered under the Wild Life Act, 1972. These cannot be imported under any circumstance. No licence is issued for these goods. Even an advance licence for export production is not allowed. <PROHBTD>.

2. Exim Policy documents

The Exim Policy consists of following four books:

2.1 Export & Import Policy

Known as the "Policy" book, it contains schemes and provisions related to Export & Import. This is a thin book running into 86 pages and 9 Chapters.

2.2 Handbook of Procedures, Vol.I

The document us called "Handbook, Vol.I" or "HOP I" in common parlance. It contains procedures to be followed by an exporter or importer or by any licensing, competent or other authority. Each Chapter of HOP is related to the Policy by a common chapter number. There are 39 appendices in the HOP covering mainly forms.

The Director General of Foreign Trade may specifies the procedure to be followed by an exporter or importer or by any licensing authority for the purpose of implementing the provisions of the Exim Policy.

2.3 Handbook of Procedures, Vol.II

This book is known as "Handbook, Vol.II" or "HOP II" or "SION" and this contains Inputs-Output Norms to facilitate determination of the proportion of various inputs used/required in manufacture of different resultant products. The norms are used for determining advance licence entitlement and also the DEPB (Duty Entitlement Pass Book) rates. Both the schemes are designed to provide duty free raw material for export production.

2.4 ITC (HS) Classification of Export & Import Items

The title is a comprehensive reference for importability and exportability of products with reference to current export & import policy on those goods. The products have been classified on the basis of eight digit Indian Trade Classification (Harmonised System),

The first six of the eight digit code is common to the internationally accepted Harmonised System released by the World Customs Organisation, Brussels. India follows the HS 1996. The customs have adopted HS 2002 from 1 January 2002. The DGFT (Director General of Foreign Trade) in the Ministry of Commerce which manages the licensing system continues on HS1996. The last two digits are taken from the Indian Trade Classification (ITC) developed by the DGCIS (Director General of Commercial Intelligence and Statistics), Kolkata.

2.5 Notifications and Public Notices

These documents represent the day to day changes in the licensing system. They are the critical components of policy administration. A notification amends or amplifies the policy while a Public Notice does the same thing for the Handbook of Procedures. In addition, there is another series called policy circulars which too amplify or amend the policy. About 200 such documents, 50 in each of the four heads, are issued by the DGFT every year.

3. Changes in Exim Policy

The amendment to the Exim Policy books are carried out in following manners.

(a) A fresh policy is issued in every five years. Current Policy has been issued on 11 April, 2008 for the period 2004-2009 .

(b) Within the 5 years framework, the Policy as amended upto a certain date, is announced every year on the last date in March. Each new policy is effective from 1st April.

(c) Apart from the fixed dates when major initiations are announced, amendments to Policy, from time to time are made by issuing notifications in official gazette and to other books by issue of public notices by DGFT. It may be noted that the numerous amendments are made in the policy every year. There are periods when an amendment is made every day.

3.1 Policy Interpretation

If any question or doubt arises in respect of the interpretation of any provision contained in the Policy is in accordance with Policy, or regarding the classification of any item in the ITC(HS), Handbook (Vol.1), Handbook (Vol.2),  the question or doubt is referred to the Director General of Foreign Trade whose decision is final and binding.

3.2 Policy Exemption

Any request for relaxation of the provisions of this Policy or of any procedure, on the ground that there is genuine  hardship to the applicant or that a strict application of the Policy or the procedure is likely to have an adverse impact on trade, an application may be made to the Director General of Foreign Trade for relief.

The Director General of Foreign Trade may pass such orders or grant such relaxation or relief as he may deem fit and proper. The officer may impose conditions while giving the relaxation. The matter may also go up to a policy relaxation committee which may take a decision in the matter.

3.3 Transitional arrangements

To ensure continuity of action taken in the past with the changes coming into force of new Policy, a provision called transitional arrangement has been made whereby any notification made or Public Notices issued or anything done under the provisions of Export & Import Policy in force immediately before the commencement of current Policy shall, in so far as they are not inconsistent with the provisions of current Policy, continue to be in force and will be deemed to have been made, issued or done under current Policy. Licences issued before the commencement of current policy are valid for import/export of the items permitted therein.

However, in case of import or export that is freely permitted but subsequently subjected to any restriction or regulation, such export or import is permitted irrespective of imposition of restriction, provided the import or export shipment is within original validity of irrevocable letter of credit established before the date of imposition of such restriction. What is important is that shipment of export or import should be made within original validity of irrevocable letter of credit established before the date of imposition of such restriction.

The shipment within original validity of L/C means date of shipment/despatch of goods from the supplying country and not the date of arrival of the goods at destination. In other words, goods must be despatched within the original validity of L/C.

The provisions of transitional arrangement are for the benefit of importers/exporters and they have the option to get the consignment cleared on current policy or old policy by invoking the provisional of transitional arrangement.

4 Importer-Exporter Code Number

No export or import can be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted.   An Importer-Exporter Code (IEC) number  is granted on application by the competent authority in accordance with the procedure specified in the Handbook (Vol.1) <IE_CODE>.

Registration -cum-Membership Certificate

Any person, applying for (i) a licence/certificate/permission to import/ export,  [except items  listed as restricted items in ITC(HS)] or (ii) any other benefit or concession under the Policy may be required to furnish Registration-cum-Membership Certificate (RCMC) granted by the competent authority in accordance with the procedure specified in the Handbook (Vol.1) unless specifically exempted under the Policy.

5. Important Definitions

Definitions of the terms and phrases used in the Exim policy is given in the attached file <EXIMPOL_DEFINITIONS>.

6. Bonded Warehouses

Private/Public bonded warehouses may be set up in the Domestic Tariff Area as per the terms and conditions of notification issued  by Department of Revenue. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such private/public bonded warehouses. Such goods may be cleared for home consumption in accordance with the provisions of the Policy and against Licence, wherever required. Customs duty as applicable must be paid at the time of clearance of such goods. If such goods are not cleared for home consumption within a period of one year or such extended period as the custom authorities may permit, the importer of such goods is required to re-export the goods.

A special shipping bill for bonding the goods is filed at the time of import. The rate of duty is that applicable on the date of putting the goods in bond but the exchange rate is the one applicable on the date of final clearance from the bond

7 Neighboring Countries

A number of tariff concessions have been given to the neighbouring countries by way of tariff preferences. The beneficiaries are: Nepal, Bhutan, Bangladesh, Sri Lanka, Maldives, Afghanistan and Pakistan. In addition, India is a signatory to the GSTP (Generalised System of Trade Preferences) convention and Bangkok Agreement for Trade between Developing countries.

4.12- Every exporter or importer must comply with the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Rules and Orders made thereunder, the provisions of this Policy and the terms and conditions of any licence granted to him, as well as provisions of any other law for the time being in force. All imported goods are also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods.

8 Samples

Import of samples is governed by the provisions given in the annexed file. <SAMPLES>.

9 Second Hand Goods

All second hand goods are restricted for imports and may be imported only in accordance with the provisions of the Policy, Handbook (Vol.1), Public Notice or a licence issued in this behalf. However, the policy is relaxed for specific cases. The detail in the file <SECOND_HAND_GOODS>.

10 Gifts

Import of gifts are permitted where such goods are otherwise freely importable under this Policy. In other cases, a Customs Clearance Permit (CCP) is required. <GIFTS>.

11 Passenger Baggage

Bonafide household goods and personal effects may be imported as part of a passenger baggage. Samples of such items that are otherwise freely importable under the Policy may also be imported as part of a passenger baggage without a licence. Exporters coming from abroad are also allowed to import drawings, patterns, labels, price tags, buttons, belts, trimmings and embellishments required for export, as part of their passenger baggage without a licence

12 Import on Export Basis

New or second hand jigs, fixtures, dies (including contour roller dies), moulds (including moulds for die-casting), patterns, press tools and lasts, construction machinery, containers/ packages meant for packing of goods for export and other equipments, may be imported for export without a licence on execution of Legal Undertaking/Bank Guarantee with the Customs Authorities.

13 Re-Import of Goods Repaired Abroad

Capital goods, aircraft including their components, spare parts and accessories, whether imported or indigenous, may be sent abroad for repairs, testing, quality improvement or upgradation of technology and re-imported without a licence.

14 Import under Lease Financing

Permission of licensing authority is not required for import of new capital goods under lease financing.

15 EPCG Scheme

EPCG scheme allows import of capital goods for pre production, production and post production (including CKD / SKD thereof as well as computer software systems) at 3% Customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorisation issue-date.

Capital goods shall include spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds.

Second hand capital goods, without any restriction on age, may also be imported under EPCG scheme.

Import of capital goods are subject to Actual User condition till the export obligation is completed.

16 Duty Exemption Schemes

The Duty Exemption Scheme enables import of inputs required for export production without the payment of customs duty or licence under foreign Trade (Development and Regulations) Act. Generally these schemes apply on import of inputs before export, that is the goods are required for export production and not for replenishment of material used in export production. Prohibited items of imports mentioned in ITC(HS) cannot be imported under the licences issued under the scheme. However, all other items, including restricted goods can be imported under the scheme.

16.1 Advance Licence

An Advance Licence is issued under Duty Exemption Scheme to allow import of inputs which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme.

Advance Licence is issued for duty free import of inputs subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of Basic Customs Duty, Surcharge, Additional Customs Duty, Anti Dumping Duty and Safeguard Duty.

Advance Licence can be issued for:

• Physical exports

• Intermediate supplies

• Deemed exports.

For physical exports, Advance Licence can also be issued on the basis of annual requirement in respect of export products for which SIONs have been notified.

17 The Duty Remission Scheme

This scheme enables post export replenishment/ remission of duty on inputs used in the export product. The licence can be sold in the market. In other words, actual import for export production is not required. There is no actual user condition attached to the import under the two Duty Remission Schemes.

Duty Remission Scheme consists of
(a) Duty Free Replenishment Certificate (DFRC) and
(b) Duty Entitlement Passbook Scheme (DEPB).

18 Jobbing, Repairing etc. for Re-Export

Import of goods, including those mentioned as restricted in ITC(HS) but excluding prohibited items supplied free of cost, are permitted for the purpose of jobbing without a licence as per the terms of notification issued by Department of Revenue from time to time.

19 Gem and Jewellery Licences

Exporters of gem and jewellery are eligible to import their inputs by obtaining Replenishment (REP) Licences and Diamond Imprest Licences from the licensing authorities in accordance with the procedures specified in this behalf.

20 Gem and Jewellery REP Licence

The exporters of gem and jewellery products listed in Appendix 22F of the Handbook (Vol.1). are eligible for grant of Replenishment Licences at the rate and for the items mentioned in the said Appendix to import and replenish inputs which have gone into the export product. Exports through third party are also admissible for REP Licences. The exports made in fulfillment of export obligation against Diamond Imprest Licences do not qualify for this benefit.

Replenishment licence may also be issued for import of consumables or for plain/studded jewellery as per the details given in para 4A of Handbook (Vol.1).

21 Diamond REP Licence

Diamond Imprest Licence for import of cut and polished diamonds including semi-processed diamonds, half cut diamonds, broken in any form, for export as it is, may also be issued for export of cut and polished diamonds. Such licences carry an export obligation, which has to be discharged in accordance with the procedure specified in this behalf.

22 Recreational bodies

Recreational bodies may be granted licence for import of restricted items to the extent of 15% of the foreign exchange earned by them through their membership, subscription and other dues received in foreign exchange. Such licences are granted for the import of goods essential for their own use. An application for grant of such licence may be made in the RIL (Restricted Items List) form given in ANF2B of the Handbook of Procedures Vol. 1 to the Director General of foreign Trade alongwith documents prescribed therein.

23 DFECC (Duty Free Entitlement Credit Certificate) Scheme for Service Exporters

The Service Providers who have an average foreign exchange earning of over Rs.1 mn in the preceding three licensing years have been extended the benefit of duty free entitlement credit  of certain percentage of foreign exchange earned by them. This facility is available to all service providers including Hotels but quantum of entitlement is different for service provider in general and Hotels in specific.

The service provider in general will be entitled for duty free credit equivalent to 10% of the average foreign exchange earned by them in preceding three years while in case of Hotels such entitlement will be 5%.

The duty free service entitlement credit certificate can be used for import of spares, office equipments and furnitures, professional equipments and consumables provided such goods are freely importable under ITC (HS). However, import of agriculture and diary products will not be allowed even if such items are freely importable under ITC (HS).

The goods imported under this certificate as per Customs1 are exempted from whole of the basic and additional (CVD) duties of customs. The goods under this notification will be given clearance only if there is sufficient balance in credit in the Duty free service entitlement credit certificate

The duty free import entitlement certificate and goods imported thereunder will be non-transferable.

24 DFECC (Duty Free Entitlement Credit Certificate) Scheme for Status Holders

Capital goods, office equipment (including computer systems, software, Fax machine, telephone) and raw materials components, intermediates, consumables and parts other than agricultural and dairy product can be imported under this notification and these goods will be exempted from whole of the basic and additional (CVD) duties of customs. The goods under this notification will be given clearance only if there is sufficient balance in credit in the duty free entitlement credit certificate.

The status holders who achieve growth of more than 25% in their exports in comparison to previous year will be entitled for this scheme. Accordingly, status holders who will achieve more than 25% growth in exports in the year 2003-04 (in free foreign exchange) as compared to export made in 2002-03 ( in free foreign exchange) subject to minimum of Rs.25 crore ( in free foreign exchange) will be entitled for duty free entitlement credit certificate @ 10% of the incremental growth. In computing the growth, export made in free foreign exchange will only be considered and deemed exports will not be considered. Further, entitlement will accrue only if growth in export is more than Rs.25 crore.

The duty free entitlement credit certificate can be used for import of specified goods which are importable without any restriction. The goods imported against such entitlement cannot be transferred and has to be used by the status holder or his supporting manufacturer/ jobworker provided the name and address of the supporting manufacturer/ jobworker.