FOREIGN TRADE POLICY 2023

SCOMET

SCOMET item is an acronym for Special Chemicals, Organisms, Materials, Equipment, and Technologies, and these are dual-use items that can be used for both civilian and military applications. India’s Foreign Trade Policy regulates the export of items on the SCOMET List. The exporter must obtain a license from the Directorate General of Foreign Trade, Ministry of Commerce, to export SCOMET.

SCOMET Items Categories

The eight categories of SCOMET items are as follows:

Category 0: Nuclear material, equipment, technology, and nuclear-related other materials

Category 1: Toxic chemical agent and other chemicals.

Category 2: Microorganisms and toxins.

Category 3: Material, Materials Processing Equipments, and other material-related technologies.

Category 4: Nuclear-related equipment, test, and production types of equipment; assemblies and components of nuclear; and related technology, not controlled under Category 0.

Category 5: Aerospace system, equipment including productions and test types of equipment, related technology, and specially designed components and accessories.

Category 6: Munitions List

Category 7: Computers, electronic, and information technology, including information security.

Category 8: Special Materials and Related Types of equipment, Electronics, Computers, Material Processing, Information Security, Sensors, Telecommunications and Lasers, Avionics, Marine, Aerospace Navigation, and Propulsion.

Note: Each category contains an exhaustive list of items covered, and special conditions apply to each type.

Key Pointers

•  For authorization to export SCOMET items the exporter needs to furnish an application for a grant of Export Authorization to DGFT through an online system.
• Licenses for export of items in SCOMET List (other than Category 0,1 and 2) solely for purpose of display or exhibition will not require any endues or end-user certifications. The export license will not be issued for the exhibition of ‘Technology’ in any category or items under Categories 0, 1, and 2
• Licenses for export of SCOMET item for exhibition in a foreign country is subject to a condition of re-import within six months. The trader needs to apply for an export license if the exhibitor intends to sell the item during the exhibition abroad. Such a sale of SCOMET items shall not take place without a valid license.
• The SCOMET items can supply from the Domestic Tariff Area (DTA) to the Special economic zone (SEZ) without authorization. However, the suppliers need to report all supplies of SCOMET items from the Domestic Tariff Area to the Special financial site to the Development Commissioner of the respective SEZ.
• Export authorization is mandatory for physically exporting items outside India from the Special economic zone to another country SCOMET items.

Licensing Authority

• Directorate General of Foreign Trade issues licenses for exporting items specified in Categories 1, 2, 3, 4, 5, 7, and 8 of the SCOMET List.
• Licensing authority for items in Category 0 is the Department of Atomic Energy.
• Department of Defence Production, the Ministry of Defence, is the prescribed authority for exporting items specified in Category 6 of the SCOMET List.

Validity of SCOMET Export License

The validity period of the export license is 24 months; it can be extended for six months and a full Upto one year through revalidation by DGFT regional office on the approval of DGFT Headquarters.

What is Advance Authorisation Scheme?

Advance Authorisation Scheme allows the duty-free import of inputs, which are physically incorporated in an export product. In addition to any inputs, packaging material, fuel, oil, and catalyst which is consumed/utilized in the process of production of export product, is also allowed.

Only Exporter (either merchant or manufacturer) who holds an AEO Certification (Authorized Economic Operator) is eligible to opt for this scheme.

The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions.

Duty-free importable items under the scheme

The following items can be imported without payment of duty under this scheme:

• Inputs that are physically incorporated in the product to be exported after making normal allowance for wastage
• Fuel, oil, catalysts which are consumed or utilized to obtain the export product.
• Mandatory spares that are required to be exported along with the resultant export product – up to 10% of the CIF value (Cost, Insurance and Freight) of Authorization
• Specified spices would be allowed to be imported duty-free only for activities like crushing, grinding, sterilization, manufacture of oil or oleoresin and not for simpler activities like cleaning, grading, re-packing, etc.

Eligibility for Advance Authorization

The Advance Authorization Scheme is available to either a manufacturer exporter directly or a merchant exporter tied with a supporting manufacturer. The authorization is available for the following:

• Physical exports
• Intermediate supply
• Supplies made to specified categories of deemed exports
• Supply of ‘stores’ on board of a foreign going vessel/aircraft provided that there are specific Standard Input Output Norms (SION) in respect of items supplied.

The validity of Advance Authorization

Advance Authorization is valid for 12 months from the date of issue of such Authorization. In the case of deemed exports, the Authorization is linked to the contracted duration of project execution or 12 months from the date of issue of such Authorization, whichever is more. However, the export obligation may be fulfilled within 18 months from the date of issue of Authorization or as notified by the DGFT. Unless specified, the export proceeds should be realized in freely convertible currency.

Grounds for issuing Advance Authorization

Advance Authorization can be issued for inputs used in the product that is to be exported on the basis of the following:

•  Standard Input Output Norms (SION) notified: The Director General of Foreign Trade (DGFT), on the recommendation of the Norms Committee, issues standard norms that define the amount of input required in the manufacture of a unit of the output product that will be exported. It is available for a wide range of products.
• Self-declaration: Sometimes the SION is not available for a particular product. In such a case, an application may be made to the Regional Authority who will issue the Advance Authorization upon review.
• Application prior to fixation of the norm by the Norms Committee: Another option available to an exporter where the SION is not defined is to make an application to the norms committee, requesting the same. After providing all the required data to the norms committee, the committee shall endeavour to either fix these norms or provide ad-hoc norms on the basis of the application made. Such ad-hoc norms are valid for one authorization only and no repeat authorizations can be issued.
• Self Ratification Scheme: Advance Authorization under this Scheme is available only to an exporter who holds the Authorized Economic Operator (AEO) Certificate under Common Accreditation Programme of CBEC. This Scheme can be opted for when there is no SION or valid ad-hoc norms for an export product and also where, SION has been notified, but the exporter wishes to use additional inputs in the manufacturing process. Ratification by the norms committee is not required under this scheme and the regional authority may issue Advance Authorization upon fulfilment of the relevant conditions.

What is Export Promotion Capital Goods (EPCG) Scheme?

The objective of the Export Promotion Capital Goods (EPCG) Scheme is to facilitate the import of capital goods for producing quality goods and services and enhance India's manufacturing competitiveness. EPCG Scheme allows the import of capital goods for pre-production, production and post-production at zero customs duty.

Capital goods for the purpose of the EPCG scheme shall include:

- Capital Goods (as defined).

- Computer systems and software that are a part of the Capital Goods.

- Spares, moulds, dies, jigs, fixtures, tools & refractories.

- Catalysts for initial charge plus one subsequent charge.

EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s) and service providers.

Under the EPCG scheme, exports failing to meet the export obligations can take advantage of schemes like Advance Authorisation, Drawback, Duty-Free Import Authorisation (DFIA), etc. along with reward schemes like Focus Product Scheme (FPS), Focus Market Scheme (FMS), Vishesh Krishi and Gram Udyog Yojana (VKGUY), etc.

TOWNS OF EXPORT EXCELLENCE

Towns of Export Excellence is a status provided to those towns which produce and export goods worth a minimum value in a specific sector. Sectors include handicraft, handloom, seafood, pharmaceutical, fisheries, apparel, coir, leather products, etc. Once a town is recognized as a TEE it helps in maximizing its potential and enables them to move higher in the value chain.

According to the Ministry of Commerce and Industry, towns producing goods worth Rs 750 crore (US$ 98.7 million) or more can be recognized as Towns of Export Excellence. For certain sectors like handloom, handicraft, agriculture, and fisheries the threshold limit is set at Rs 150 crore (US$ 19.7 million).

MAI SCHEME

Market Access Initiative (MAI) Scheme was launched in 2013 is an Export Promotion Scheme envisaged to act as a catalyst to promote India's exports on a sustained basis.

The scheme is formulated on focus product-focus country approach to evolve specific market and specific product through market studies/survey. Assistance would be provided to Export Promotion Organizations/Trade Promotion Organizations/National Level Institutions/ Research Institutions/Universities/Laboratories, Exporters etc., for enhancement of exports through accessing new markets or through increasing the share in the existing markets. 

The following activities are eligible for financial assistance under the Scheme:

• Marketing Projects Abroad
• Capacity Building
• Support for Statutory Compliances
• Studies
• Project Development
• Developing Foreign Trade Facilitation web Portal
• To support Cottage and handicrafts units

Eligible Agencies

• Departments of Central Government and Organisation of Central/
• State Governments including
• Indian Missions abroad
• Export Promotion Councils
• Registered trade promotion Organisation
• Commodity Boards
• Apex Trade Bodies recognized under Foreign Trade Policy of Govt of India
• Recognized Industrial & Artisan Clusters
• Individual Exporters (only for statutory compliance etc.)
• National Level Institutions (e.g. Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs), National Institute of design (NIDs), NIFT etc.)/ Research Institutions/Universities/ Recognized laboratories, etc.

ICEGATE

ICEGATE stands for “Indian Customs Electronic Data Interchange Gateway” or the e-commerce portal of the Central Board of Excise & Customs. ICEGATE is an e-filing service portal for traders and cargo carriers. It includes the custom department and trade users. ICEGATE serves the purpose of Electronic Data Interchange and electronic communication requirements for the department. ICEGATE login is mandatory for e-filing any import or export of trades, cargo carriers, and other online trading.

BACKGROUND: THE SOFTWARE TECHNOLOGY PARK (STP) SCHEME

The STP Scheme is a 100% export-oriented scheme for the development and export of computer software, including export of professional services using communication links or physical media. As a unique scheme, it focuses on one sector, i.e. computer software. The scheme integrates the government concept of 100% Export Oriented Units (EOU) and Export Processing Zones (EPZ) and the concept of Science Parks/Technology Parks, as operating elsewhere in the world. The unique feature of the STP scheme is the provisioning of single-point contact services for member units, enabling them to conduct exports operations at a pace commensurate with international practices.

SCHEME BENEFITS & HIGHLIGHTS

• Approvals are given under single window clearance system.
• An STP unit may be set up anywhere in India.
• Jurisdictional STPI authorities can clear projects costing less than Rs.100 million with Indian Investment.
• 100% foreign equity is permitted.
• All the imports of Hardware & Software in the STP units are completely duty free, import of second-hand capital goods are also permitted.
• Re-export of capital goods is also permitted.
• Simplified Minimum Export Performance norms i.e., "Positive Net Foreign Exchange Earnings".
• Use of computer system for commercial training purposes is permissible subject to the condition that no computer terminals are installed outside the STP premises.
• Sales in the Domestic Tariff Area (DTA) are permissible.
• The capital goods purchased from the DTA are entitled for refund of GST.
• Capital invested by foreign entrepreneurs, know-how Fees, royalty, dividend etc., can be freely repatriated after payment of Income Taxes due on them, if any
• The items like computers and computers peripherals can be donated to recognized non-commercial educational institutions, registered charitable hospitals, public libraries, public funded research and development establishments, organizations of Govt. of India, or Govt of a State or Union Territory without payment of any duties after two years of their import.
• 100 Percent Depreciation on computers and computer peripherals over a period of five years. 

What does Domestic Tariff Area (DTA) mean?

The term DTA is normally used by the trade in exported goods, imported goods or locally procuring/manufacturing goods where in any kind of duty is involved.

Each Software Technology Park (STP) unit has a Customs Bonded Warehouse which is treated as Customs Bonded Area. If one wants to move goods in or out of the said warehouse, permission from customs/excise is required. Such goods procured locally or imported attracts a duty amount. These units would have imported/procured such goods on the basis of export obligations with government. If a unit under STP fulfilled such export obligation and achieved value addition, the authorities may permit the unit to sell dutiable goods to local market. So once after completion of export obligation, STP units sell dutiable goods to Domestic Tariff Area by obtaining permission from the customs/excise authorities.

If one obtains any goods under free of duty with government schemes, she can sell the final products to domestic tariff area, once after fulfilling her export obligation with the government licensing authority.

PRELIMS PRACTICE QUESTION

Q. Which of the following statements are correct with reference to the provisions made in Foreign Trade Policy 2023?

a.    The consignment-wise cap on E-Commerce exports through courier has been raised from ₹10Lakh to ₹50 Lakh in the FTP 2023.

b.    The Merchanting trade of restricted and prohibited items under the export policy would now be possible.

c.     Four towns have been added to the Towns of Export Excellence List and towns producing goods worth Rs 1500 crore or more can be recognized as Towns of Export Excellence.

d.    Special Advance Authorisation Scheme has been extended to the export of Apparel and Clothing sector.

1. a and b

2. b and d

3. a, b and d

4. b, c and d

Correct Answer: b