The Ministry of Commerce & Industry has announced the release of the eagerly anticipated Foreign Trade Policy, 2023 (FTP-2023). It will replace the previous Foreign Trade Policy, 2015-2020, extended upto 31 March 2023 due to the COVID-19 pandemic and geo-political circumstances. The new policy will become effective on 1 April 2023. FTP-2023 shifts focus from incentives to a remission and entitlement-based regime, to remain compliant with WTO guidelines. FTP-2023 focuses on greater trade facilitation through technology and automation aiming to boost the country’s exports to USD 2tn by 2030.
Some of the key highlights of FTP-2023 are as under:
Perpetual Validity:
- FTP-2023 will have perpetual validity and shall be updated on a need basis and as, per the feedback from trade and industry.
Streamlining of Advance Authorisation (AA) scheme/Export Promotion of Capital Goods (EPCG) scheme:
- FTP-2023 aims at the automation of the issuance of various authorisations through process simplification to achieve a reduction of process time and immediate approval of applications, as under:
|
Authorisation/Process |
Current processing time |
Automatic route processing time |
|
Advance authorisation issuance |
3 to 7 days |
1 day |
|
EPCG issuance |
3 to 7 days |
1 day |
|
Revalidation of authorisations |
3 days to 1 month |
1 day |
|
Extension of Export Obligation (EO) period |
3 days to 1 month |
1 day |
- Reduced application fees under AA/EPCG scheme are as under:
|
License Value in INR |
Application fees for non-MSMEs (in INR) |
Reduced Application fees for MSMEs (in INR) |
|
Up to 10mn |
1 per 1000 |
100 |
|
10mn to 100mn |
1 per 1000 |
5,000 |
|
Above 100mn |
Capped at 100,000 |
5,000 |
- The redemption process for the Advance Authorisation (AA)/Export Promotion Capital Goods (EPCG) scheme will be made online and completely paperless, similar to the application procedure.
Revamped Certificate of Origin (CoO) issuance procedure:
- The FTP-2023 will overhaul the electronic platform for issuing Certificates of Origin (CoOs). This update will allow for self-certification and automatic approval of CoOs where possible
- Initiatives to facilitate the direct electronic exchange of CoO with partner countries are envisaged.
Rationalisation of ‘Status Holder’ export turnover thresholds:
- FTP-2023 has revised the thresholds for accreditation as ‘status holders’ to enable more exporters to receive accreditation/status. The revised export threshold limit is as under:
|
Status House Category |
Existing Export Performance Threshold (In USD Mn) |
Revised Export performance Threshold (In USD Mn) |
|
One Star |
3 |
3 |
|
Two Star |
25 |
15 |
|
Three Star |
100 |
50 |
|
Four Star |
500 |
200 |
|
Five Star |
2000 |
800 |
Rationalisation of Merchanting Trade Reforms:
- The FTP-2023 permits merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports involving an Indian intermediary, subject to compliance with RBI Guidelines, except for goods/items in the CITES and SCOMET list.
Town of Export Excellence (TEE):
- FTP- 2023 has granted four new towns of export excellence, as under:
|
Town of Export Excellence |
Product Category |
|
Faridabad |
Apparel |
|
Moradabad |
Handicrafts |
|
Mirzapur |
Handmade Carpet and Dari |
|
Varanasi |
Handloom & Handicraft |
- TEE recognition enables industrial units of the region/town in getting recognition/credibility on a global stage
- Recognised associations of units in TEE are granted financial assistance under Market Access Initiative (MAI) scheme for export promotion
- Common service Providers (CSP) in TEE are also entitled to obtain EPCG authorisation enabling the exporters to have shared infrastructure for manufacturing of goods.
Internationalisation of INR:
- FTP- 2023 focuses on making Indian Rupees (INR) a global currency by facilitating International Trade settlement in INR and extending benefits under FTP for payments realised in INR through special Vostro accounts set up as per RBI.
Recognition of districts as export hubs:
- The FTP-2023 provides for measures for development of districts as export hubs, by focusing on bringing greater level of awareness and commitment regarding exports at the district level, build capacity to create new exporters and identify new markets for the focused products and services.
- District Export Action Plans (DEAPs) to be prepared for each district highlighting 2-3 high potential products/services from the districts which may be prioritised for export
- Each district will constitute a District Export Promotion Committee (DEPC) to prepare and implement district-specific Export Action Plans.
Boost to E-commerce sector:
- Chapter 9 provides a framework for the promotion of the e-commerce sector
- All benefits under the FTP are to be extended to e-commerce exports
- Enablement of IT system and Integration of various departments and ministries to be undertaken to streamline e-commerce exports.
- Establishment of Dak Ghar Niryat Kendras in coordination with Foreign Post Offices (FPOs) to facilitate cross-border e-commerce transactions and enable MSME to reach international markets
- Set up export hubs with warehousing facilities for e-commerce players for stocking of goods, customs clearance, facilitating activities like labelling testing, etc.
Measures to boost Manufacturing Sector:
- Under the EPCG scheme, the Dairy sector exempted from Average Export Obligation (AEO) will not be applicable.
- Products like Battery Electric Vehicles (BEV), Wastewater Treatment and Recycling, Rainwater harvesting systems, etc., will be eligible for reduced EO criteria of 4.5 times the duty saved as against 6 times under the EPCG scheme
- The benefit of the self-ratification scheme for fixation of input-output norms extended to Two-star and above status holders
- Special Advance Authorisation scheme on self-declaration basis extended to clothing and apparel sector to facilitate prompt execution of export orders wherein ad-hoc-norms shall be fixed within the stipulated period of 90 days
- In addition to the existing MSME sector, the fruits and vegetable sector shall also be eligible for benefit of double weightage for counting export performance for Status Holder certification.
Streamlining of SCOMET licensing procedure:
- FTP-2023 features a separate, detailed Chapter governing the exports of SCOMET items and it aims at consolidating SCOMET policy for the export of various dual-use items in one place for ease of operations and compliance by industry and trade
- FTP-2023 makes India’s SCOMET policy in line with various international commitments under export control regimes like the Wassenaar arrangement, Australia Group and Missile Technology Control Regime
- FTP-2023 focuses on simplifying export procedures for certain SCOMET items like UAV/Drones, Cryogenic tanks, etc.
Introduction of the One-time Amnesty Scheme:
- Responding to long-time industry demand, an Amnesty scheme has been announced for one-time settlement of default of EO under the aforesaid schemes to regularise EO default cases under the EPCG and AA schemes
- The Notification in this regard will be issued in due course of time
- Under the amnesty scheme, the authorisation holder can regularise the default in EO, by payment of Customs duties exempted on the unfulfilled portion of EO along with interest which is capped at 100% of duty liability. However, no interest will be payable on the portion of Additional Customs Duty and Special Additional Customs Duty
- The amnesty scheme shall be valid up to 30 September 2023
- The authorisation holders under investigation for fraud or diversion shall not be eligible to opt for the amnesty scheme.
BDO Comments:
The Ministry of Commerce & Industry has announced the much-awaited policy which lays down the roadmap for boosting India’s exports. FTP-2023 appears to be a forward-looking policy as it seeks to focus on the growth of emerging sectors like e-commerce, MSMEs, etc. FTP-2023 stays clear of the incentive-based regime to a remission and entitlement-based regime, making it WTO compliant. The FTP-2023 has addressed a persistent industry request by introducing an 'Amnesty scheme' regularise EO default cases under the Advance Authorisation (AA)/Export Promotion Capital Goods (EPCG) scheme. This initiative will be particularly beneficial for small businesses, as it will allow them to resolve their past export obligation issues and move forward without any lingering concerns.
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