Objective: This chapter covers general provisions regarding Import & Export of goods and services.
This chapter gives you an idea about the general set of rules for Import and Export.
In India, Import and Export of all the commodity are Free, unless regulated. There is a list of commodities which are restricted or banned by the government of India. If any Importer or Exporter wants to Import or Export and of the commodity from that list, has to take special permission for it. Hence, we have used the word regulated.
Indian Trade Classification (Harmonised System) of Export & Import [ITC(HS)]:
- It’s a code system which classifies all the commodity with a unique 8 digit code.
- It’s a code for all merchandise/goods for Export or Import
- World Customs Organization maintains 6 digits ITC (HS) code named International Harmonised Systems & India maintains 8 digits ITC (HS) code.
- Against each code Import & Export, policy is given for the particular commodity or service
Importer – Exporter Code (IEC):
- IEC is mandatory for any export/import activity.
- Every exporter and importer should have this code.
- It’s a unique 10 digits number
- Only one IEC number can be obtained against one PAN card.
In simple language above both, the codes are like roll numbers given to students to identify them and to avoid any confusion.
How to obtain an Importer – Exporter Code (IEC)?
- It can be filled manually as well as online in accordance with the Handbook of a procedure.
- Processing Fees of Rs. 500/-
- In the IEC form, a list of documents needs to be submitted or uploaded are given.
- Once e-IEC is approved, an applicant is informed through e-mail.
Documents to be submitted for obtaining IEC:
- PAN card of entity or individual
- Address proof
- LLPIN / CIN / Registration Certification Number
- Bank account details
- Cancelled Cheque
(B) Details of the proprietor / partners / directors / secretary or chief secretary
- DIN / DPIN (In case of company / LLP firm)
(C) Details of signatory applicant
- Identity Proof
- PAN Card
- Digital Photograph
(D) In case the applicant has a digital signature, the application can be submitted online & no physical documents are required.
(E) In a case of non-availability of a digital signature, a print of the applicant filed only, duly signed by the applicant, has to be submitted to RA.
Mandatory documents for export/import of goods:
- BL / Airway Bill
- Commercial Invoice
- Shipping Bill / Export Bill
- BL / Airway Bill
- Commercial Invoice
- Bill of entry
Which are the Principles that DGFT follows for restrictions of any commodity:
DGFT may, through notification, impose restriction on export & import, necessary for protection of
- Public morals
- Human, Animals or Plants life or Health
- Patent, Trademark, Copyright & the prevention of deceptive practices
- Use of prison labor
- National treasures of artistic, historic or archaeological value
- Prevention of traffic in arms, ammunition & implement of war
What is actual user condition?
It means the Importer of the goods will use the goods in the manufacturing of finished goods. However, if such import requires an Authorisation (License), actual user alone may import such good(s) unless actual user condition is specifically given by DGFT.
Terms & Conditions of Authorisation (License):
Every license or authorisation shall include T&C specified by Reginal Authority or DGFT along with the following:
- Description of goods, quality & value of goods
- Actual user conditions
- Export obligation
- Minimum value addition to be achieved
- Minimum export/import price
- BG / LUT / Bond
- Validity period of import/export
Denied Entity List (DEL):
- If an authorisation holder violates any T&C of authorisation or fails to fulfill the Export obligation or fail to deposit the requisite amount within the period specified in demand notice issued by Department of Revenue, he/she shall be liable for action in accordance with FT(D&R) Act [Foreign Trade Development & Regulation of 1992].
- To raise ethical standards & for ease of doing business, DGFT has allowed self-certification. If found untrue, DGFT can take action in accordance with FT(D&R) Act 1992.
- DGFT records a reason from the Importer / Exporter in writing before including a firm in DEL.
- Concerned Regional Authority (RA) can hold the DEL ordered, for the reason to be recorded in writing, not more than 60 days.
- Firm’s name can be removed if firm completes the Export Obligation / Pay Penalty / submit required documents etc.
Import / Export through State Trading Enterprises (STEs):
- STEs are enterprises authorized to engage in trade (export/import that is owned, sanctioned, or otherwise supported by the government.
- STEs can be governmental or non-governmental enterprises
- An import/export done through STEs is in accordance through ITC (H&S)
- Such STEs shall make any such purchase or sales involving imports or export solely in accordance with commercial considerations including price, quality, availability, marketability, transportation etc.
- DGFT may, however, grant an authorization to any other person to import or export any of the goods notified for exclusive trading through STEs.
What is Passenger Baggage?
- Bonafide household goods & personal use products can be imported in accordance with passenger baggage rules.
- Freely imported goods may also be imported under passenger baggage without an authorisation.
- Exporters coming from abroad are also allowed to import drawings, patterns, labels, price tags, buttons, belts trimming in accordance to passenger baggage without authorization.
Private / Public Bonded Warehouses For Imports:
- It is a setup in DTA (Domestic Tariff Area)
- It is a setup as per the T&C of notification issued by DOR (Dept. of Revenue)
- Any person may import goods except prohibited items & warehouse them in such bonded warehouse
- Goods can be kept there for 1 year & some extended period (as applicable) without paying the customs duties.
- Goods can be exported directly from the warehouse without paying the duty.
- For clearance of goods, applicable customs duty needs to be paid.
- If goods are not cleared then it supposed to be re-exported
Special provision for Hides, Skins & Semi-finished goods
- Above mentioned goods may be imported in the public bonded warehouse for the purpose of DTA Sale.
- The unsold items thereof can be re-exported at 50% of the applicable export duty.
Benefits for supporting manufacturers
- If supporting manufacturer wants to be eligible for any benefits then his company name along with the merchant exporter name must be included in the export documentation, especially in ARE-1/ARE-3/Shipping Bill/Bill of Export/Airway Bill.
- Third party export shall be allowed under FTP. In such cases, both manufacturer & third party exporter should be mentioned in the export documentations e.g. Shipping Bill.
Import For Export:
The basic idea behind Import for Export is the commodity which is coming in India should be only be exported with or without any substantial value addition.
e.g. If an importer is importing plastic from the USA, then the importer will process it and will make a plastic bottle out it. So here he is adding value to the commodity imported. From being simple plastic, the bottle is made out of it (value addition). If costing of imported plastic is Rs. 100 then it should be exported at least at Rs. 115 (15% value addition).
Few below points should keep in consideration while Import for Export:
- Goods should come under free category
- Import or Export should be done in accordance to FTP (Foreign Trade Policy)
- Goods imported, in accordance with FTP, may be exported in same or substantially the same form without an authorization (license).
- Both new & second-hand goods may be imported for export provided.
- Importer clears goods under customs bond
- Goods are freely exportable
- Export should be against freely convertible currency
- Imported goods are allowed to export with the payment terms in rupee only for Iran country, subject to minimum 15% value addition.
Export of Replacement Goods:
If goods exported or part of it found defective/damaged then the replacement of goods or part of it shall be allowed clearance by customs authorities provided that replacement goods are not mentioned in restricted items for export in ITC (HS)
Export of Repaired Goods:
Goods or parts, except restricted under ITC (HS), on being exported and found defective, damaged for use may be imported for repair and subsequent re-export. Such goods shall be allowed clearance without authorization and in accordance with the customs notifications.
Export of spares:
Warranty spares (whether indigenous or imported) of plant, equipment, machinery, capex or any other 50 goods (except those restricted under ITC (HS) may be exported along with the main equipment or subsequent but within contracted warranty period of such goods.
Non-Realisation of Export Proceeds:
- If an exporter fails to realized export proceeds within the time specified by RBI, the exporter shall be faced penalty and liable to return all benefits/incentives availed against such exports.
- If export proceeds haven’t been realized due to force Majeure or for reasons beyond his/her control, he may approach RBI for writing off the unrealised amount.
- The payment realized through insurance cover, would be eligible for benefits under FTP.
Registration cum Membership Certification (RCMC)
Any person applying for an authorization for import/export which is under restricted items or to avail benefits under FTP you need to obtain RCMC.
Here we are done with the chapter no. 2 of FTP 2015-2020.
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