Exim Policy 2002-07 (main points)

May 22, 2009 November 17, 2019

1. The EXIM Policy for 2002-07 which came in effect on 1st April, 2002 was the first policy which had to be formulated keeping in view all the commitments India had made under the WTO. In 2001, all quantitative restrictions on imports were removed.
2. SEZ:
Offshore Banking Units (OBUs) were permitted in SEZs. Detailed guidelines were worked out by RBI to help some of our cities emerge as financial nerve centers of Asia. Units in SEZ were permitted to undertake hedging of commodity price risks, provided such transactions were undertaken by the units on stand-alone basis. This would impart security to the returns of the unit. It had also been decided to permit External Commercial Borrowings (ECBs) for tenure of less than three years in SEZs. The detailed guidelines would be worked out by RBI. This would provide opportunities for accessing working capital loan for these units at internationally competitive rates.
3. Agriculture
Export restrictions like registration and packaging requirement were removed on Butter, Wheat and Wheat products, Coarse Grains, Groundnut Oil and Cashew to Russia. Quantitative and packaging restrictions on wheat and its products, Butter, Pulses, grain and flour of Barley, Maize, Bajra, Ragi and Jowar had already been removed on 5th March, 2002.
Restrictions on export of all cultivated (other than wild) varieties of seed, except Jute and Onion, removed. To promote export of agro and agro based products, 20 Agri export zones had been notified. In order to promote diversification of agriculture, transport subsidy was to be available for export of fruits, vegetables, floriculture, poultry and dairy products. The details was worked out in three months. 3% special DEPB rate for primary & processed foods exported in retail packaging of 1 kg or less.
4. Cottage and Handicraft :
An amount of Rs. 5 crore under Market Access Initiative (MAI) had been earmarked for promoting cottage sector exports coming under the KVIC. The units in the handicrafts sector can also access funds from MAI scheme for development of website for virtual exhibition of their product. Under the Export Promotion Capital Goods (EPCG) scheme, these units would not be required to maintain average level of exports, while calculating the Export Obligation. These units were entitled to the benefit of Export House status on achieving lower average export performance of Rs.5 crore as against Rs. 15 crore for others. The units in handicraft sector were entitled to duty free imports of an enlarged list of items as embellishments up to 3% of FOB value of their exports.
5. Towns of Export Excellence:
With a view to encouraging further development of centers of economic and export excellence such as Tirupur for hosiery, woolen blanket in Panipat, woollen knitwear in Ludhiana. Common service providers in these areas ware entitled for facility of EPCG scheme. The recognized associations of units in these areas would be able to access the funds under the Market Access Initiative scheme for creating focused technological services and marketing abroad. Such areas would receive priority for assistance for identified critical infrastructure gaps from the scheme on Central Assistance to States. Entitlement for Export House status at Rs. 5 crore instead of Rs. 15 crore for others.
6. Leather Exports: Duty free imports of trimmings and embellishments upto 3% of the FOB value hitherto confined to leather garments extended to all leather products.
7. Textiles: Sample fabrics permitted duty free within the 3% limit for trimmings and embellishments. 10% variation in GSM was allowed for fabrics under Advance Licence. Additional items such as zip fasteners, inlay cards, eyelets, rivets, eyes, toggles, velcro tape, cord and cord stopper included in input output norms. Duty Entitlement Passbook (DEPB) rates for all kinds of blended fabrics permitted. Such blended fabrics to have the lowest rate as applicable to different constituent fabrics.
8. Gem & Jewelry: Customs duty on import of rough diamonds was reduced to 0%. Import of rough diamonds is already freely allowed. Licensing regime for rough diamond was abolished. This was done to help the country emerge as a major international centre for diamonds. Value addition norms for export of plain Jewelry reduced from 10% to 7%. Export of all mechanized unstudded Jewelry allowed at a value addition of 3 % only. Having already achieved leadership position in diamonds, now efforts were to be made for achieving quantum jump on Jewelry exports as well. Personal carriage of Jewelry allowed through Hyderabad and Jaipur airport as well.
9. Electronic Hardware: The Electronic Hardware Technology Park (EHTP) scheme was modified to enable the sector to face the zero duty regime under ITA(Information Technology Agreement)-1. Net Foreign Exchange as a Percentage of Exports (NFEP) positive in 5 years. No other export obligation for units in EHTP. Supplies of ITA I items having zero duty in the domestic market to be eligible for counting of export obligation.
10. Chemicals: All pesticides formulations to have 65% of DEPB rate of such pesticides. Free export of samples without any limit. Reimbursement of 50% of registration fees for registration of drugs.
11. Project Exports: Free import of equipment and other goods used abroad for more than one year.
12. Facilities to Status Holders: The status holders were eligible for the License/Certificate/Permissions and Customs clearances for both imports and exports on self-declaration basis. Fixation of Input-Output norms on priority; Priority Finance for medium and long term capital requirement as per conditions notified by RBI; Exemption from compulsory negotiation of documents through banks. The remittance, however, would continue to be received through banking channels; 100% retention of foreign exchange in Exchange Earners’ Foreign Currency (EEFC) account; Enhancement in normal repatriation period from 180 days to 360 days.
13. Neutralizing high fuel costs: Fuel costs to be rebated by it in Standard Input Output Norms (SIONs) for all export products. This would enhance the cost competitiveness of our export products.
14. Setting up of “Business Centre” in Indian missions abroad for visiting Indian exporters/businessmen.
15. ITPO portal to host a permanent virtual exhibition of Indian export product.
16. Focus LAC (Latin American Countries) was launched in November, 1997 in order to accelerate our trade with Latin American countries. This had been a great success. Focus Africa was proposed to be launched . The first phase of the Focus Africa programme was to include 7 countries namely, Nigeria, South Africa, Mauritius , Kenya, Ethiopia, Tanzania and Ghana. The exporters exporting to these markets were given Export House Status on export of Rs.5 crore.
17. Links with CIS countries to be revived. We have traditional trade ties with these countries. In the year 2000-01, our exports to these countries were to the extent of US$ 1082 million. In this group, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, Ukraine and Azerbaijan were to be in special focus in the first phase.
18. North Eastern States, Sikkim and Jammu & Kashmir: Transport subsidy for exports to be given to units located in North East, Sikkim and Jammu & Kashmir so as to offset the disadvantage of being far from ports.
19. Re-location of industries: To encourage re-location of industries to India, plant and machineries would be permitted to be imported without a license, where the depreciated value of such relocating plants exceeds Rs. 50 crores.
20. A new 8 digit commodity classification for imports was adopted from 1st April 2002. This classification would also be adopted by Customs and DGCI&S; shortly. The common classification to be used by DGFT and Customs would eliminate the classification disputes and hence reduce transaction costs and time. Similarly, Ministry of Environment and Forests is in the process of finalization of guidelines to regulate the import of hazardous waste.
21. Reduction of the maximum fee limit for electronic application under various schemes from Rs. 1.5 lakh to Rs. 1.00 lakh. Same day licensing introduced in all regional offices.
22. Customs: Adoption and harmonization of the 8 digit ITC(HS) code. The percentage of physical examination of export cargo had already been reduced to less than 10 percent except for few sensitive destinations. The application for fixation of brand rate of drawback was finalized within 15 days.
23. Banking: Direct negotiation of export documents to be permitted. This would help the exporters to save bank charges. 100% retention in EEFC accounts. The repatriation period for realization of export proceeds extended from 180 days to 360 days. The facility is already available to units in SEZ and exporters exporting to Latin American countries. (however these facilities were made available to status holders at that time)
24. Import/Export of samples to be liberalized for encouraging product up gradation.
25. Penal interest rate for bonafide defaults to be brought down from 24% to 15%.
26. No penalty for non-realization of export proceeds in respect of cases covered by ECGC insurance package.
27. No seizure of stock in trade so as to disrupt the manufacturing process affecting delivery schedule of exporters.
28. Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realization Certificate for documents negotiated directly.
29. Optional facility to convert from one scheme to another scheme. In case the exporter is denied the benefit under one scheme, he was entitled to claim benefit under some other scheme.
30. Newcomers to be entitled for licenses without any verification against execution of Bank Guarantee.
31. Duty Exemption Entitlement Certificate (DEEC) book was abolished. Redemption on the basis of Shipping bills and Bank Realization Certificates.
32. Withdrawal of Advance License for Annual Requirement (AAL) scheme as problems were encountered in closure of AAL and the significance of scheme considerably reduced due to dispensation of DEEC. The exporters can avail Advance License for any value. Mandatory spares to be allowed in the Advance License up to 10% of the CIF value.
33. Duty Entitlement Passbook (DEPB) : Value cap exemption granted on 429 items to continue, No Present Market Value (PMV) verification except on specific intelligence, Same DEPB rate for exports whether as CBUs or in CKD/SKD form, Reduction in rates only after due notice. DEPB for transport vehicles to Nepal in free foreign exchange. DEPB rates for composite items to had lowest rate applicable for such constituent.
34. Export Promotion Capital Goods (EPCG) : EPCG licenses of Rs.100 crore or more to had 12 year export obligation period with 5 year moratorium period. Export Obligation fulfillment period extended from 8 years to 12 years in respect of units in agri-export zones and in respect of companies under the revival plan of BIFR. Supplies under Deemed Exports to be eligible for export obligation fulfillment along with deemed export benefit. Re-fixation of EO in respect of past cases of imports of second hand capital goods under EPCG Scheme.