The Indian Government has liberalized import and export restrictions on goods to a large extent in the last decade. Yet, some restrictions continue to exist like those intended to cover goods and technologies involving dual use. Goods contravening intellectual property rights can be seized as per law. But the overall thrust of the Government has been to give impetus to exports.
The general provisions relating to import and export of goods are contained in the Foreign Trade Policy, 2009-2014 (‘FTP’) and the Handbook of Procedures, 2009-2014 (‘HBP’). In terms of the FTP, exports and imports are unrestricted except where regulated by FTP or any other law in force. The item-wise export and import policy is specified in India Trade Classification, Harmonized System [“ITC (HS)”] notified by the Director General of Foreign Trade (DGFT).
Schedule 2 of the ITC (HS) contains the item-wise export policy which includes a list of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) items which are either restricted or prohibited for export. The list aims to control the export of items that have dual-use or military use and proliferation of which may pose serious threat to international peace and security. The list has eight categories each of which covers special chemicals, organisms, materials, equipment or technologies.
The regime is administered by the Directorate General of Foreign Trade. Penalties for export control violations may include corporate fines, revocation or suspension of export privileges, and individual fines and/or imprisonment of responsible personnel. Experienced counseling is essential to highlight the mitigating circumstances and to advise on the export compliance and enforcement process.
India has always played a role of a responsible global player in highly regulated commercial, defense, aerospace and other high-tech sectors. However, the public-private partnership especially in the defense sector has added a new dimension to this regime. While the research and development centers in the above sectors are in India, the actual manufacturing takes place in another country. Export monitoring or control occurs at this intersection of technology and law and non-compliance with export control laws may adversely impact the business and stifle investment. Export Controls in India aim to limit the export of items or technology that have dual-use or military use and proliferation of which may pose serious threat to international peace, security and stability. With this objective in mind, India suitably amended the Foreign Trade Policy in the year 1991-92.
Companies need to develop and implement export compliance programs designed to facilitate export transactions and withstand government scrutiny. When necessary, they may have to get routine compliance audits conducted so as to defend themselves against enforcement actions.
Globalisation in recent decades and integration of national economies has put export promotion policies and schemes on fast track. Indian government is no exception to these international currents. The tax administration in India has put in place slew of measures singularly aimed at boosting exports. From full exemption to units engaged in 100% export production, the tax-breaks take different forms like duty-free import of inputs meant for export production and refund of taxes paid on inputs contained in export goods. Administration of export promotion schemes involves two different Ministries in India - Finance and Commerce. They are also governed by different statutes.
Several export promotion schemes have been put in place by the government as part of its Foreign Trade Policy. Illustratively, we could cite Advance Authorisation Scheme, Export Promotion of Capital Goods Scheme, Duty Free Import Authorisation Scheme, 100% Export Oriented Units Scheme and Served From India Scheme. Export community can avail benefit of these schemes on fulfilling export obligations. Interpretation of the schemes has been prone to disputes resulting in substantial demand of duties and penalties for alleged violations.
Exporters desirous of availing the benefits of export promotion schemes have to ensure legal compliance. Complicated issues relating to Foreign Trade Policy and Procedures have travelled from Director General of Foreign Trade to High Courts and the Supreme Court of India.