HIGHLIGHTS OF ANNUAL SUPPLEMENT ( ) TO THE

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1 HIGHLIGHTS OF ANNUAL SUPPLEMENT ( ) TO THE FOREIGN TRADE POLICY ANNOUNCED BY MINISTER FOR COMMERCE, INDUSTRY & TEXTILES SHRI ANAND SHARMA in New Delhi On 18TH April, 2013 The Zero Duty Export Promotion Capital Goods (EPCG) and 3% EPCG Scheme have been harmonized in one Scheme to be known as Zero duty EPCG Scheme covering all sectors. Incremental Exports Incentivisation Scheme Government has announced Incremental Export Incentivisation Scheme on for the exports made during January 2013 to March This scheme is available for exports made to USA,EU and Asia. It has been agreed to extend this scheme for the year The calculation of the benefit shall be on annual basis under the extended scheme. The Government has also agreed to include additional countries under Incremental Exports Incentivisation Scheme. 53 countries of Latin America and Africa have been added with the objective to increase India s share in these markets. The present exports to each of these markets is less than US $ 100 million. Market and Product Diversification Norway has been added under Focus Market Scheme and Venezuela has been added under Special Focus Market Scheme. The total number of countries under Focus Market Scheme and Special Focus Market Scheme becomes 125 and 50 respectively. Approximately, 126 new products have been added under Focus Product Scheme. These products include items from engineering, electronics, chemicals, pharmaceuticals and textiles sector. About 47 new products have been added under Market Linked Focus Product Scheme (MLFPS). These products are from engineering, auto components and textiles sector. 2 new countries i.e., Brunei and Yemen have been added as new markets under MLFPS. MLFPS is being extended from to for exports to USA and EU in respect of items falling in Chapter 61 and Chapter 62 of ITC(HS). Widening the Scope of Utilization of Duty Credit Scrip Duty Credit Scrips issued under Focus Market Scheme, Focus Product Scheme and Vishesh Krishi Gramin Udyog Yojana (VKGUY) can be used for payment of service tax on procurement of services within the legal framework of service tax

2 exemption notifications under the Finance Act, Holder of the scrip shall be entitled to avail drawback or CENVAT credit of the service tax debited in the scrips as per Department of Revenue rules. All duty credit scrips issued under Chapter 3 can be utilized for payment of application fee to DGFT for obtaining any authorization under Foreign Trade Policy. This benefit shall be available only to the original duty credit scrip holders. Duty credit scrip can also be paid for payment of composition fee and for payment of value shortfalls in EO under para 4.28 (b) of Hand Book of Procedure Vol. 1. Facility to close cases of default in Export Obligation Requests have been received for grant of relief to close cases where there is default in export obligations pertaining to advance authorizations and EPCG authorizations. It has been decided to allow a facility to close such cases after payment of required duty, along with applicable interest. The duty + interest have to be paid within a limited period of six months from the date of notification of this scheme. The total payment shall not exceed two times the duty saved amount on default in Export Obligation. Reduced EO for units in the State of Jammu & Kashmir In order to encourage manufacturing activity in the State of Jammu & Kashmir, it has been decided to reduce the specific export obligation (EO) to 25% of the normal export obligation. Earlier, this benefit was announced on 5th June, 2012 in respect of units located in North Eastern Region and Sikkim. This provision is now being extended to J&K. Status Holder Incentive Scheme (SHIS) Status Holder Incentive Scheme (SHIS) was extended for the year The scheme will not be available for the year Regional Authority shall allow limited transferability of SHIS scrip within group company of the status holder provided the group company is a manufacturer. Ease of Documentation and procedural simplification Submission of physical copies of IEC and Registration-cum-Membership Certificate (RCMC) with individual application has been dispensed with. It has been decided to dispense with submission of hard copy of EP copy of shipping bills in case of (a) advance authorization, (b) duty free import authorization for grant of Export Obligation Discharge Certificate (EODC) if exports are made through EDI ports. Application fee can be paid either in cash or through demand draft or through EFT. Now exporters/importers would be allowed shortly to utilize their credit card for payment of such application fee.

3 Existing procedures contained in para 2.20A of Handbook of Procedures related to execution of bank guarantee / legal undertaking stands deleted.

4 HIGHLIGHTS OF THE ANNUAL SUPPLEMENT TO THE FOREIGN TRADE POLICY The Annual Supplement to the Foreign Trade Policy was released by the Union Commerce and Textiles Minister in New Delhi on June The highlights of the Supplement are given below: 1. 2 % INTEREST SUBVENTION SCHEME: Continuation and Expansion It was a very persistent representation of EPCH that the Interest Subvention of two per cent which expired on should be continued for an another one year. The same has been accepted. A notification to this effect may be issued by RBI on any day. 2. TOWNS OF EXPORT EXCELLENCE: It has been a constant demand of EPCH to declare Saharanpur as a Town of Export Excellence (TEE) for Handicrafts. The same has been accepted. 3. USE OF DELIVERY AGAINST ACCEPTANCE (DA) TERMS NOT TO BE ENCOURAGED FOR EXPORT OF CARPETS / HANDICRAFTS: Export of Handicraft items and export of Hand-Made Woollen Carpets including other floor coverings like Woolen Durries, Druggets, Gabbas, Namdhas and Shaggy shall not be allowed on the basis of Delivery against Acceptance (DA) terms, unless they are covered by Bank Guarantee or ECGC guarantee. This would significantly protect the business and financial interests of small exporters. 4. MARKET & PRODUCT DIVERSIFICATION 7 new markets are being added to Focus Market Scheme (FMS). These countries are Algeria, Aruba, Austria, Cambodia, Myanmar, Netherland Antilles, and Ukraine 7 new markets are being added to the Special Focus Market Scheme (Special FMS). These countries are Belize, Chile, El Salvador, Guatemala, Honduras, Morocco, and Uruguay.

5 46 new items are being added to Market Linked Focus Product Scheme (MLFPS). This would have the effect of including 12 new markets for the first time. (the list of item is yet to be notified) MLFPS is being extended till 31st March 2013 for export to USA and EU in respect of items falling in Chapter 61 and Chapter handicrafts items where the benefit of 2% duty free Credit Scrip was made available during last review of Error! Hyperlink reference not valid. in October 2011, the benefit has been increased to 5% of fob value of exports (List attached). Also, additional items in Table 1 of Appendix -37 D of Error! Hyperlink reference not valid., where duty credit scrip benefits is available are as under:- Sl. No. FPS Product Code ITC Code (HS) Description SHAWLS (EXCEEDING 60 CM) AND THE LIKE-HANDPRINTED SHAWLS OF WOOL OR FINE ANIMAL HAIR - HANDPRINTED Rate Percentage 5% 5% SHAWLS OF SILK 5% SHAWLS OF MANMADE FIBER 5% UTENSILS 2% OTHER HOUSEHOLD ARTICLES OF 2% IRON N.E.S. (OTHER THAN CAST IRON)OR STEEL,ENAMELLED MADE UPS ARTCLS OF COTTON 2% 5. SUPPORT FOR EXPORT OF PRODUCTS FROM NORTH EASTERN REGION: Export of specified products through notified Land Customs Stations of North Eastern Region shall be provided additional incentive to the extent of 1% of FOB value of exports. This benefit shall be in addition to any other benefit that may be available under Foreign Trade Policy in respect of these exports. 6. ENCOURAGEMENT FOR MANUFACTURING SECTOR IN DOMESTIC MARKET: The present Policy allows scrips under different schemes of Chapter 3 of Foreign Trade Policy, namely, Focus Product Scheme (FPS), Focus Market

6 Scheme (FMS), Vishesh Krishi and Gram Udyog Yojana (VKGUY) Scheme, Status Holder Incentive Scrip (SHIS) Scheme, Market Linked Focused Product (MLFPS) Scheme, Served From India Scheme (SFIS) and Agri. Infrastructure Incentive Scrip (AIIS) Scheme, for import of goods as per conditions of these Schemes. Now these scrips shall be permitted to be utilized for payment of Excise Duty for domestic procurement. Earlier only scrips under SFIS were so permitted for procurement of goods from domestic market. Now all scrips would be permitted to source from domestic market so as to encourage manufacturing, value addition and employment. This will be an important measure for import substitution and will help in saving of foreign exchange in addition to creating additional employment. 7. SIMPLIFICATION OF PROCEDURES: Exports shipments from Delhi & Mumbai through Post, through Courier or through e-commerce shall be entitled for export benefits under FTP. An Inter-Ministerial Task Force constituted by the Ministry of Finance would expeditiously look into various aspects to the feasibility of enabling shipments through all postal locations. 8. NEW e-brc INITIATIVE: A MAJOR EDI INITIATIVE: An extremely challenging and significant EDI initiative, e-brc has been launched by DGFT. e-brc would herald electronic transmission of Foreign Exchange Realization from the respective Banks to the DGFT s server on a daily basis. Exporter will not be required to make any request to bank for issuance of Bank Export and Realization Certificate (BRC). This will establish a seamless EDI connectivity amongst DGFT, Banks and Exporters. e-brc would facilitate early settlement and release of FTP incentives / entitlements. This is a significant step to reduce transaction cost to the exporters. 9. TECHNOLOGICAL UPGRADATION / EPCG SCHEME Zero Duty EPCG Scheme had come to an end on 31st of March For continued technological up-gradation of export sectors, this Scheme has now been extended up to 31st March There is no change in the coverage of the sectors benefitting from this scheme. 10. AMENDENT IN ZERO DUTY EPCG SCHEME: Upto 31st March 2012, the benefit of Zero Duty EPCG Scheme was not available to such applicants who would have availed benefit of Status Holder Incentive Scrip (SHIS). It is now decided that if such SHIS benefit already availed is surrendered subsequently with applicable interest to the concerned RA, and then the benefit of Zero Duty EPCG Scheme would be extended.

7 11. INTRODUCTION OF A NEW POST-EXPORT EPCG SCHEME: Exporters if they choose to, may import Capital Goods on payment of duty in cash and subsequently receive duty credit scrip on completion of export obligation. Thus there would be no duty remission / duty exemption at the time of import of the Capital Good (CG). Applicant will have to inform the Regional Office of DGFT (RA) about the import of CG and based on which RA will fix export obligation. Since the duties have been paid upfront at the time of import of CG, the EO would be 85 % of normal EO. On the basis of export performance, a Duty Credit Scrip will be issued subsequently, by RA, in proportion to export obligation so fixed. This would obviate the monitoring and reporting requirements, as the scheme would be self-monitored. Reduced transaction cost coupled with comparatively reduced EO would make this scheme attractive. 12. SINGLE BANK GUARANTEE UNDER COMMON SERVICE CENTRE : To facilitate setting up of Common Service Centres located in the town of export excellence (TEE), a Common Service Provider (CSP) under EPCG Scheme will henceforth be permitted to give a single Bank Guarantee (BG). The quantum of BG will be equivalent to the amount of duty foregone. It is open to CSP to provide the BG for full amount by himself or on a sharing basis along with the users of the common service. 13. INCENTIVES FOR PROMOTING INVESTMENT IN LABOUR INTENSIVE SECTORS: Status holders are issued Status Holders Incentive Scrip (SHIS) to import Capital Goods for promoting investment in up-gradation of technology of some specified labour intensive sectors like Leather, Textile & Jute, Handicrafts, Engineering, Plastics and Basic Chemicals. It is now decided that up to 10% of the value of these scrips will be allowed to be utilized to import components and spares of capital goods imported earlier. Such a dispensation was not available earlier. At present these scrips are subject to Actual User Condition and are not transferable. Since a status holder may or may not have manufacturing facility, it is now decided to allow limited transferability of SHIS scrip. However, such Transferee shall have to (a) be a status holder and (b) have manufacturing facility

8 14. VISAKHAPATNAM AIRPORT RECOGNISED UNDER EXPORT PROMOTION SCHEMES: Visakhapatnam Airport has been identified as a new Port for the purpose of benefits under Export Promotion Schemes.

9 Sub : Highlights of Annual Supplement of Announcement on the Foreign Trade Policy announced by the Union Commerce & Industry Minister on 13th October 2011 relating to the handicrafts sector. The Annual Supplement of the Foreign Trade Policy ( ) announced by the Hon ble Union Commerce & Industry Minister on 13 th October The highlights pertaining to the handicrafts sector are as follows:- 1. Town of Export Excellence (para 3.5 of the Foreign Trade Policy ) The constant demand of EPCH to add Firozabad (for Glassware) and Agartala (for Cane and Bamboo products) to the list of Town of Export Excellence has been accepted and now these two towns shall also fall in the list of Town of Export Excellence together with Jodhpur, Jaipur, Srinagar, Anantnag, Barmer (Appendix 7 of the H. B. of Procedure, Vol-I of ). 2. Focus Product Scheme (para 3.15 of the Foreign Trade Policy ) The list of items under FPS (table 4) has been expanded to include 130 additional items. These items are mainly in the sectors of Chemical / Pharmaceuticals, Textiles, Handicrafts, Engineering and Electronics sector. The products included shall be entitled for duty credit scrip benefit equivalent of 2 % of FOB value of exports. The list of handicrafts export items is attached (Table 4). 3. Special Focus Market Scheme (SFMS) ( para 3.14 of the Foreign Trade Policy ) It has been decided to introduce a Special Focus Market Scheme with a view to increase the competitiveness of exports with a geographical targeting. The scheme would provide additional 1% duty credit when exports are made to these countries. This duty credit is over and above the duty credit granted under FMS i.e if an item covered under FMS is exported to the countries listed under SFMS, then the total duty credit available would 4%. 4. Procedural Simplification The following procedural simplifications were also announced The application of IEC has become online w.e.f This reduces the interface of exporters with the Regional Authorities of DGFT. An effort is also on to update the IEC database containing more than 7.6 lakhs IEC. All the IEC holders are being urged to cooperate in this effort and update their details on-line. This exercise would be completed by Continuation of Interest Rate Subvention of 2% by RBI (it is not a part of Announcement dated but announced separately on ) The interest subvention of 2% on export finance has been extended beyond RBI has issued a Circular No. DBOD.Dir.(Exp).BC. No.38/ / dated 11 th October 2011 extending the period of subvention from to This will provide some relief to the exporters.