This Seminar paper is a Doctrinal and Analytical research paper in which are
going to unearth the perspective of International Trade, backdrop to
International trade, International Trade Integration, Payment Mechanisms in
Global Trade, International Payment Systems, Letter of Credit in International
Trade, International Trade Terms - INCOTERMS, Types of Licenses, Types of
Customs Duties & Taxes, Customs Department - An Introduction, Customs
Brokerage, Imports and Customs Clearance, Documentation in Customs
Clearance, Import Documentation, Customs Clearance Agency &
Process, International Marketing Business Model, Export Marketing
Channels, Increasing Exports through FTZ, Why Do Exports Matter?, The Case
against Export Credit Agencies, import export procedures in India, Anti- Dumping
law and its areas of conflits and overlaps with the Competition laws of India
and also the Anti-Dumping Senario of China.
Aims and Objectives:
Introduction- Perspective on International Trade
- To understand how International Trade is managed.
- To undertand the Payment Mechanism in Global Trade.
- To understand Types of Custom Duties & Taxes.
- To understand what is Custom clearance Agency & it's Process.
- To understand Import & Export procedures in India
International trades between countries and across continents have existed for
centuries including previous civilizations. Traditionally international trade
consisted of traded goods like textile, food items, spices, precious metals,
precious stones, and objects of art and various items across the borders.
Everybody has heard of the silk route as well as amber road and other famous
routes that existed and the ports and settlements that flourished due to the
trade, which was carried on through land route as well as sea routes.
come a long way since the earlier times and International trade today has taken
on new dimension. It was a fact earlier that impact of trade between two
countries was not limited to economics alone, but fuelled political, social
ambitions too. Today with the advancement of technology and impact of
globalization has made it necessary for all countries to engage necessarily in
international trade for their survival.
Various factors including but not limited to industrialization, development of
transportation, globalization, technology that enables trade and communication
has contributed to change in the format of business organizations as well as
Companies and Organizations today are no longer entities with a local identity.
Multi national organizations have emerged through the previous century with
footprints all over the globe. They have in fact shrunk the earth and changed
the way businesses are conducted. Companies no longer limit themselves to local
markets. They no longer depend upon local resources. These companies setup
manufacturing wherever it is conducive in terms of cheaper resource availability
as well as support from local government and in terms of markets, geographical
boundaries do not bother them. They are present everywhere.
Technology in terms of communication as well as software technology has changed
the way business organizations manage activities be it manufacturing,
procurement, finance or sales. Today software applications drive the processes
and work at the speed of thought.
In present scenario, no country can afford to remain isolated from and not
participate in globalization. While countries do open their economies to global
competition, they need to tread very carefully not to upset their domestic
economy and protected industries. This balancing act is often managed through
individual countries trade and tariff policy, which forms a part of each
countries foreign trade policy that governs its approach to international trade
Post Second World War, World Trade Organization has been playing major role in
facilitating and attempting to streamline the global trade and tariff structures
with an aim to move towards free trade. However in reality, free trade may just
be a dream as long as there is no parity between developed and developing
Today most of the countries are party to several bi-lateral as well as multi
lateral tariff and trade agreements like GATT- General Agreement on Tariffs and
Trade though which they regulate imports and exports to and from specific
In the last few decades we have seen the emergence of services export and
imports and it is continually growing. Developing countries are harnessing their
intellectual capital to provide software services to the developed countries.
Today's international trade has many more new dimensions like intellectual
property, a variety of services, trade related investments, Bilateral and
Multilateral Trade Agreements, Establishing terms for trade in services,
investments as well as creating climate for dispute settlement.
Managing International trade has multi dimensional aspects, which need to be
considered, by each country. Any political, economic or other events anywhere in
on the earth have an impact on each countries international trade. We have seen
the impact of recession in one country affecting across the globe. We have also
seen impact of financial markets crash in one country having ripple effects all
over the world.
Any Business Manager holding responsibility of a business function in an
organization today would have to be equipped with the macro level understanding
of the world trade, macroeconomics, macro finance and its impact. He needs to
understand at the micro level export and import policies and procedures of
various countries to be able to steer his business ahead in accordance with the
existing environment. It is his ability to fore see the risks, assess the impact
and manage the risk that is going to be detrimental to his organization's
History of International Trade
Any time you walk into a super market and pick up any stuff like a knife or a
toy and chances are that the item has been manufactured in China or assembled in
Mexico. Pick up coffee pods and you will see that they have been imported from
Africa. When you shop for clothes, it is quite likely that you will see Made In
We all know that international trade has been in vogue for centuries and all
civilizations carried on trade with other parts of the world. The need for
trading exists due to the variations in availability of resources and
comparative advantage. In the present context where technology and innovation in
all fields have thrown open borders to globalization, no country can afford to
remain isolated and be self-sufficient.
International trade has a rich history starting with barter system being
replaced by Mercantilism in the 16th and 17th Centuries. The 18th Century saw
the shift towards liberalism. It was in this period that Adam Smith, the father
of Economics wrote the famous book 'The Wealth of Nations' in 1776 where in he
defined the importance of specialization in production and brought International
trade under the said scope. David Ricardo developed the Comparative advantage
principle, which stands true even today.
All these economic thoughts and principles have influenced the international
trade policies of each country. Though in the last few centuries, countries have
entered into several pacts to move towards free trade where the countries do not
impose tariffs in terms of import duties and allow trading of goods and services
to go on freely.
The 19th century beginning saw the move towards professionalism, which petered
down by end of the century. Around 1913, the countries in the west say extensive
move towards economic liberty where in quantitative restrictions were done away
with and customs duties were reduced across countries. All currencies were
freely convertible into Gold, which was the international monetary currency of
exchange. Establishing business anywhere and finding employment was easy and one
can say that trade was really free between countries around this period.
The First World War changed the entire course of the world trade and countries
built walls around themselves with wartime controls. Post world war, as many as
five years went into dismantling of the wartime measures and getting back trade
to normalcy. But then the economic recession in 1920 changed the balance of
world trade again and many countries saw change of fortunes due to fluctuation
of their currencies and depreciation creating economic pressures on various
Governments to adopt protective mechanisms by adopting to raise customs duties
The need to reduce the pressures of economic conditions and ease international
trade between countries gave rise to the World Economic Conference in May 1927
organized by League of Nations where in the most important industrial countries
participated and led to drawing up of Multilateral Trade Agreement. This was
later followed with General Agreement of Tariffs and Trade (GATT) in 1947.
However once again depression struck in 1930s disrupting the economies in all
countries leading to rise in import duties to be able to maintain favorable
balance of payments and import quotas or quantity restrictions including import
prohibitions and licensing.
Slowly the countries began to grow familiar to the fact that the old school of
thoughts were no longer going to be practical and that they had to keep
reviewing their international trade policies on continuous basis and this
interns lead to all countries agreeing to be guided by the international
organizations and trade agreements in terms of international trade.
Today the understanding of international trade and the factors influencing
global trade is much better understood. The context of global markets have been
guided by the understanding and theories developed by economists based on
Natural resources available with various countries which give them the
comparative advantage, Economies of Scale of large scale production, technology
in terms of e commerce as well as product life cycle changes in tune with
advancement of technology as well as the financial market structures.
For professionals who are occupying management or leadership positions in
Organizations, understanding the background to the international trade and
economic policies becomes necessary as it forms the backdrop for the business
organizations to charter their course for growth.
Backdrop to International Trade
Any student or professional wanting to understand more about Imports and Exports
would have to understand the history and economic principles that have chartered
the course of international trade to its current regime.
In the backdrop of the countries economic policies and financial conditions such
as its balance of payments situation, the governments formulate rules and
regulations that govern the countries trade with other countries.
World Trade Organization or WTO as it is called is the International
Organization that deals with the global rules of trade between nations. Its
primary function and goal is to facilitate smooth and free flow of trade between
WTO came into being on 1st January 1995 and is Head Quartered in Geneva,
Switzerland. The Organization was created at the Uruguay Round Negotiations and
consists of 153 member countries. A Director General and functions with a
Secretariat Staff of 637 heads WTO.
WTO functions primarily as the Forum for trade negotiations between countries.
Its main functions include Administering WTO Trade Agreements, Handling
Disputes, Monitoring National Trade policies of member countries, Technical
assistance to Member Countries. Considered to be one of the youngest of
International Organizations, the WTO is regarded as a Successor to the GATT
agreement that came into being in the after warmth of Second World War.
Historically treaties have been the agreements that ruled between two countries.
Post Second World War and creation of WTO and other organizations have paved way
for more and more of international co-operations in the field of politico
economic environment, with the result there have come to existence many
regional, intra regional and global super nations groups engaging in regional
Creation of The European Union is one of the most important events in the
History of our Civilization. EU, known as European Union was formed by
Masstricht Treaty in 1991 and laid foundation for an economic and monetary union
that included creation of one single currency across member nations. The
European Free Trade Association was setup in 1960 with one of the main aims to
establish multilateral associations between the member countries to abolish
customs barriers and creating a single free market across European Union.
Some of the other associations and agreements that have come into being are The
North American Free Trade Agreement (NAFTA) signed by Canada, Mexico and US in
1994. The Association of Southeast Asian Nations (ASEAN)
Complexities arise in International Trade due to the nature of economies of the
countries all over the world. Less Developed Countries and Developing Countries
economies are agriculture based and seasonal and their reliance on export
markets is very high. They in turn import manufactured goods from developed
countries where in the cost of imports is fairly stabilized. With the variation
in export earnings and high or stabilized imports, the countries stand to face
huge fluctuations in terms of international trade which in turn effects their
However amongst the developed countries the international trade has always been
beneficial. In fact most of the EU member countries have managed to increase
their incomes due to the removal of trade barriers within the EU. But the trade
relations between developed and under developed countries have always been the
bone of contention and controversies. The business orientations of the Multi
National Companies who establish manufacturing as well as selling in countries
where labor and resources are cheaper is seen as a form of exploitation. WTO
meetings and conferences are used as a platform by various interest groups to
bring to the table various issues concerning public health and safety,
environmental impact and other evils arising out of international trade.
We are slowly seeing the new shades of moral and ethical values as well as other
issues that impact our environment and global concerns featuring in and
affecting the international trade.
International Trade Integration
No doubt international trade has existed spanning civilizations, in the current
global economic situation no country can keep away without participating in
international trade. Countries are moving cautiously away from capitalistic and
protectionist outlook and engaging in trade with other countries.
With the creation of WTO, there have been constant efforts made to unite
countries to create more markets, to standardize tariffs and trade laws as well
as remove trade barriers in trying to create free markets.
We have seen very many bi lateral and multi lateral agreements taken place that
have harmonized international trade to a large extent. Together with the
agreements, several countries have begun to form unions to harmonize and free
trade regulations within themselves in a bid to create free markets. One such
example is the Economic Union of European Countries. Initially EU was a Customs
Union that further developed into Economic Union.
Countries have also formed several other types of unions as well as zones in a
bid to give impetus to international trade. We shall discuss a few of them
briefly in this article.
Customs Union refers to a coming together of member countries to form a union
where in they allow free trade amongst the member countries without customs
duties and tariffs. However they formulate a common external trade policy to
determine common import duties that are levied for imports from a third party
country other than the member country.
Customs Union is the first step towards harmonizing and removing trade barriers
to facilitate smoother and increased trade flow within the member groups. This
would result in increased economic efficiency and improve political
relationships amongst the members too paving way for further economic
The Customs Union of Zollverein which was formed out of coming together of
German States is another example of Customs Union. Customs Union can also be
called Free Trade Zones with common Trade Tariffs and Policies.
Free Markets & Economic Integration
- Customs Union can also be called Free Trade Zones with common Trade
Tariffs and Policies
- Customs Union is the first step towards building Economic integration that leads
to formation of common markets and economic unions and federation.
- Common markets allow free movement of all resources including labor, capital as
well as other resources without tariffs and formalities.
Monetary Union, Customs and Monetary Union
- Economic Union is a trade bloc, which consists of both free markets and
Customs Union within the member community
- Economic Unions involve close co-ordination and integration of economic
and fiscal policies of the member countries
- Examples: European Union, CARICOM - Single Market and Economy of Caribbean
- Creation of Economic Union paves way for creating a Monetary Union and further
evolves into a Customs and Monetary Union.
- Under this Union, member countries enjoy common economic union with free markets
with no restriction on movement of goods, labor, capital and resources across
member countries, common tariffs for external trade, besides combining it with a
common monetary currency system.
- Examples: Common Monetary and Economic Community of Central Africa.
Economic Union and Monetary Unions finally lead up to Complete Economic
Integration as the final stage. In Economic Integration, the member countries
operate with single currency and fiscal policy coupled with single economic
policy and function as single economy.
To achieve and stabilize single economy, it necessitates the political
integration, which brings into being the concept of United Countries with
autonomous states governed by federal government. United States of America is
the outstanding example of such integration evolving into one Nation.
Payment Mechanisms in International Trade
Setting up International Trade Mechanisms involves inter disciplinary processes
including Finance, Logistics, Taxation and Supply Chain disciplines. Every
Business Manager would need to know the nuances of the trade even though he may
or may not be involved in the micro management of the processes.
Any Import or Export entails commercial transaction and payment. When an import
is made into the US, the foreign supplier would have to be paid in the currency
in which he has raised the invoice. Normally international transactions are made
using USD as the currency. However in many cases of transactions with Europe,
the Euro Dollar is used as the currency too.
When an Export originates out of US to another country, the Exporter would have
to receive payment from the End Customer.
In Exports we have several types of trade or export transactions and the nature
of the business determines the payment terms.
When a new customer approaches and places an order on the Exporter, normally
might insist on advance payment for executing the order. This method normally
continues for a few times until mutual trust is built between the two parties
and they get to know each other.
Letters of Credit
An Exporter if dealing with an unknown customer at the other end may not have
any prior exposure to the credit worthiness of the Customer and would normally
insist on Confirmed Letter of Credit to be opened by the Customer before
shipping the goods. In such cases the Exporter may not be extending any credit.
Also in case of high value transactions with known customers too; exporters
prefer to get paid through Letter of Credit.
While dealing with a customer, the Exporter can check seek a credit worthiness
rating from the customer's bank to be able to ascertain the authenticity and
credibility of the Customer. Normally Large Multi Nationals demand such credit
worthiness reports as a part of their policy.
Bill of Exchange of Documentary Drafts
When there has been sufficient relation between an Exporter and the Customer
(Importer) and the customer's credit worthiness is known through previous
records, the Exporter might decide to extend credit and accept payment on bill
of exchange basis. This system is also called as Documentary Drafts. Documentary
drafts are of two types namely Sight Drafts and Date and Time Drafts.
Open or Ongoing Account
When there is a huge volume of continuous business transactions between the
Exporter and Importer and exports continue to happen on ongoing basis, the
Exporter can simply export on the basis of a purchase order and expect the
Importer to pay promptly on due date. This is the usual method adopted by most
of the Multi National Companies as well as the large organizations that have
sufficient import volumes spread across various countries and are dealing with
multiple vendors on ongoing basis. In such cases they just determine the annual
volumes to be supplied by each vendor, issue an open purchase order and keep
reviewing only the delivery schedule. They offer standard payment commitment on
a particular date to all vendors as a global policy. The payment process will be
set and determined as a part of their business agreement.
Other Types of Trade and Related Payment Mechanisms
Besides the above types of payment mechanisms based on normal Exports and
Imports, there are other types of business models which work on various other
modes of payment terms too.
An exporter might sign up a contractor with a distributor overseas to import,
hold stock and sell the goods on his behalf. In such a situation, the
distributor may not own the stocks and the ownership might continue to lie with
the exporter. The distributor would only be an intermediary to sell the stocks
and repatriate the money realized back to the exporter and get remunerated in
terms of service charges or commission. In such cases there may be a business
agreement in place but no fixed payment mechanism may be adopted.
Counter Trade / Counter Purchase / Barter Trade
In yet another case of business arrangement called counter trade, exports may be
linked with return purchase of some other items from the importer or from
another source in the country. The payment may also involve services other than
products. This kind of trade becomes a necessity while dealing with countries
that do not have sufficient foreign currency. There is also another system of
international barter. which is not very commonly practiced in the commercial
International Payment Systems
Brief Introduction about International Payments
If you have shopped online on international portals or have received payments
from abroad, you would have wondered about how the payments flow across the
world and which banks and financial institutions underpin global commerce and
Further, if you work in a corporate that has global supply chains with
international suppliers and customers, you would be again dealing with a complex
network of institutions and banks that route the payments from one end of the
supply chain or the value chain to the other.
In addition, when nations trade with each other and when central banks transact
with each other as well as banks in different countries deal with each other,
then they are all participating in the international payment system that is the
bedrock of global payment flows.
Components and Constituents of the International Payment System
So, who and what are the constituents and components of the international
payment system? To start with, banks and financial institutions form the first
layer of the international payment wherein they hold accounts of other global
banks who in turn hold accounts of the former. This enables the banks to send
and receive payments from each other as they can simply debit their accounts and
credit the other bank's account with them and this in turn leads to payments
flowing to the recipient bank that debit the sending bank and credit their
Indeed, it can be said that banks such as Citibank which is part of the
international financial conglomerate, Citigroup, Standard Chartered, HSBC, and
Barclays form the lifeline of the international payment system by routing the
money from the senders to the recipients anywhere in the world, anytime of the
year, and any place that they are located in.
The SWIFT Protocol
However, it is not enough for banks and other financial institutions to simply
transfer money to each other without having a common protocol and standard by
which they can communicate with each other. In other words, they need to talk
to each other in a language that is understood by them.
Hence, there is indeed a common protocol that forms the basis for such
communication, this is the SWIFT standard wherein the acronym stands for Society
for Worldwide International Funds Transfer wherein this payment standard
prescribes the rules and regulations that all participants in the international
payment network must abide with to ensure that there is a common standard of
messaging and communication between the banks and other financial institutions.
For instance, the sender, the recipient, the intermediary, and the address and
other details are to be captured in a specific format that is standard across
banks so that each participant in the payment value chain knows exactly what is
contained in the payment message.
An Example of How International Payments Work
To take an example, if you are located in the United States and want to send a
funds transfer to India, you must first setup the beneficiary and then transfer
funds from your account to the beneficiary. While this completes your end of the
value chain, the next step is when your bank in the United States debits your
account and credits its account with the funds. After this, it transfers the
money to its partner bank in India or if it does not have any dealings with
Indian banks, it contacts a bank in the United States that has such dealings and
in both these cases; the funds are then transferred from the banks in the United
States to the bank in India.
Once the banks in India receive the funds, they must then send it to the
ultimate beneficiary wherein the funds are debited from its account and credited
to the recipient. Again, this step might be a single or two step processes
depending on the recipient holding an account with the concerned bank that
receives the funds.
Automation and Digitalization of the International Payment System
As you can see from the above example, international payments involve a complex
chain of transactions and payment routes that entail cooperation and
coordination between multiple banks and financial institutions. All these flows
are made possible by automated payment systems that use the SWIFT standard which
as explained earlier enables and ensures that the payments flow smoothly
throughout the value chain.
Further, in recent years, there has been so much automation and digitalization
of the payment systems that funds from one country to the other are flowing in
an almost real time manner with just minor delays because of the clearing houses
Clearing houses are financial institutions such as the Reserve Bank of India in
India and the United States Federal Reserve in the US which function as the node
for the payments between domestic banks and international banks. Clearing houses
are also places where traditionally there have been like the village markets
where at the end of the day, the various merchants gather to settle their
accounts and square the debts and the credits.
As can be seen from the points raised so far, international payment flows go
smoothly as long as all participants in the value chain do their part in
addition to adhering to the SWIFT protocol. Further, the global payment value
chain is efficient mainly because globalization has led to liberalization of the
banking rules and regulations that have enabled banks anywhere to deal with
other banks everywhere and anytime and every time.
Finally, the next time you send or receive an international payment, just think
about what it takes to enable your payment and imagine bits and bytes of data
and information streaming across the world so that your payment is processed
smoothly and successfully.
Letter of Credit - Meaning and Different Types of LC
International trade between an Exporter and Importer would entail multiple
transactions in terms of documentation exchange, physical cargo movement as well
as settlement of payment which have to be clearly defined and setup in order to
ensure smooth business transaction.
Over the years international trade has established various methods and payment
mechanisms that are accepted globally by all financial institutions and other
Normally when the Customer is new to the Exporter, the business transactions are
done either based on advance payment or Letter of Credit option. LC is one of
the safest mechanisms available for an Exporter to ensure he gets his payment
correctly and the importer is also assured of the Exporters adherence to his
requirement in terms of quality, quantity, shipping instructions as well as
A letter of Credit is the Buyer's Banker's promise to the Bank of the Seller /
Exporter that the bank will honor the Invoice presented by the Exporter on due
date and make payment, provided that the Seller/Exporter has complied with all
the requirements and conditions set by the Importer in the said letter of credit
or the Buyer's Purchase Order and produced documentary evidence to prove
compliance, along with the necessary shipment related documentation.
Confirmed Letter of Credit
A Letter of Credit is always sent by the Buyer's bank to the Seller's Bank or
any bank that is becomes an advising bank. Normally the Seller's bank becomes an
advising bank when a normal LC is received and it delivers or advises the buyer
regarding the receipt of LC with no responsibility towards it. In case of a
Confirmed LC, the Seller's bank checks out the authentication of the LC from the
Buyer's bank and confirms to stand responsible for negotiating, collecting
payment from the Buyer's bank and making payment to the seller in line with the
terms and conditions stipulated in the LC. By adding confirmation to the LC, the
Seller's bank too becomes equally responsible to make payment for the
transaction under the LC. Seller's Bank in turn will charge and collect service
charges from the Seller for the same.
Revocable and Irrevocable Letter of Credit
Normally the Letter of Credits issued is irrevocable, which means that no single
party can unilaterally make any changes to the LC, unless it is mutually
agreeable to both the parties involved. However an LC is said to be revocable if
the terms allow any one single party to be able to make changes to the LC
unilaterally.However it is in the interest of the buyer that he should always
insist on irrevocable Letter of Credit.
When the LC is opened, stipulating the condition that, on presentation of the
negotiable set of shipping document by the seller as per the terms of the LC are
made, the buyer's bank will make payment at sight meaning immediately to the
seller's bank subject to fulfillment of terms and conditions of the LC being
fulfilled, the LC is called Sight LC.
Future or Credit LC
If the payment schedule under the said LC stipulates payment at certain future
dates after presentation of negotiable set of shipping documents by the Seller
and fulfilling the LC terms and conditions, such an LC is termed Future LC or
Credit LC. It is quite normal for sellers to extend credit of 30 days to 60 days
under LCs. However the shipping documents would have to be presented to the bank
immediately so that they documents reach the buyer well ahead in time before the
consignment reaches the foreign shores and the buyer is able to clear the
consignment and take delivery.
International Trade Terms - INCOTERMS
Globalization has given impetus of international trade which is increasing by
the day. International trade involves multiple agencies, transportation agents,
carriers as well as Customs and Banks etc of the two countries involved in
trade. Any Export or Import transaction involves transportation of goods
predominantly via sea or air and in some cases over the road transportation too.
Export and Import transactions are essentially dependant upon documentation and
information to flow across all related agencies smoothly. In fact it is
essential for information to flow to the agencies involved in each sector in
advance before the physical goods arrive or move. The advancement of technology
in terms of internet and EDI has helped smoothen the transactions
internationally across all countries. Similarly in the case of international
terms of trade too, things have been smoothened and standardized across all
countries with the introduction of INCOTERMS published by ICC or International
Chamber of Commerce in 1936.
INCOTERMS are the standard terms of trade that define the rights and obligations
of the parties involved in trade. It specifies the responsibility of the buyer
and the seller by defining the transaction and the cost aspects concerning the
transaction and especially related to carriage, custom duties as well as
Insurance, etc. However it limits itself to the scope of the liability of costs
and definition thereof and does not deal with the ownership or transfer of title
INCOTERMS are divided into 4 groups namely E,F,C & D.
GROUP � E
This group contains only one Incoterm namely EXW - Ex. Works.
This term represents minimum liability on the part of the Seller. Seller&s
responsibility ends with delivering goods at his factory doc. The rest of the
risk and expenses involved are borne by the Buyer and would have to be carried
out through his agent at Origin.
GROUP � F
Consists of FCA, FAS & FOB terms. Under this category the Seller pays for the
pre carriage expenses at the Origin and the main carriage as well as Destination
charges are borne by the Buyer.
FCA - Free Carrier - Seller delivers goods to the Buyer&s nominated vehicle and
his responsibility ceases with delivery. Unloading, transportation as well as
Insurance from this point will be borne by the Buyer.
FAS - Free Alongside Ship - Seller completes Export formalities and delivers
cargo alongside ship. From this point onwards the risk and costs including
transportation and Insurance pass on to the Buyer.
FOB - Free On Board - Seller responsible for inland transportation, Export
clearance as well as delivery cargo onboard the Ship. Once Onboard the Ship the
risk and responsibility shifts to the Buyer who pays the transportation,
Insurance and Destination Charges.
GROUP � C
Under this group the Seller arranges for and pays for transportation but does
not take on the risk.
CFR - Cost and Freight - Seller pays transportation cost up to Destination Port.
Insurance and Risk are with the Buyer from the time the Seller delivers cargo on
CIF - Cost, Insurance & Freight - Seller pays for transportation and Insurance
but the Risk passes to the buyer as soon as the cargo is delivered on board the
CPT - Seller pays transportation cost. The risk and insurance lies with the
buyer from the point of delivery of cargo to the carrier by the Seller.
CIP - Carriage & Insurance Paid to - Seller pays transportation and Insurance.
The risk passes to the buyer when Seller delivers cargo to carrier.
GROUP � D
Under this group the Seller assumes all or most of the risk and takes
responsibility of delivery at Destination upto the agreed point of delivery.
DAF - Delivered at Frontier - Seller responsible to deliver cargo upto the point
of entry at Destination. Risk and responsibility further passes on to the Buyer.
DES - Delivered Ex Ship - Seller assumes risk until the ship with the cargo
reaches the port of Destination. Then the risk shifts to Buyer from the point of
discharge of vessel onwards.
DEQ - Delivered Ex. Quay Duty Paid - Seller takes responsibility until the cargo
is delivered after import clearance at destination and customs duty paid and
delivered to the point on buyers dock.
DDU - Delivered Duty Unpaid - Seller takes responsibility to deliver cargo at
the destination port where the Buyer takes on the responsibility for import
clearance, Import duties and onward delivery.
DDP - Delivered Duty Paid - Seller takes responsibility until the cargo reaches
destination, clears the customs, pays the duty and delivers cargo at Buyer&s
Types of Licenses in International Trade
International Trade has become the order of the day in the current environment
of Globalization. The nature of economies namely under developed, developing and
developed countries as well as the availability of natural resources, labor,
technology and capital required for production etc play a important role in
countries economy as well as its reliance on international trade. While
countries which are rich in resources look for exporting to other countries and
earning foreign exchange, countries mostly the developed countries rely on
imports from developing countries for their use.
Countries like Europe and Us are heavily dependant upon Imports, developing
countries like China and other Asian countries tend to rely on exports to these
Though the countries and WTO have been advocating free trade and several Bi
Lateral Treaties and Multi Lateral treaties have come into being to remove trade
barriers from one member county to another, all of the countries still find the
need to practice and have protectionist attitude towards international trade.
There are political as well as economic considerations that govern the import
and export duties levied by Governments. Primarily import and export duties aim
to encourage or restrict the consumption as well as production in the domestic
economy and market.
Countries levy Import and Export Duties on specific items and also based on
countries of origin. The management of duties and tariffs is managed through
Trade Laws and Policies. Besides imposing duties, countries also restrict and
manage the import and export of items with the help of Licenses to Import and
Types of Licenses
Open General Licensed Items
While normal items and traded goods like textiles, consumer durables,
Handicrafts, electronics items, Food articles, Drugs etc are generally allowed
to be imported and exported by all countries freely without restrictions.
Imports against Specific Import Licenses
Many items like second hand capital equipment, plant and machinery, engines etc
are traded, transferred and imported normally by developing and under developed
economies.Such second hand machinery and goods are allowed to be imported into
the receiving countries only through specific license obtained for the said
purpose. Such license would set forth conditions required to be met by the
importer to prove the residual life of the machinery etc. Import of Fire Arms
and Ammunitions are always covered under specific licenses in most of the
Import - Quantity Restrictions or Quota
Some countries like USA do allocate quantity restrictions for import of items
like textile on certain countries and exporters would have to adhere to the
quota norms, which are periodically reviewed and amended as required.
While the domestic industries are engaged in export of some important natural
resources and raw materials like iron and steel, certain kinds of herbs etc,
Governments control and restrict the export through issuing Export Licenses.
Most countries maintain a negative list of items which prohibit import and
export of certain items like animal hides and other wildlife, precious wild
life, live stock, narcotics and many more sensitive items.
When people import or export items into the country without applicable licenses,
do not bring in consignments avoiding customs clearance and thus avoid paying
duties as well as those items that are prohibited are brought into the country
illegally, such trade is labeled as smuggling.
International Trade and Taxes - Types of Customs Duties
The International Trade is rapidly changing and evolving as a result of
Globalization and advancement of electronic and communication science. These
have brought the entire world under global economy. Benefits of global economy
ensure that despite different states of economic development in various
countries, technology and products become accessible across countries. It
enables all countries to specialize in particular trade and participate and
benefit from global markets, thereby they are able to benefit from utilizing
their resources, labor or whatever advantages of production they are endowed
Globalization has also given rise to the Multi National Companies that operate
globally and are able to leverage on setting up production wherever it is
cheaper and market their goods in countries where markets exist.
When countries have domestic markets and domestic industries, they cannot be
left open to compete in global market without regulatory controls. Domestic
industries need to be protected and supported to face up to competition and
markets need to be regulated to ensure no dumping takes place. Moreover
countries need to watch over depletion of their natural resources too and
control the pricing and financial aspects of international trade related to
All countries exercise controls over international trade through Trade Laws,
Tariffs and Taxes which are called Import Duty and Export Duty. These are aimed
at making trade practices safer, fair and ethical too. Tariffs are influenced by
political as well as economic and financial outlook of the Governments as well
as the bilateral relationship of the country with the other partnering country.
In a bid to made global markets accessible to all freely, the WTO has been
trying to negotiate with all member countries. Uruguay Round did manage to bring
about commitments from countries to cut down tariffs and bring them to base
levels which remain standard across member countries, while the recent DOHA
round of discussions have been centered around agriculture market access and
Types of Customs Duties
All countries maintain and publish schedule of tariffs annually and these are
filed with WTO and generally in line with the international community tariffs.
The rate of duty under the published tariff is called Bound Rates or basic
Applied Rates or Basic Customs Duty
Applied Rates are the effective rate of duties charged by the Customs at the
specific period or time of import. The affective rate can vary from the
Schedule. Generally the trend is to keep the applied rates same as schedule or
at lower than schedule tariff. Countries do not generally tend to charge more
than the schedule.
Application of Duty
Normally the customs duty is set as a set percentage against the value of the
consignment. This percentage value ensures that with the fluctuation of prices
in the international market, the duty component gets automatically adjusted.
However besides basic customs duty, additional duty in terms of fixed value per
ton or per unit quantity as specific or special duty are also applied for
various purposes, to control and balance the import or export, or at times to
augment revenue collection and various other purposes related to international
as well as national situations.
Governments also levy special and temporary duties as percentage over the
portion of customer duty on specific purpose and for specified time. It can also
be applicable only on specific categories.
The tariffs can be based on revenue generation, prohibitive or protective
outlook of the regulatory policy and authorities. It can also be on retaliatory
mode as well as based on bi lateral or specific trade pact with other countries.
All duties incase of both imports as well as exports are valued and collected by
Customs Authorities through their branches set up at every port of entry in the
Customs Department - An Introduction
International Trade is facilitated and controlled by Countries with the help of
Foreign Policy, Export Import Regulations, Schedule and Tariff of Import and
Export Duties as well as Trade Laws and Regulations.
Customs Department is the Federal Government Agency that is invested with
Authority to conduct Customs Valuation and collect Import as well as Export
Duties on behalf of the Government.
Customs are present in all points of entry into and out of the country. These
include airports, sea ports, on road border check posts and any other point of
exit and entry into the country.
Customers Departments are invested with quasi powers similar to the police and
work in close co-ordination with the border security, police and other security
Imports and Exports cover two channels of transport of goods. Business related
trade is carried on through cargo imports. Caro Import as well as export can be
consigned through road network, via shipping as well as airfreight. All the said
modes will be covered by Customs Department.
The second mode of export and import relates to personal baggage. Though this
mode does not have much of revenue implications but still the baggage has to go
through customs inspection to ensure illegal items and prohibited items are not
being imported or exported. Items like Narcotics, illegal weapons and cash etc
are always smuggled into the country through various routes. Customs department
has revenue intelligence teams that are trained to prevent such acts and arrest
In the Airports and Ports, Customs have designated area and offices where the
exporters deposit the export consignments. After customs clearance the cargo is
directly handed over to the Airline or the Shipping line from Customs department
for onward shipment.
Similarly, imports cargo is offloaded from the aircraft or ship into the Customs
designated area and store until it is custom cleared and released to the
The customs designated area is always a bonded area where in only customs is
permitted entry. The cargo that is kept within the bonded area cannot be moved
or taken out without Customs permission.
Customs Department officials inspect the inbound cargo and based on the
descriptions of the items in Invoice and other documents, assign the correct
tariff to arrive at the valuation of the consignment based on the Invoice value.
The duty amount is calculated and once the duty payment is made by the importer,
the cargo is released. The process of submitting the cargo for customs clearance
as well as facilitating the documentation and clearance process is handled by
Third Party Service Providers called Customs Brokers.
Similar process is followed for customs exports too. Customs Brokers file
documents on behalf of the clients to Customs department, facilitate cargo
inspection and approval to enable exports to be completed.
Customs Departments also work closely with border security forces and revenue
intelligence agencies to work on information related to smuggling and illegal
entrants into the country.
Revenue intelligence wing of Customs deals with matters pertaining to valuation
of imports and try to check transfer pricing under valuation, under invoicing
etc done by importers to evade import duty payments. They also build database of
international prices of specific commodities and the trends in the markets to be
able to spot under valuation attempts by importers.
A Brief on Customs Brokerage
International trade is regulated through tariffs and trade laws established by
the Country's Federal Governments to control the imports and exports of the
country. The Government invests executive powers to the Customs Departments,
headed by Custom's Commissioners to administer the policies and tariffs on all
imports and exports into and out of the country.
Customs Clearance Departments are setup in all ports of entry and exit at the
Country's borders including Airports, Sea Ports and Check Posts at Road.
Customs Clearance involves valuation of the goods for their authenticity in
terms of both physical inspection as well as value assessment. The Customs
inspect the documents submitted to ascertain that the valuation on the
Commercial Invoice is on par with the international markets and approve the
assessment based on appropriate classification. Once the consignment is
assessed, valuation determined the demand for duty is made on the Importer. On
receipt of duty payment, the consignment is released out of the Customs bond.
The entire process of imports is governed not only by the Customs Laws, but all
imports are required to be compliant with the other relevant Boards and Bodies
like Food and Drug Administration, Department of Agriculture approval, Fisheries
and Wildlife Department approval etc. While the import consignment is in the
custody of Customs, the rest of the tests and approvals would have to be
acquired before the customs can release the consignment.
The above process of customs clearance can take from anywhere from one day to
seven days depending upon each case. There are several commercial documents that
are to be submitted by the Importer and few Custom related documents have to be
prepared and submitted to enable customs clearance of the imports.
The customs clearance process and co-ordination with the Customs and other
agencies necessitates the services of engaging a Customs Clearance Broker or
Customs Clearance Brokerage Agency is a Third Party Service Agency that is
licensed by Customs Department to operate and represent the Importer. Customs
Clearance License Holder is required to have passed Customs Test and Examination
and is required to be fully conversant with Customs Laws, Rules, and Processes
and ensure adherence to the same.
There are several Customs Clearance Service Providers who are specializing in
the field. There are many freight forwarder companies including Multi National
Companies that own and operate Customs Clearance services for their clients.
The Customs Clearance process requires several documents including commercial
documents from the Buyer, Seller as well as bill of Transport from the
Transporting Company, Certificate of Origin from the Seller country etc. Besides
the Customs Bill of Entry is one of the key documents required to be submitted
along with the rest of the documents. These documents are filed electronically
from the Customs Broker's office before the consignment land. From the time the
consignment lands and is warehoused at the Custom's Bonded Warehouse, there is a
free period of three days to seven days (varies from country to country) within
which the customs clearance process would have to be completed and the
consignment released. If not the consignment then starts accruing demurrage on
daily basis and would have to be paid up by the Importer before clearance of the
Customs Clearance Agent plays a very crucial role in representing the Importer
with Customs and takes the responsibility for compliance of all Rules and
Regulations on behalf of the Importer.
Imports and Customs Clearance - Overview
When any Organization Imports any item into the country, the cargo would need to
be Custom Cleared. The consignment transported by Air, Ship or by Trailer on the
Road, would have to be deposited at the Customs Notified and Bonded Area.
Customs Clearance or brokering is done by third party service providers who are
licensed by Customs for the said purpose. They represent the Importer and
co-ordinate with Customs Department as well as other specific departments to
Custom Clear the cargo.
There are list of several items that cannot be imported into the countries
freely and would require specific License. Alcoholic Beverages, Animals and
Animal products, Fire Arms and Ammunitions, Meat and Meat products, Milk, Diary
and Cheese products, Plants and Plant products, Poultry and Poultry Products,
Petroleum and Petroleum products etc would have to be imported under the License
issued by various agencies and such imports would have to be in compliance with
the rules and conditions laid down by respective agencies.
There are several other items such as art materials, artifacts and antiques,
cultural property, hazardous and toxic materials, internationally banned
products like ivory etc are usually prohibited for imports into the Country.
Bureau of Alcohol, Tobacco, and Firearms, Animal and Plant Inspection Service,
Fish and Wildlife Service, Food and Drug Administration are few of the agencies
that exist in most of the countries which regulate and oversee imports of the
specific items covered under their schedule.
When the Cargo lands at the Customs Bonded W/house, along with Customs
Clearance, the licensed items would need to be inspected and approved for
clearance by these specific agencies too. Customs brokers carry out the
necessary process of submitting documentation, facilitate sampling and
inspection and follow up to obtain approvals.
All cargo being imported as well as export from a country would have to be
deposited at Customs Bonded warehouse to complete export and import formalities
and receive Customs approval to hand over the cargo to the freight forwarder in
case of Export and to the Importer incase of Imports. The customs bonded
warehouse is a customs notified area and the cargo while in bonded warehouse is
under the Customs Charge. Normally bonded warehouses are available and operated
by Customs Departments at the Airports and Seaports. In case of larger airports
and Shipping yards, the Government set up a separate corporation or agency to
setup and operates such bonded warehouse.
In many cases Governments do give
licenses to the Customs Clearing Agents to setup bonded warehouses for exports
wherein the cargo can be offloaded by the exporter, customs formalities
completed and after customs approval the cargo can be stuffed into the Shipping
container. Generally if the export cargo is of smaller lots, the clearing agents
move the cargo to these bonded warehouses. If the export is of one full
container volume, then the cargo is stuffed into the container at the exporter's
premise itself and the container is deposited at the shipping yard in the
customs bonded warehouse or designated area waiting for export clearance.
An imported consignment can be imported and warehoused in Customs bonded
warehouse for certain period of time in bond. This gives the flexibility to the
importer to custom clear the consignment in parts when required for consumption
and pay customs duty only for the consignment that is being de bonded. They can
further sell the materials to third party while in bond and it would be
considered as high sea sale. Un till the importer files bill of entry for home
consumption and pays customs duty to take delivery of the consignment, the
import consignment technically is not considered to be imported and owned by the
Customs bonded warehouses charge normal warehousing rental and other
transaction charges for the goods warehoused. Additionally beyond a certain free
period ascertained by Customs in advance, the importer may be charge a certain
interest on the customs duty payable on the said import, depending upon case to
Documentation in Customs Clearance
Any Importer wishing to bring in cargo into the country may do so through air,
ship, and road or multi modal transport. Every import consignment is required to
be deposited by the transportation agency or the freight forwarder into the
Customs Designated Bonded warehouse for Customs Clearance.
Customs Clearance is facilitated by Customs Clearance Agent or Broker who is
Authorized, Licensed agency or operator to file the necessary documents on
behalf of the importer and co-ordinate the clearance activity.
Customs Clearance Process entails filing of Bill of Entry in electronic form by
Clearing Agent on behalf of the Importer with Customs, along with other
Commercial Documents including Declarations from Importer, Commercial Invoice,
Packing List, P. Order Copy as well as Certificate of Origin and Licenses to
Import if any.
Bill of Entry is the main key document on which the Customs approves clearance
of the cargo and the document is crucial for availing duty credits if any by the
Importer post clearance. The Bill of Entry document is also required as an
important record for audit purposes and any further inspection from any
Types of Bill of Entry
Depending upon the nature of transaction the Bill of Entry form varies.
important types of BOE are discussed herein:
BOE for Home Consumption
When an import consignment is required to be custom cleared and the importer
wishes to take delivery and use the cargo for internal consumption in his
business organization, the Bill of Entry for Home Consumption is filed. The Bill
of Entry for Home Consumption is in white color.
BOE for Bonding
If the Importer does not wish to custom clear the imported consignment right
away and wishes it to be warehoused at the Customs Bonded Warehouse, then the
Bill of Entry for Bonding is submitted, so that the customs can permit the
transfer of import shipment to be warehoused at the customs bonded warehouse
without payment of duty but on execution of a bond by the importer and postpone
the clearance to a future point of time. The importer by filing the Yellow
colored BOE for bonding is able to defer the payment of duty until such time
that he requires clearing the consignment.
When this BOE for bonding is filed, the customs assess the consignment and
determine the duty payable and the importer executed a bond for the required
value but is not required to pay the actual customs duty.
Ex-Bond Bill of Entry
When import consignments are not custom cleared immediately on arrival and are
warehoused at the customs bonded warehouse, the importer can choose to custom
clear the entire consignment or in parts whenever he requires by filing Ex-Bond
Bill of Entry to clear the consignment from the warehouse on payment of duty.
The valuation under the Ex-Bond Bill of Entry will take into account the
prevailing rates of duty at the time of actual removal of imported consignment
from the warehouse and not the duty assessed through Bonding BOE. In case there
has been a revision in the tariff, the prevalent tariff at the time of removal
from the bonded warehouse will prevail.
Ex-Bond Bill of Entry is green in color and is also called 'Green Bill'.
Import Documentation Requirement for Customs Clearance
In effecting Imports as well as Exports, documentation plays a very important
role. Especially in case of imports, the availability of right documents, the
correctness of the information available in the documents as well as the
timeliness in submitting the documents and filing the necessary applications for
the Customs Clearance determines the efficiency of the Customs Clearance
process. Any delay in filing or non availability of documents can delay the
process and thereby importer stands not only to incur demurrage on the imported
cargo but also stand to loose business opportunities.
Customs Clearance process requires set of documents to be submitted by the
Importer, By the airline, shipping line or concerned Freight Forwarder as well
as the Customs documentation prepared and submitted by Clearing Agent on behalf
of the Importer.
Some of the documents required from Importer from his end are:
This is the most important document that certifies the sale as well as gives the
description of the items as well as reflects the pricing or the value of the
Customs valuation is based on the value reflected on the Commercial Invoice.
Customs also verifies the rates charged in the commercial invoice and can
question the rates applied incase it has sufficient cause to believe that the
rates charged as not as per international market rates or the invoice is under
valued to avoid duties.
It is mandatory to put the shipping marks on all the cargo covering each and
every individual piece or parcel. The details of the number of parcels in the
consignment, their dimension, the shipping marks, the gross and net weights of
each of the parcels along with the number of units contained in each parcel is
catalogued in the form of packing list.
Packing List is used to identify the parcels as belonging to the particular
consignment under the said Invoice.
Certificate of Origin
Certain bilateral agreements and multi lateral agreements would enjoy favorable
tariffs for import duties. In such cases when the consignments are exported from
such member countries, the designated Export Agency issues Certificate of Origin
to the importer for submission to Customs. Based on this certificate the Customs
Department of the Importing Country classifies the cargo under specific
Certificate of Origin also helps to avoid third party countries from routing
imports through member countries and effecting third party exports to avoid
duty, quantity or license restrictions.
Bill of Lading or Airway Bill
Bill of Lading is a negotiable multi modal transport document issued by the
Shipping Line certifying carriage of the said cargo under the specific invoice
on behalf of the exporter or importer depending upon the terms of sale. An 'On
Board Bill of Lading' is usually considered to be the apt Bill of Lading that
signifies that the cargo has been loaded 'On Board' the vessel or the ship. This
is one of the documents required for negotiations of payment from importer to
Air way Bill is the negotiable transport document issued by an Airline or a
Freight Forwarder who consolidates the airfreight cargo.
In case of Road Carriage, the Transporter issues a negotiate Way Bill covering
Depending upon the mode of transport, one of these documents would be required
to be submitted along with the commercial invoice and packing list to the
Customs for clearance.
Customs Clearance Agency and Process
Any Organization that is engaged in Imports or Exports would require the
services of third party Customs Clearance Agent as well as a Freight Forwarder.
While freight forward manages the transportation part of the exports and
imports, customs clearance and the approval and co-ordination with the rest of
the regulatory authorities to affect the imports and exports is done by the
Customs Clearance Broker.
Every Exporter and Importer would need to know the basics of the Import and
Export policies as well as conditions applicable to their specific products of
import and exports. In addition they should also be aware of the processes
involved in imports and exports broadly. However it is the Customs Clearance
agent who would know the working of all the Customs Rules and Laws and ensure
compliance of the same in a speed manner so as to ensure that the import
consignment is cleared within the allotted free period and does not incur
Pre Customs Clearance
Customs valuation process demands a list of documents that are required to be
submitted by the Importer. Gathering the various documents from the Importer,
from the forwarding agent and creating customs documents required to be filed
for clearance process is undertaken by the Clearance Agent. It is he who
prepares the Bill of Entry the main document on which the Customs approves the
valuation and clearance.
With the standardization of INCO Terms and Documentation, the documents are
prepared in advance as soon as the consignment is dispatched from the Country of
Origin and the Bill of Entry along with the commercial documentation and the
transportation documents are filed electronically from the Clearance Agency's
office and registered at the Customs Department.
Clearance Process at Customs
On arrival of the consignment at the Customs Bond, the Customs carries out
physical inspection as well as valuation of the import. Valuation of the import
consists of ascertaining the correct description of the items, classification of
the items under relevant Customs Chapter and Tariff, Ascertaining that there is
no case of under invoicing and certifying the valuation of the consignment and
arriving at the Customs Duty required to be paid. The clearance agency proceeds
to advice and co-ordinate with the importer to make necessary Customs Duty
Payments and takes physical delivery of the Consignment and delivers it to the
Importer at the designated place along with the set of Original documents.
Customs Rules permit a free bonding or warehousing period of three to seven days
(depends from country to country and location). Normally the air shipments are
given only three days for clearance while the sea shipments are given up to
seven days of free warehousing in Customs Bonded Warehouse. The importer through
the Customs Clearance agent has to clear the consignment within the free period,
failing which a daily demurrage would be charged on the consignments for all
days up to the time of actual delivery. The demurrage could prove to be very
expensive and hence it is important to ensure that the Customs Clearance Agency
is efficient and knows its job well enough.
Importer cannot be expected to spend his time on getting the consignments
cleared after ensuring that he is compliant with all the processes. Hence the
role of the Customs Clearance Agency comes into the picture for he undertakes to
represent the Importer with the Customs Department and follow through the
Approach to Exports and International Marketing Business Model
Today every individual entrepreneur owned businesses as well as Corporates have
changed the way they look at their vision and business planning. Companies how
ever big or small are no longer operating in domestic markets alone, for they
have at their disposal the entire global market which is just waiting to be
captured. The globalization has increased the international trade which has been
enabled and propelled due to the electronic and internet revolution. Every
company draws up ambitious business plans for its domestic markets as well as
targeting the most attractive foreign markets for its products with a long term
view makes up for most of the business plans.
Today most of the Organizations are thinking global, setting up networks
globally and this is leading to an increase in international trade.
Multi National Product Company's view of global markets and trade is totally
different from the other smaller organizations. They generally tend to identify
their markets first. To be able to cater to the growing markets they identify
suitable manufacturing locations that give them the best cost advantage in terms
of labor as well as other resources.
Using various Supply chain network models, as well as commissioning various
Market Research reports, they choose to setup manufacturing or assembly plants
based on analysis and detailed network designs. Accordingly we see manufacturing
plants being set up or transferred from one region to another region. Many US
and European companies have setup manufacturing locations in Malaysia, India,
Hong Kong, Singapore, Indonesia, Philippines for these are known to offer
skilled labor at cheaper costs and are ideally located to the growing markets
Then there are other companies in the US as well as Europe and other parts of
the world who believe in outsourcing or contract manufacturing. There are
several Large scale ECM / EMS companies like Sanmina, Solectron, Foxcon,
Flextronics etc who have setup manufacturing facilities for electronics field
and cater to leading brands all over the world. In the field of Electronics and
Computers, contract manufacturing seems to be very much in vogue since 1980s.
Even in the field of pharmaceuticals, last two to three decades have seen
several changes in terms of manufacturing. Multi national Companies have
increasingly outsourced manufacturing of bulk drugs to countries that are
cheaper especially to countries like China, India and Philippines etc.
The increased international trade and sales and marketing efforts in new markets
have given impetus to international trade. While planning to capture a new
market different Organizations have different approaches. While very big Multi
National Companies like Procter & Gamble, Unilever, IBM, Microsoft etc, have
approached new markets directly by establishing their own networks and offices
in foreign countries, there are other companies that have sought to go in for a
Joint venture with local business partners and bring in Foreign Direct
Investments into the country. This approach varies from country to country and
is especially dependent upon the foreign countries policy towards foreign direct
investment and their support for global players to set shop in the country.
However there are host of medium and small size organizations those that explore
new markets with a very clear approach of manufacturing locally, products for
export markets and exporting to the new markets. Such organizations focus more
on setting up marketing network in the new markets. There are different options
that are followed by different organizations depending upon their business
There are several different options available to exporters to market their
products and manage the exports to the foreign country. Many companies appoint
Sales Representatives or Agents that market the products, book orders and work
on commission basis. The second type of model followed by many organizations is
to appoint Country Distributor who will buy the stocks and sell in the local
market. Yet another type of export marketing involves consignment sale to agents
in which the consignment is exported to the agent who does not own the stock but
holds it in inventory and sells in the market and repatriates the earning
directly back to the company.
Export Marketing Channels
For any Business Organization which is eyeing a foreign market as a part of its
Exports strategy, getting its Marketing and Supply chain in place forms a
critical part of the initial process which will determine his initial foray into
While doing business in foreign markets is very lucrative, the initial cost of
marketing can be very high until business volumes pick up sufficiently to
justify the kind of expenses being incurred. However the expenses are justified
keeping view the long term potential of the country and the export market.
Every market in each country is unique and is characterized or influenced by the
local ethos, culture and traditional practices. In most cases the exporters
would find it more expensive to station themselves or open offices in the
foreign countries initially until them are able to add sufficient volumes. They
do go through a period of learning curve where in they get to understand the
markets, the customer requirement and this helps them fine tune their offerings
in the times to come. However it become imperative for exporters to be able to
find the right representatives or marketing agencies in the foreign country who
will be able to market their products, book customer orders and help finalize
negotiations. Such trade representatives or marketing agencies can be sourced
through various resources. In most of the cases the Trade Fairs and Exhibitions
are the best places to meet with the relevant professionals in said area of
expertise. Besides the trade directory and listings too provide details of the
players in the market.
However exporters would have to take time to travel to the foreign market, be in
the market, understand the potentials and be able to choose the right
partners.Once the marketing plan has been finalized and marketing agents
identified the next task on hand for the Exporter would be to set up a supply
chain model to be able to service the foreign markets. It is essential to have
this arrangement in place before the marketing initiatives are kick started, for
one cannot have customers waiting for products, especially in case of exports
that involve longer lead times. Businesses for long have practiced appointing
distributorship as a model of supply chain that has been working well all over
So essentially here we are talking about signing up with two different Export
Sales Agreements. In the first instance the Exporters would need to identify and
sign up a Sales Agent or Sales Representative Agency and a Country Distributor.
In some of the markets you might find a Marketing Agency cum Distributor who is
a dominant market player in which case you stand to benefit from having to deal
with one agency.There exists a lot of difference between the two agreements
required in the above cases for the roles and responsibilities as well as
liabilities are totally different in both cases.
||Sales & Marketing Agency
||Marketing, Locating Customers, Building &
Developing Sales Leads, Negotiate & Close Sales Order.
||Buys product Stocks, Manage inventory,
Service Customer Order, Execute and affect deliveries, Collect Payment.
||Does not Own Stocks. Only Co-ordinates for
Customer Delivery directly from Source or through Distributor.
||Owns and Maintains STOCKS
||Profit Mark up on Product Cost
||Influences pricing with Exporter, but the
last call is left to Exporter to close the deal.
||Can Take independent call on pricing as the
ownership of stocks lies with self.
||With the Seller/Exporter
Apart from the above two channels, Exporters sometimes use Consignment Sales
Agents too. When the Exporter is initially getting a feel of the markets and is
looking to tap the customers he would need to hold the stocks at hand so that he
is able to offer immediate delivery to the new customer and help bag orders. In
such cases the exporter will use a Consignment Agent who will import and hold
the consignment on behalf of the exporter.
Once the orders are received and the consignment is delivered, the Consignment
Agent will receive payment from the customer and in turn repatriate the amount
received back to the Exporter after keeping the agreed amount of margin as per
his agreement. In such cases the stocks are owned by the Exporter until it is
invoiced by the Consignment Agent to the Customer.
The Consignment agent acts as a custodian of goods only and does not carry any
other ownership. He provides a legal entity for the Exporter to send goods to in
the foreign country and manages the supply chain services as per instructions of
the Exporter. The entire responsibility, risk including marketing, pricing,
collections and liquidation of stocks lies with the Exporter.
Increasing Exports through Free Trade Zones (FTZ)
Countries have long since realized the importance of furthering their interest
by supporting the International Trade and Exports from in house and actively
supporting the industries to become globally competitive. Besides this
objective, many governments also aim to promote Foreign Direct Investment into
the country and encourage Multi National Companies to set shop and manufacture
goods for home consumption as well as Exports. In order to support such
initiatives most countries set up Special Economic Zones in their country.
Governments develop certain underdeveloped or rural regions as industrial parks,
provide international standard amenities and designate such zones as Special
Economic Zones. These areas are normally exempt from most of the normal trade
barriers, tariffs and national laws and seek to promote free market export
oriented manufacturing activities. There are several sub categories of Special
Economic Zones (SEZ) namely Free Trade Zones (FTZ), Export Processing Zones
(EPZ), Free Zones (FZ), Industrial Parks, Free Ports etc.
The Governments give preference to large scale manufacturing or assembly units
to be set up by Multi National Companies of repute and provide tax holidays as
well as waiver of many of the formalities required to be followed by the
Companies in the said Zone. Typically the Companies import Raw Materials and
manufacture goods locally thus using local cheaper labor and Export the goods
outside the Country. Both the Imports and Exports are exempt from Customs Duties
and other levies. Only the goods that enter the local market as domestic sale
product are taxed. Such manufacturing intensive zones help generate a lot of
employment in the rural sector and lead to the overall development of the area
and in turn stimulate economic growth in the area. Besides local growth of the
area, it helps country earn huge foreign exchange as well.
Ireland was the first country to set up Shannon Free Zone which was followed up
quickly by most of the developing countries like Philippines, Malaysia, China,
India, Mexico, Costa Rica, Honduras, and Guatemala etc. The list of countries
now having adopted EPZ has cross over 100 numbers.
While Jabil Ali FTZ made a huge impact on Dubai and its growth, China has
benefited from its most successful SEZ - Shenzhen which helped employ over 10
million people. India has become one of the Asia's largest outsourcing hubs
thanks to establishment of SEZs through out the Country.
Though in many countries the SEZs are implemented by the Governments, quite a
few SEZs have been implemented by private parties too as private operator,
private developers. Quite a few countries have adopted a mid path of setting up
public sector quasi-government agencies with a pseudo corporate institutional
structure and autonomy in operations. In some other cases SEZs have also
developed on the basis of public-private partnership arrangements.
SEZs can be said to be the precursor for establising liberal market economy and
free trade. Today world over more than 3000 FTZs in over 116 countries are
employing appx. 43 million people engaged in manufacturing of various consumer
items such as clothes, shoes, electronic gadgets, computers and toys etc.
Why Do Exports Matter?
Countries all over the world try to promote exports. Almost every country offers
financial incentives to exporters. Countries like China have Special Economic
Zones wherein exporters are not charged any tax. Similarly, other countries have
special banks and insurance agencies promoted by the government to facilitate
This brings us to the importance of exports. If the government is spending so
many resources and providing so many incentives to exporters, then they must be
important for a country. In this article, we will understand the economic
benefits that are derived from exports.
Utilization of Comparative Advantage
The fundamental principle driving international trade is that of comparative
advantage. Some countries are blessed with some natural resources whereas others
have different resources at their disposal. Consider the case of a country like
Saudi Arabia. It has much more oil than it could possibly use. However, there
are very few other resources that can be used internally. It is exports which
allow Saudi Arabia to lead a prosperous life. They export the excess oil and
import all the other goods. Similarly, countries like India and China which have
the highest working populations export their labor services. Hence, it is
important for any country to recognize their core competency and start focusing
on exporting them.
Contribution to GDP
Net exports are the difference between imports and exports. If the net exports
number is positive it adds to the GDP of the nation. On the other hand, if the
net exports number is negative, it subtracts from the GDP of the nation. This is
because goods which are sent abroad are also manufactured locally. Since GDP
counts only local production, exports definitely lead to an increased GDP.
Of late, countries have started using GDP as a proxy measure to determine the
rate of economic growth. Hence exports have become even more important because
they appear to be directly linked to economic growth.
Increase in Employment
Exports lead to domestic production. Domestic production requires domestic
labor. Hence, exports lead to an increase in employment in the nation. Apart
from direct employment provided by exports, there is also a spillover
effect. This means that once export workers get paid, they also spend their money
to consume goods and services. This leads to even more job creation. As a
result, the entire economy develops. Economists often cite the example of China
while explaining this point. The unemployment rate in China has been drastically
cut down after the export-oriented policies were brought into place.
Also, economists often cite the United States example to prove their point.
After World War-2, the United States was a dominant exporter of goods to the
world. This period saw a massive rise in employment in the United States.
However, soon America became dependent on cheap imports from nations such as
China, Japan, and Korea. Now, the unemployment rate has skyrocketed in America.
Since the production of goods is not happening in America, the American worker
It is for this reason that countries are now wary of decreasing exports. A fall
in exports is treated as an early indicator of impending economic recession.
Recovery from Recession
Exports are a very important tool to spur economic growth in a country. This
means that exports can also be used to recover from recessions. The logic behind
this is simple. During the recession, there is a negative sentiment in the
entire economy. Factories and offices stop giving wage increments. As a result,
consumers start deferring their purchases. The result is that a vicious cycle
ensues and production comes to a halt.
During the same time, other countries around the world are not suffering from a
recession. Hence the consumers in these countries are willing to spend. It is
here that exports come into play. Exporters from recession prone countries can
send their goods to nations with favorable economic climate. This will increase
the local GDP and reduce unemployment. This puts the economy
Increasing exports is one of the most effective ways to beat the recession.
Earning Foreign Exchange
The dollar is the most important currency in the world today. It is a reserve
currency. This means that international trades happen either in dollar or gold.
Essential commodities like oil and gold are priced only in terms of dollar or
gold. Hence all countries need dollars for their survival.
Exports are the only way to earn dollars. It is for this reason that exports are
considered to be vital to the solvency of a nation. A thriving economy can
suddenly implode in the absence of dollars. This is because they will not be
able to import essential commodities. Hence, exports are considered to be the
lifeline of ant economy. This is why governments all over the world create
special schemes to spur exports.
It must also be noted that exports need to be done at a profit. Some countries
are subsidizing their products so that they become cheaper on the international
market and spur exports. This will not benefit the economy. This is because at
the end, this amounts to giving away stuff for free! Subsidies do not spur
exports. They simply give away money that was earned by other industries in the
nation. Subsidies are more political in nature. They are meant to benefit some
people at the expense of the majority.
The Case against Export Credit Agencies
Export credit agencies are quasi-government agencies. These agencies are usually
backed by government institutions. This means that they are under the purview of
government authorities and also have access to taxpayer funds. All developed
countries in the world have created their own export credit agencies.
Collectively these agencies wield a tremendous amount of influence on world
trade. It is estimated that the ECA backed exports amount to more than $200
billion each year.
Economic textbooks often portray export credit rating agencies as a positive
force which helps improve international trade. However, there are also many
criticisms which are leveled against these agencies. In this article, we will
have a closer look at the reasons which make ECA's dangerous and harmful for the
The credit provided by Export Credit Agencies (ECA's) can be thought off as a
store credit card. Just like a store credit card provides loans to consumers at
high-interest rates, export credit agencies also provide finance to importers
from poor countries at high-interest rates.
Export credit agencies sometimes offer direct finance to foreign governments. In
other cases, they provide indirect finance. This means that finance is actually
provided by a private party. However, it is guaranteed by export credit agencies
meaning that the loan becomes risk-free for the borrowers. Many times
transactions between private parties end up becoming transactions between public
institutions. For instance, if exporter A and importer A use export credit
finance, then their transactions may be insured by the ECAs of both countries!
The problem is that importers only take credit from export credit agencies after
they have exhausted all other options. This means that the projects funded by
ECA's are inherently risky. A lot of times this means that the project fails and
the importer is unable to pay back the loans. It is surprising to find out that
ECA's are amongst the leading creditors for many third world countries. For
instance, export credits amount to about 64% of all the external debt which is
owed by Nigeria! Similarly, this number stands at 42% for the Republic of Congo.
This is the reason why export credit agencies are often called debt traps by
analysts in these third world countries. They are the Trojan horse which seems
friendly at first but end up being more harmful than the bigwigs like World Bank
and International Monetary Fund.
Taxpayers Exposed to Bad Loans
As mentioned above, export credit is generally opted for by buyers who are
unable to obtain any other source of finance. As a result, they lead to a higher
percentage of bad loans than normal. The ECA's charge a higher interest rate to
make up for the loss. However, a significant percentage of the loans lent out by
the ECAs are never repaid.
This is a big problem since it is a hidden transfer of wealth from the taxpayers
to the exporters. The exporters end up being the beneficiary of these loans. On
the other hand, taxpayers who have no idea about the underlying situation end up
paying for these loans.
It is a known fact that export credit agencies have hidden interests. Although,
the ECA's themselves are supposed to be non-profit institutions, the employees
at these institutions are often patronized by corporations. As a result, a lot
of the policies created by ECAs are biased and have hidden agendas.
A lot of times these policies take the shape of priority sectors. Under the
guise of providing financing to important sectors, the taxpayer money is
redirected to a particular industry or even a particular company. Many analysts
have also noted that sometimes the ECAs are keener on guaranteeing the loans and
liabilities of some particular financial institutions.
ECA's Lead to Trade Wars
In the more recent past, ECA's have been blamed for the trade wars that have now
become a part of global economics. This is because, in some cases, the ECAs
often provide subsidized finance to importers. As such, the ECA's make an
exported product more attractive for the importer as compared to goods produced
In many cases, this does not go down well with governments. As such, they end up
increasing the import duty to offset the financing advantage. This increased
duty is seen as a sign of aggression and the other country also ends up levying
countervailing duties on the other country. Therefore, ECAs are a way of
covertly capturing market share in another country. Many countries have now
become aware of this strategy and hence these agencies are at the root of
several trade wars.
Lack of Transparency
Lastly, critics argue that for the amount of power and influence these credit
rating agencies have, they have very little accountability. In many countries,
they are not even audited! Even if they are audited, their records are not made
public. Hence, there is an opaqueness to these transactions which makes them
appear inherently shady. Leaving apart the financial aspects, there is no
control over the social and environmental effects of the projects which are
funded by these agencies.
The bottom line is that the export credit agencies are also a government agency.
Just like other government agencies, they are also prone to bureaucracy, red
tape and corruption.
Import and Export Procedures in India
The Foreign Trade (Development & Regulation) Act, 1992 ('FTDR Act') provides for
the development and regulation of India's international trade. The FTDR Act has
been enacted with an intention to provide a framework for the development and
standardization of India's foreign trade by the way of facilitating imports into
enhancing exports from India and all the other matters related to the same. The
FTDR Act empowers the Government of India to enact the FTP.
The FTP is a detailed policy statement on India's international trade and
facilitates the exports from and imports into India. The FTP also contains
within its ambit the Handbook of Procedures ('HBP') along with the item-wise
export and import policy called the ITC(HS) which is notified by the Directorate
General of Foreign Trade ('DGFT').
Under the FTP, import into and export from India is 'free,' unless specifically
'restricted', i.e., subject to a license, permit or authorization or,
'prohibited.' The policy restrictions under the FTP are contained in the
Schedules appended to the ITC(HS). Schedule 1 of the ITC(HS) pertains to the
Import Policy, whereas, Schedule 2 of the ITC(HS) pertains to the Export Policy.
Further, the DGFT is the authority responsible for the effective implementation
of the FTDR Act as well as the FTP as amended from time to time.
In India, the imports and exports are regulated by the Foreign Trade
(Development and Regulation) Act, 1992, which empowers the federal government to
make provisions for development and regulation of foreign trade. The current
provisions relating to exports and imports in India are available under
the Foreign Trade Policy, 2015-20.
Typically, the procedure for import and export activities involves ensuring
licensing and compliance before the shipping of goods, arranging for transport
and warehousing after the unloading of goods, and getting customs clearance as
well as paying taxes before the release of goods.
Below, we outline the steps involved in importing of goods.
Prior to importing from India, every business must first obtain an Import Export
Code (IEC) number from the regional joint DGFT. The IEC is a pan-based
registration of traders with lifetime validity and is required for clearing
customs, sending shipments, as well as for sending or receiving money in foreign
The process to obtain the IEC registration takes about 10-15 days.
Ensure legal compliance under different trade laws
Once an IEC is allotted, businesses may import goods that are compliant with
Section 11 of the Customs Act (1962), Foreign Trade (Development & Regulation)
Act (1992), and the Foreign Trade Policy, 2015-20.
However, certain items � restricted, canalized, or prohibited, as declared and
notified by the government � require additional permission and licenses from the
DGFT and the federal government.
Procure import licenses
To determine whether a license is needed to import a particular commercial
product or service, an importer must first classify the item by identifying its
Indian Trading Clarification based on a Harmonized System of Coding or ITC (HS)
ITC (HS) is India's chief method of classifying items for trade and
import-export operations. The ITC-HS code, issued by the DGFT, is an 8-digit
alphanumeric code representing a certain class or category of goods, which
allows the importer to follow regulations concerned with those goods.
An import license may be either a general license or specific license. Under a
general license, goods can be imported from any country, whereas a specific or
individual license authorizes import only from specific countries.
Import licenses are used in import clearance, renewable, and typically valid for
24 months for capital goods or 18 months for raw materials components,
consumables, and spare parts.
File Bill of Entry and other documents to complete customs clearing
After obtaining import licenses, importers are required to furnish import
declaration in the prescribed Bill of Entry along with permanent account
number (PAN) based Business Identification Number (BIN), as per Section 46 of
the Customs Act (1962).
A Bill of Entry gives information on the exact nature, precise quantity, and
value of goods that have landed or entered inwards in the country.
If the goods are cleared through the Electronic Data Interchange (EDI) system,
no formal Bill of Entry is filed as it is generated in the computer system.
However, the importer must file a cargo declaration after prescribing
particulars required for processing of the entry for customs clearance.
If the Bill of Entry is filed without using the EDI system, the importer is
required to submit supporting documents that include certificate of origin,
certificate of inspection, bill of exchange, commercial invoice cum packing
list, among others.
Once the goods are shipped, the customs officials examine and assess the
information furnished in the bill of entry and match it with the imported items.
If there are no irregularities, the officials issue a 'pass out order' that
allows the imported goods to be replaced from the customs.
Determine import duty rate for clearance of goods
India levies basic customs duty on imported goods, as specified in the first
schedule of the Customs tariff Act, 1975, along with goods-specific duties such
as anti-dumping duty, safeguard duty, and social welfare surcharge.
In addition to these, the government levies an integrated goods and services tax
(IGST) under the new GST system. The IGST rates depend on the classification of
imported goods as specified in Schedules notified under Section 5 of the IGST
Just as for imports, a company planning to engage in export activities is
required to obtain an IEC number from the regional joint DGFT. After obtaining
the IEC, the exporter needs to ensure that all the legal compliances are met
under different trade laws.
Further, the exporter must check if an export license is required, and
accordingly apply for the license to the DGFT.
An exporter is also required to register with the Indian Chamber of Commerce
(ICC), which issues the Non-Preferential Certificates of Origin certifying that
the exported goods are originated in India.
Import and export documents
Businesses are required to submit a set of documents for carrying out export and
import activities in India.
These include commercial documents � the ones exchanged between the buyer and
seller, and regulatory documents that deal with various regulatory authorities
such as the customs, excise, licensing authorities, as well as the export
promotion bodies that help avail export import benefits.
The Foreign Trade Policy, 2015-2020 mandates the following commercial documents
for carrying out importing and exporting activities:
- Bill of lading or airway bill
- Commercial invoice cum packing list;
- Shipping bill or bill of export, or bill of entry (for imports).
Additional documents like certificate of origin and inspection certificate may
be required as per the case.
The important regulatory documents include:
- GST return forms (GSTR 1 and GSTR 2);
- GSTR refund form;
- Exchange Control Declaration;
- Bank Realization Certificate; and
- Registration cum Membership Certificate (RCMC).
The RCMC helps exporters and importers avail benefit or concession under
the Foreign Trade Policy 2015-20. (On April 1, India was to unveil the Foreign
Trade Policy 2021-2026. The existing policy was extended by a year due to
Covid-19, which was to end on March 31. And the government decided to further
extend it for 6 more months.)
Antidumping is a process of preventing dumping in Indian market. It is the
process of creating a barrier of selling products in low price from its actual
price in other countries. The antidumping is a process of stopping illegally
trading of products at low cost from its actual price in market. The section 9A,
9AA, 9B of Custom Tariff Act, 1975 deals with the provision of antidumping and
dumping in India. This article deals with the dumping and antidumping scenario
in India, where Indian market is also dealing with the dumping problem such as,
Chinese selling their goods in India with lesser price from its actual price of
the products. These kinds of dumping practice are going on in India. The dumping
is kind of an unseen crime. Dumping generate many problems for domestic
industries of India . The latest amendment of 2020 in the custom tariff act,
1975 has recently substituted of new section for section 8B which stated as
power of central government to apply safeguards measures. The government of
India is taking some safety measures for domestic industries of India against
dumping problems going on from last decades.
What is the meaning of Dumping?
Definition from Oxford Law Dictionary :-The sale of goods abroad at prices below
their normal value. Within the EU dumping regulations prohibit the sale of goods
at below normal value. Countervailing (or antidumping) duties may be ordered on
certain imported goods to prevent dumping.
Definition from Mitra's Legal and Commercial Dictionary:
Placing goods on the market in large quantities at unprofitable prices or prices
lower than those charged elsewhere. (Anti-Dumping duties are imposed to limit or
discourage the importation and sale of goods in unfair competition with
Dumping according to GATT (General Agreement on Tariffs and Trade) / WTO (World
Dumping is, in general, a situation of international price discrimination, where
the price of a product when sold in the importing country is less than the price
of that product in the market of the exporting country. Thus, in the simplest of
cases, one identifies dumping simply by comparing prices in two markets.
However, the situation is rarely, if ever, that simple, and in most cases it is
necessary to undertake a series of complex analytical steps in order to
determine the appropriate price in the market of the exporting country (known as
the normal value) and the appropriate price in the market of the importing
country (known as the export price) so as to be able to undertake an
What are provisions in India governing Anti-Dumping?
Anti-dumping Duty (Section.9A of Custom Tariff Act, 1975):
Where any article is exported from any country or territory (hereafter in
this section referred to as the exporting country or territory) to India at
less than its normal value, then, upon the importation of such article into
India, the Central Government may, by notification in the Official Gazette,
- if the article is not otherwise chargeable with duty under the
provisions of this Act, a duty; or
- if the article is otherwise so chargeable, an additional duty, not
exceeding the margin of dumping in relation to such article: not exceeding
the margin of dumping in relation to such article:
- Sub- section (1) and (2) of section 9 shall stand amended as follows
when section 2 of Act No. 52 of 1982 comes into force:--" (1) Where any
country or territory pays, or bestows, directly or indirectly, any bounty or
subsidy upon the manufacture or production therein or the exportation
therefore of any article, then, upon the importation of any such article
into India, whether the same is imported directly from the country of
manufacture, production or otherwise, and whether it is imported in the same
condition as when exported from the country of manufacture, production or
has been changed in condition by manufacture, production or otherwise, the
Central Government may, by notification in the Official Gazette, impose:
- if the article is not otherwise chargeable with duty under the
provisions of this Act, a duty; or
- if the article is otherwise so chargeable, an additional duty, not
exceeding the amount of such bounty or subsidy; Provided that the Central
Government may, pending the determination in accordance with the provisions
of this section and the rules made thereunder of the amount of such bounty
or grant, impose a duty or additional duty under this sub- section not
exceeding the amount of such bounty or subsidy as provisionally estimated by
it and if such duty or additional duty exceeds such bounty or subsidy as so
- the Central Government shall, having regard to such determination and as
soon as may be after such determination, reduce such duty or additional
- refund shall be made of so much of such duty or additional duty which
has been collected as is in excess of the duty of the duty or additional
duty as so reduced.
1. Subs. by Act 52 of 1982, s. 2 (w. e. f. 2- 9- 1985 ).
2. Ins. by s. 3 ibid., (w. e. f. 2- 9- 1985 ).
3. Ins. by Act 18 of 1992, s. 110.
(b) in sub- section (2),--
(i) for the words" no amount of any such bounty or grant", the words" amount of
any such bounty or subsidy" shall be substituted;
(ii) for the words" additional duty", the words" duty or additional duty, as the
case may be," shall be substituted. Provided that the, Central Government may,
pending the determination in accordance with the provisions of this section and
the rules made thereunder of the normal value and the margin of dumping in
relation to any article, impose on the importation of such article into India a
duty or additional duty under this sub- section on the basis of a provisional
estimate of such value and margin and if such duty or additional duty exceeds
the margin as so determined,
(a) the Central Government shall, having regard to such determination and as
soon as may be after such determination, reduce such duty or additional duty;
(b) refund shall be made of so much of such duty or additional duty which
has been collected as is in excess of such duty or additional duty as so
reduced. Explanation. - For the purposes of this section,
(a) " margin of dumping", in relation to an article, means the difference
between the price at which such article is exported and its normal value;
(b) " normal value", in relation to an article, means-
(i) the comparable price in the ordinary course of trade for the said article or
like article when meant for consumption in the exporting country or territory-
as determined under sub- section (2); or
(ii) where such comparable price cannot be ascertained because of the particular
market situation or for any other reason, such value shall be either-
(A) the highest comparable price for the said article or like article from the
exporting country or territory to any third country in the ordinary course of
trade as determined under subsection (2); or
(B) the cost of production of the said article or like article in the country of
origin along with reasonable addition for selling and any other cost, and for
profits, as determined under subsection (2).
(2) Subject to any rules made under sub- section (3), the Central Government
shall, after making due allowance in each case for differences in conditions and
terms of sale, for differences in taxation and for other differences affecting
price comparability, and, after such inquiry as it may consider necessary,
determine, for the purposes of sub- section (1), the export price and the normal
value of, and the margin of dumping in relation to, any article.
(3) The Central Government may, by notification in the Official Gazette, make
rules for the purposes of this section, and without prejudice to the generality
of the foregoing, such rules may provide for the manner in which articles liable
for any duty or additional duty under sub- section (1) may be identified, and
for the manner in which the export price and the normal value of, and the margin
of dumping in relation to, such articles may be determined and for the
assessment and collection of such duty or additional duty.
(4) Every notification issued under sub- section (1) shall, as soon as may be
after it is issued, be laid before each House of Parliament.Refund of Anti-dumping Duty in Certain Cases (Section.9AA of Custom Tariff Act,
No levy on Section 9 or Section 9A in Certain Cases (Section.9B of Custom Tariff
- Where upon determination by an officer authorized in this behalf by the
Central Government under clause (ii) of sub-section (2), an importer proves
to the satisfaction of the Central Government that he has paid anti-dumping
duty imposed under sub-section (1) of section 9A on any article, in excess
of the actual margin of dumping in relation to such article, the Central
Government shall, as soon as may be, reduce such anti-dumping duty as is in
excess of actual margin of dumping so determined, in relation to such
article or such importer, and such importer shall be entitled to refund of
such excess duty:
Provided that such importer shall not be entitled to refund of so much of such
excess duty under this sub-section which is refundable under sub-section (2) of
Explanation - For the purposes of this sub-section, the expressions, margin of
dumping, export price and normal value shall have the meanings respectively
assigned to them in the Explanation to sub-section (1) of section 9A.
- The Central Government may, by notification in the Official Gazette,
make rules to -
(i) provide for the manner in which and the time within which the importer may
make application for the purposes of sub-section (1);
(ii) authorize the officer of the Central Government who shall dispose of such
application on behalf of the Central Government within the time specified in
such rules; and
(iii) provide the manner in which the excess duty referred to in sub-section (1)
shall be -
(A) determined by the officer referred to in clause (ii); and
(B) refunded by the Deputy Commissioner of Customs or Assistant Commissioner of
Customs, as the case may be, after such determination.
(1) Notwithstanding anything contained in section 9 or section 9A, -
(a) no article shall be subjected to both countervailing duty and anti-dumping
duty to compensate for the same situation of dumping or export subsidization;
(b) the Central Government shall not levy any countervailing duty or
(i) under section 9 or section 9A by reasons of exemption of such articles from
duties or taxes borne by the like article when meant for consumption in the
country of origin or exportation or by reasons of refund of such duties or
(ii) under sub-section (1) of each of these sections, on the import into India
of any article from a member country of the World Trade Organization or from a
country with whom Government of India has a most favored nation agreement
(hereinafter referred as a specified country), unless in accordance with the
rules made under sub-section (2) of this section, a determination has been made
that import of such article into India causes or threatens material injury to
any established industry in India or materially retards the establishment of any
industry in India; and
(iii) under sub-section (2) of each of these sections, on import into India of
any article from the specified countries unless in accordance with the rules
made under subsection (2) of this section, a preliminary finding has been made
of subsidy or dumping and consequent injury to domestic industry; and a further
determination has also been made that a duty is necessary to prevent injury
being caused during the investigation:
Provided that nothing contained in sub-clauses (ii) and (iii) of clause (b)
shall apply if a countervailing duty or an anti-dumping duty has been imposed on
any article to prevent injury or threat of an injury to the domestic industry of
a third country exporting the like articles to India;
(c) the Central Government may not levy:
(i) any countervailing duty under section 9, at any time, upon receipt of
satisfactory voluntary undertakings from the Government of the exporting country
or territory agreeing to eliminate or limit the subsidy or take other measures
concerning its effect, or the exporter agreeing to revise the price of the
article and if the Central Government is satisfied that the injurious effect of
the subsidy is eliminated thereby;
(ii) any anti-dumping duty under section 9A, at any time, upon receipt of
satisfactory voluntary undertaking from any exporter to revise its prices or to
cease exports to the area in question at dumped price and if the Central
Government is satisfied that the injurious effect of dumping is eliminated by
(2) The Central Government may, by notification in the Official Gazette, make
rules for the purposes of this section, and without prejudice to the generality
of the foregoing, such rules may provide for the manner in which any
investigation may be made for the purposes of this section, the factors to which
regard shall be at in any such investigation and for all matters connected with
Determination of Dumping:
- Diffrence between Normal Value and Export Price : Margin of Dumping (%
of export price
- Normal Value :- Comparable price at which the goods under complaint are
sold, in the ordinary course of trade, in the domestic market of the
- If the normal value cannot be determined by means of domestic sales,
following two alternative methods may be considered:
- Comparable representative export price to an appropriate third country.
- Cost of production of the goods under complaint in the country of origin
with reasonable addition for administrative, selling and general costs and
- Export Price :- Price paid or payable for the goods by the first
- Formula for calculating Margin of Dumping:
- (Export Price - Normal Value = Margin of dumping.)
The margin of dumping, if any, for goods from a particular exporter is the
amount determined by subtracting the weighted average export price of the goods
from the weighted average normal value of the goods.What is the process of Anti- Dumping in India?
The article produced in India must either be identical to the dumped goods in
all respects or in the absence of such an article, another article that has
characteristics closely resembling those goods.Injury to the Domestic
The Indian industry must be able to show that dumped imports are causing or are
threatening to cause material injury to the Indian 'domestic industry'.
Injury analysis can broadly be divided in two major areas:
Who can file an application?
- The Volume Effect: The Authority examines the volume of the dumped
imports, including the extent to which there has been or is likely to be a
significant increase in the volume of dumped imports, either in absolute
terms or in relation to production or consumption in India.
- The Price Effect: Extent to which the dumped imports are causing price
depression or preventing price increases for the goods which otherwise would
have occurred Causal Link: A'causal link' must exist between the material injury
being suffered by Indian industry and dumped imports.
- An application can be filed by the domestic industry or DGAD
(Directorate General of Anti-Dumping and Allied Duties) on its own cognizance.
- The proceedings begin and responses are invited from 50% domestic
producers constituting the total domestic market.
- Provisional anti-dumping duty is levied on the basis of preliminary
- Final findings are drawn on the basis of inspection of domestic industry
- The final anti-dumping duty is levied on the exporting company.
The entire investigation process has to be concluded within 12 months from the
date of filing the application. Anti-dumping rules also state that this period
may be extended by the period of 6 months, limiting the time period to 18
months. An application for appeal can be filed against the final decision can be
filed with the Customs, Excise and Service Tax Appellate Tribunal along with Rs.
15,000 within 90 days of final order.
The affected domestic industry can hire a corporate lawyer experienced in
anti-dumping matters who can file the anti-dumping application for it.
Relief to the Domestic Industry:Anti-Dumping Duties:
- Preliminary Screening: Application scrutinized to ensure that it is
adequately documented and provides sufficient evidence for initiation.
- Initiation: Public Notice issued initiating an investigation to
determine the existence and effect of the alleged dumping. Diplomatic
representative of the Government of the exporting country notified.
- Access to Information: The Authority provides access to the
non-confidential evidence presented to it.
- Preliminary Findings: Made within 150 days of the date of initiation.
- Provisional Duty: A provisional duty not exceeding the margin of dumping
may be imposed by the Central Government on the basis of the preliminary
- Oral Evidence: Interested parties can request the Designated Authority
for an opportunity to present the relevant information orally.
- Final Determination: Made within 150 days of the date of preliminary
- Disclosure of Information: The Designated Authority will inform all
interested parties of the essential facts which form the basis for its
Non-cooperative exporters are required to pay the residuary duty (highest of the
co- operative exporters) Lesser Duty Rule: Government is obliged to restrict the
anti- dumping duty to the lower of the two i.e. dumping margin and the injury
margin Injury Margin: Difference between the fair selling price due to the
domestic industry and the landed cost of the product under consideration De
Minimis Margins: Any exporter, whose margin of dumping is less than 2% of the
export price and the volume of the dumped imports are below 3% of the total
imports, shall be excluded from duties.Price Undertakings:
Exporter concerned must furnish an undertaking to revise his price.
Advantages of Dumping
Disadvantages of Dumping
- The main advantage of dumping is selling at an unfairly competitive
lower price. A country subsidizes the exporting businesses to enable them to
sell below cost. The nation's leaders want to increase market share in that
industry. It may want to create jobs for its residents. It often uses
dumping as an attack on its trading partner's industry. It hopes to put that
country's producers out of business and become the industry leader.
- There is also a temporary advantage to consumers in the country being
dumped upon. As long as the subsidy continues, they pay lower prices for
Anti-Dumping duty on POLY- PROPYLENE(PP) Exported into India:
- The problem with dumping is that it's expensive to maintain. It can take
years of exporting cheap goods to put the competitors out of business.
Meanwhile, the cost of subsidies can add to the export country's sovereign
- The second disadvantage is retaliation by the trading partner. Countries
may impose trade restrictions and tariffs to counteract dumping. That could
lead to a trade war.
The third is censure by international trade organizations. These include
the World Trade Organization and the European Union.
Competition Law And Anti-Dumping Law � Areas Of Overlaps And
- PP - used in industries for packaging, woven sacks for cement,
fertilizers, sugar and various consumer items such as house ware, auto
components, pipes, water tanks, furniture, appliances raw material in a
variety of and medical.
- Appeal by Reliance Industries, supported by Haldia Petrochemicals
corporation Ltd. (HPCL), the only two producers of PP in the country, against PP
imports from Saudi Arabia, Oman and Singapore.
- Reliance industries among the top 8 producers in world, holds a 70
percent share of the domestic market caters to 3 percent of global
consumption of PP.
- Directorate General of Anti-dumping and Allied Duties (DGAD) has
imposed definitive anti-dumping duty of up to USD 323.5 per tone of PP imported
from Saudi Arabia, Oman and Singapore.
- Government's justification of the duty imports from the subject
countries have increased in absolute terms as well as in relation to total
imports, total demand and total production in India. The market share of the
duopolistic domestic industry has come down, while the demand has increased.
Despite increase in demand, the prices of the domestic industry have been
- However, according to the Indian Plastic Federation (IPF), imports
from Saudi Arabia, Oman and Singapore have increased only marginally from 5% in
2005-06 to 6% in 2008-09.
- It will lead to a significant price rise of the raw material (PP); in
some cases the price may rise to almost double as the amount of duty is
almost equivalent to the international market price. Most of the units
associated with processing industry are small and medium enterprises (SMES) and there is fear of
hurting them in case of rise in the domestic market.
COMPETITION ACT, 2002 An Act to provide, keeping in view of the economic
development of the country, for the establishment of a Commission to prevent
practices having adverse effect on competition, to promote and sustain
competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in India, and for
matters connected therewith or incidental thereto.
The Act provides a very wide mandate for the Competition Commission of India to
enforce. The Act contains provisions which have rather become standard in the
competition jurisdictions all across the globe.
The agreements, abuse of dominant position and regulation of combinations.
provisions relate to anti-competitive
Dominance is not frowned upon by the Competition Act, 2002 but the abuse of
dominance is frowned upon by the legislation. O Anti-competitive agreements and
dominance are to be prohibited by the orders of the Commission whereas the
mergers are to be regulated by the orders of the Commission abuse of.
Competition Commission of India (CCI):
It is a statutory body of the Government of India responsible for enforcing the
Competition Act, 2002, it was duly constituted in March 2009.
Competition Act, 2002
- The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was
repealed and replaced by the Competition Act, 2002, on the recommendations
of Raghavan committee.
- Competition Commission of India aims to establish a robust competitive
- Through proactive engagement with all stakeholders, including consumers,
industry, government and international jurisdictions.
- By being a knowledge intensive organization with high competence level.
- Through professionalism, transparency, resolve and wisdom in
Composition of CCI
- The Competition Act was passed in 2002 and has been amended by the
Competition (Amendment) Act, 2007. It follows the philosophy of modern
- The Act prohibits anti-competitive agreements, abuse of dominant
position by enterprises and regulates combinations (acquisition, acquiring
of control and M&A), which causes or likely to cause an appreciable adverse
effect on competition within India.
- In accordance with the provisions of the Amendment Act, the Competition
Commission of India and the Competition Appellate Tribunal have been
- Government replaced Competition Appellate Tribunal (COMPAT) with
the National Company Law Appellate Tribunal (NCLAT) in 2017.
Functions and Role of CCI
- The Commission consists of one Chairperson and six Members as per the
Competition Act who shall be appointed by the Central Government.
- The commission is a quasi-judicial body which gives opinions to
statutory authorities and also deals with other cases. The Chairperson and
other Members shall be whole-time Members.
- Eligibility of members:
The Chairperson and every other Member shall be a person of ability,
integrity and standing and who, has been, or is qualified to be a judge of a
High Court, or, has special knowledge of, and professional experience of not
less than fifteen years in international trade, economics, business,
commerce, law, finance, accountancy, management, industry, public affairs,
administration or in any other matter which, in the opinion of the Central
Government, may be useful to the Commission.
Judgements of CCI
- To eliminate practices having adverse effect on competition, promote and
sustain competition, protect the interests of consumers and ensure freedom
of trade in the markets of India.
- To give opinion on competition issues on a reference received from a
statutory authority established under any law and to undertake competition
advocacy, create public awareness and impart training on competition issues.
- The Competition Commission of India takes the following measures to
achieve its objectives:
- Consumer welfare: To make the markets work for the benefit and welfare
- Ensure fair and healthy competition in economic activities in the
country for faster and inclusive growth and development of the economy.
- Implement competition policies with an aim to effectuate the most
efficient utilization of economic resources.
- Develop and nurture effective relations and interactions with sectoral
regulators to ensure smooth alignment of sectoral regulatory laws in tandem with
the competition law.
- Effectively carry out competition advocacy and spread the information on
benefits of competition among all stakeholders to establish and nurture
competition culture in Indian economy.
- The Competition Commission is India's competition regulator, and an
antitrust watchdog for smaller organizations that are unable to defend
themselves against large corporations.
- CCI has the authority to notify organizations that sell to India if it feels
they may be negatively influencing competition in India's domestic market.
- The Competition Act guarantees that no enterprise abuses their 'dominant
position' in a market through the control of supply, manipulating purchase
prices, or adopting practices that deny market access to other competing
- A foreign company seeking entry into India through an acquisition or
merger will have to abide by the country's competition laws.
- Assets and turnover above a certain monetary value will bring the group
under the purview of the Competition Commission of India (CCI).
- CCI imposed a fine of ₹63.07 billion (US$910 million) on 11 cement companies
for cartelisation in June 2012. It claimed that cement companies met regularly
to fix prices, control market share and hold back supply which earned them
- CCI imposed a penalty of ₹522 million (US$7.6 million) on the Board of
Control for Cricket in India (BCCI) in 2013, for misusing its dominant position.
- The CCI found that IPL team ownership agreements were unfair and
discriminatory and that the terms of the IPL franchise agreements were loaded in
favor of BCCI and franchises had no say in the terms of the contract.
- CCI imposed a fine of ₹10 million upon Google in 2014 for failure to comply
with the directions given by the Director General (DG) seeking information and
- CCI imposed a fine of ₹258 crores upon Three Airlines in 2015.
- Competition Commission of India (CCI) had penalized the three airlines
for cartelisation in determining the fuel surcharge on air cargo.
- CCI ordered a probe into the functioning of Cellular Operators Association of
India (COAI) following a complaint filed by Reliance Jio against
the cartelization by its rivals Bharti Airtel, Vodafone India and Idea cellular.
- The commission ordered an antitrust probe against Google for abusing its
dominant position with Android to block market rivals. This probe was
ordered on the basis of the analysis of a similar case in the EU where Google was found
guilty and fined.
- CCI issued letters to handset makers in 2019, seeking details of terms and
conditions of their agreement with Google.
- This is to ascertain if Google imposed any restrictions on them for
using the company's apps in the past 8 years from 2011.
- Google Inc. v. CCI.
A Complaint was filed before the CCI that Google Inc. has abused its dominant
position in the internet advertising space by promoting its vertical search
services like Youtube, Google News, Google Maps, etc. In other words, these
services would appear predominantly during a search result on Google,
irespective of their popularity or relevance. The main issue was whether an
administrative body like CCI had inherent powers to review or recall its order
passed under section 26(1) in the absence of any specific provisions in the
Competition Act, 2002? The Delhi Court held that Competition Commission of India
can recall or review its order subject to certain restrictions and the same
should be done sparingly and not in every case where an investigation has been
ordered without proper hearing.
COMPAT in M/s. Excel Crop Care Limited v. Competition Commission of India &
In the case of Sandhya Organic Chemicals, for which the tablets are the sole
product, COMPAT reduced the penalty to a tenth of the original sum ordered by
the CCI, on account of its relatively small production capacity. The challenge
was made to this as an issue. In the present case it has been nightly held that
it was important to articulate the reasons as to why a particular percentage of
penalties were being imposed and secondly, what would be the relevant turnover
for such imposition.
Jet � Etihad Case.
An appeal under Section 53B was made to COMPAT challenging the Jet - Etihad Orde
was dismissed on the point of locus standi without examining the merits of the
Jet � Ethad Order. Though Section 53A provides that any person, aggrieved may
challenge an order of CCI, COMPAT interpreted 'any person' to mean, a person
aggneved by the CCI order and that it could not mean 'any and 'every person.
Mohit Manglani v. M/s Flipkart India Pvt. Ltd. & Ors.
It was alleged by the Informant that these e-commerce websites have been
indulging in anti-competitive practices in the nature of "exclusive agreements"
with seller of goods/services. The Informant stated that owing to such
practices, the consumer was left with no option in regards to terms of purchase
and price of the goods and services and was bound to either purchase the product
as per the terms of the website or opt not to purchase the product in totality.
Whether the practice of entering into exclusive agreement for sale and purchase
of goods by way of e-commerce is violating the provisions? It was held that an
exclusive arrangement between manufacturers and e-portals is not against Section
3. It is rather to help the consumer make an informed choice.Need of CCI
Conflict between Anti-Dumping Law and Competition Law
- Promote free enterprise: Competition laws have been described as the
Magna Carta of free enterprise. Competition is important for the preservation of
economic freedom and our free enterprise system.
- Protect against market distortions: The need for competition law arises
because market can suffer from failures and distortions, and various players
can resort to anti- competitive activities such as cartels, abuse of
dominance etc. which adversely impact economic efficiency and consumer
- Thus, there is a need for competition law to provide a regulative force
which establishes effective control over economic activities.
- Promotes domestic industries: During the era in which the economies are
moving from closed economies to open economies, an effective competition
commission is essential to ensure the continued viability of domestic
industries, carefully balanced with attaining the benefits of foreign
investment increased competition.
- Antidumping laws were initially enacted to address the situation of
'international price predation'.
- They were considered as extension of competition laws.
- Antidumping laws as they exist today do not seem to be concerned with
the issue of predatory pricing.
- They attach sanctions to every instance of international price
discrimination which can be shown to cause injury to the domestic industry.
- Objectives of Competition laws are Promotion of competition and
prevention of anti- competitive practices Protection and promotion of
consumer interest Achieving economic efficiency Geographic/ regional
integration Public interest Competition advocacy
- Objectives of Anti dumping laws Remedying the injury to the domestic
industry due to dumping Public interest Address predatory pricing
- Consumer welfare
Competition laws are primarily aimed at protecting and promoting competition in
markets. Antidumping laws are aimed at remedying the injury to the domestic
industry which may arise due to dumping.Price Discrimination:
Under competition law, only the price discrimination, which adversely affects
competition in markets and thus has negative consumer welfare impact, is
prohibited. o Under anti dumping law, every instance of price discrimination is
Under competition law 'predatory pricing' is understood as a deliberate
strategy, adopted by a dominant firm, with an intent to drive competitors out of
the market by setting very low prices. o Conditions to be met before imposing a
sanction The firm should be in a position of dominance The sale of goods should
be at a price below a relevant measure of cost � The firm should do so with the
intent to reduce competition or eliminate competitors.
Antidumping law does not specifically address the issue of predatory pricing.
Antidumping law is concerned only about the price at which the product alleged
to be dumped is sold in the two markets and not directly about the cost of
production of the product or intent behind the discrimination.Criticism of Anti-Dumping Law and its effect on competition 
From the economics point of view, there is no reason to support any anti-dumping
law, since price differentiation across markets is a perfectly rational and
legitimate profit-maximization action.
Domestic price discrimination normally is not penalized.
They do not afford effective assistance to the domestic industry they are
intended to protect. o They protect producers at the expense of consumers, which
results in higher prices, lower quality products, less consumer choice and a
general lowering of the standard of living for the vast majority of people.
Domestic producers can enlist the help of government to prevent foreign
competition even when there has been no dumping.
They provide good for the minority i.e. producers at the expense of the greatest
number i.e. consumers.
They reduce rather than enhance social cooperation and harmony. o They
redistribute income in the wrong direction i.e. from the poor and middle classes
to the rich. O Domestic producers can raise their prices with little fear of
being underpriced by foreign suppliers.
Thus existence of antidumping law hurts competition both ways, � by forcing
exporters to sell at higher prices and by providing the domestic producers the
freedom to charge higher prices than what would be otherwise possible.
Shortcomings related to the enforcement of Anti-Dumping Laws
Under current anti-dumping rules, national authorities are allowed to exercise
enormous discretion. Since the criteria for determining the export price and the
normal value are neither stringent nor specific, the importing country can
determine incidents of dumping at will. It can lead to the protection of
inefficient domestic industry. A firm is likely to be subject to an anti-dumping
investigation if it exports a product at a price lower than the normal value in
the home market, regardless of whether there is a predatory intent or not.
Anti-dumping rules allow exporters to avoid antidumping actions if exporters
agree to raise their prices. o Such agreements are a means of suspending ongoing
anti-dumping cases and can be used to promote anticompetitive behaviour.
Effects on Trade Flow due to imposition of Anti-Dumping duties
A decline in the aggregate annual import of about 7% in the year 1993 from a
growth of 17.4% in imports arising due to trade liberalization in 1992. In
general, trade from the subject country is restricted when the anti-dumping
duties are levied. Right after the case is filed and during the duration of
investigation, imports drop by a large amount (91%) from pre-petition level. By
the next year after the case has been filed, imports start going up again (rise
by 53%). However, they never again regain their pre-petition high.
Anti-dumping investigations have restrictive impact on imports from the subject
Countries, other countries benefit by increasing their sales. This diversion
of trade from subject to non-subject countries can offset the restrictive
effects of anti- dumping. o the necessarily imply that anti-dumping duties have
no effect at all on overall import trade. existence of trade diversion does not
overall imports fall in response to anti-dumping duties, by a small but
considerable amount.Anti-Dumping Scenario Of China
Anti-dumping export ratio (ADER), defined as economy's share of anti-dumping
cases in the world divided by economy's share in world exports,
If ADER>1, then that economy is targeted more than its share in the exports.
China's ADER = 4.
Also the ADERS of Korea, India and South Africa are more than 1.
WHY DOES CHINA TOP THE LIST?
- After 1992, when Foreign Direct Investments (FDI) into China was allowed,
many companies have invested heavily in China � Started exporting from China
rather than from the home country. As the labor and transportation costs in
China were relatively very low Exporting the produce from these firms was seemed
to be economical There were instances of anti-dumping duties on these companies
which seem to have Chinese origin. Reduced cases against other countries as
opposed to increased cases against China.
- Also, China is considered as a non-market economy liberty to the
investigating economy to calculate cost incurred by referring to costs of
some neighboring countries like India where labor, transportation and other
factors determining price of comparatively high a commodity is unfair
calculation of normal prices and the injury calculation in domestic market,
might result in more number of antidumping measures against China.
- In first decade of facing anti-dumping investigations Chinese
enterprises have not coordinated well in dealing with anti-dumping cases in
an effective manner. This reflects the weakness in the Chinese enterprises
in terms of backward corporate governance practice and also the overall
weakness of nationwide legal infrastructure. This applies to Indian context
in some instances as well. We are not effective in defending the
anti-dumping duties being imposed against our domestic exporters, especially
with the small and medium size enterprises (SMES) as in the shrimp exporters case.
India's import and export system is governed by the Foreign Trade (Development &
Regulation) Act of 1992 and India's Export Import (EXIM) Policy. Imports and
exports of all goods are free, except for the items regulated by the EXIM policy
or any other law currently in force. Registration with regional licensing
authority is a prerequisite for the import and export of goods. The customs will
not allow for clearance of goods unless the importer has obtained an Import
Export Code (IEC) from the regional authority.
The area in which the imports are almost essential are defence requirements,
crude oil, fertilizers, capital goods, industrial inputs like raw materials,
components, consumables, spares, etc., import of samples, import of technology,
import of drawing and designs, import of services etc.
It is necessary for any developing country to expand exports continuously
because export growth ultimately results in creation of jobs, building up of
infrastructure, economies of scale and added foreign exchange earnings. Today's
world is economic in nature and increased exports give credibility to the
standing of the country in overseas market. Exports, therefore, are of
importance and are considered a national priority by the Government of India.
Award Winning Article Is Written By: Mr.Wasif Salim Shaikh
Authentication No: SP124912820855-06-0921