The Indian Post – Vol 1 – Custom & Foreign Trade Policy Edition – March 2022 – International law


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Overhaul of the foreign trade policy

The pandemic has led to the extension of the five-year foreign trade policy (FTP) 2015-2020 for two years. From April 1, 2022, the new Indian FTP is expected to be introduced. In all likelihood, the focus will be on boosting exports and reducing compliance.

Meanwhile, the Indian government has initiated a review of some export-related programs that have been disputed and found to be inconsistent with the WTO legal framework. For example, India’s commodity export program (ME IS) has been replaced by the remission of duties and taxes on exported products (RoDTEP) to compensate exporters for non-chargeable taxes on exported goods. India’s current Special Economic Zone (SEZ) are to be replaced by brand new legislation later this year. This will be an opportune time for companies in the SEZ to raise their concerns. The new SEZ law is expected to overcome barriers related to land acquisition, connectivity and lack of support from local state governments. A three-decade-old export promotion capital good (EPCG) which allowed exporters to import capital goods duty free into India also needs to be reconsidered.

India Manufacturing Initiative

With the advent of the Modi government in 2014, this has been a well heralded and cohesive political effort to position India as a ‘manufacturing/services hub’. Few government initiatives in this regard include the production-related incentive (IPL) Programs in 14 key sectors with the aim of creating national manufacturing champions and generating employment opportunities for the nation’s youth.

In addition, the Public Procurement (Preference to Make in India), Order 2017 notified by DPIIT on June 15, 2017 gives preference to local suppliers in central government procurement. Public procurement categorizes suppliers into three categories
to know. Local Class I Provider, Local Class II Provider, and Non-Local Provider. This categorization will determine the order of preference in government tenders and is entirely dependent on the value of “local content” – the added value provided by suppliers in India.

The recently announced EU budget for 2022 gives further impetus to the above-mentioned reforms. Some key policy initiatives announced in the budget include a master plan with an expenditure of $2.67 billion to support the growth of road, rail, port, etc. infrastructure. exemptions where there is sufficient national capacity; and Boost to ‘Start up’ community by setting up a committee of experts for the PE/VC sector, are some of the other initiatives.

It is proposed to increase the capital procurement budget for Defense to 68% from the current 58%. Additionally, defense R&D will be open to start-ups, industry and academia with 25% of the defense research and development budget. In addition, private industry participation will be sought for the design and development of military platforms and equipment in collaboration with DRDO and other organizations through an SPV model.

Changes to Customs Rules (importing goods at preferential duty rates) 2017 have been proposed. These rules essentially provide for the benefit of a preferential duty on the importation of specified goods. The amended rules establish simplified procedures for claiming the benefit by largely automating the entire process, from use to reporting in a consolidated monthly return.

Export controls (SCOMET list)

After a major overhaul of the SCOMET List (Indian Export Control List) in 2017, the government reviews its SCOMET list from time to time to align it with multilateral export control regimes, namely the Wassenaar Arrangement, the Missile Technology Control Regime and the Australian Group – for which India is a member. Recently, the DGFT has introduced the General Authorization for the Export of Chemical Products and Related Equipment (BCAE) with effect from 19 January 2022. GAEC is a single, general authorization (valid for five years) for the export of chemicals and related equipment to one of the member countries of the Australian Group. GAECs aim to provide a simpler and hassle-free export licensing process.

Allied Regulatory Updates

With a view to standardizing products, the statutory body – Bureau of Indian Standards (BIS) in agreement with other ministries, have sought to include various sectors such as electronics, chemicals, toys, etc., which now require mandatory BIS certification. Going forward, it is expected that various other products will be included in the long list.

The National Security Directive on the Telecommunications Sector (Directive), as approved by the Cabinet Committee of the Government of India on 16th December 2020, requires telecommunications service providers (TSP) in India to procure only such equipment for their networks which are certified”Trusted Products” from “Source of trustEffective June 15, 2021, the directive aims to enhance the security of telecom networks in India, particularly in anticipation of network expansions in light of the upcoming launch of 5G technology in India.

A trusted telecom portal has also been launched by the Indian government to administer the process of equipment procurement by TSP. The National Cybersecurity Coordinator (NCSC) is the designated authority for determining a vendor’s inclusion as a trusted source and a product’s inclusion as a trusted product. For such determination, the NCSC is required to obtain the approval of the National Telecommunications Industry Security Committee (NSCT) which is headed by the Deputy NSA of India and includes members from various ministries and industries.

Recent Survey Trends

India is also tightening rules to prevent misuse of its free trade agreements (ALE) by exporters allegedly bypassing goods via countries with which India had signed FTAs. While the regulatory framework of Indian customs law was put in place in 2020, customs authorities have recently opened investigations against several companies inasmuch as FTA imports, mainly aimed at verifying the authenticity of imports and their added value.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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