Foreign Trade Policy and Procedure: formula sheet

Key formulas

Objective (Section 3(1))

Central Government, by Order in the Official Gazette → development and regulation of foreign trade by facilitating imports and increasing exports

Power is exercised by Order, not by an ordinary notification of the Act itself.

Import / export of goods (Section 2(e)(I))

Bringing into, or taking out of, India any goods by land, sea or air

Applies to goods only. Mode of transport can be land, sea or air.

Import / export of services or technology (Section 2(e)(II))

Four modes each way: cross-border supply, supply in the other country to a consumer, supply through commercial presence, supply through presence of natural persons

Import: into India, abroad to an Indian consumer, foreign supplier's commercial presence in India, foreign natural persons in India. Export is the mirror image from India's side.

SEZ proviso (Section 2(e))

Import/export for an SEZ or between two SEZs is governed by the Special Economic Zones Act, 2005

A key exception to remember.

Regulation of services and technology (Section 3(2) proviso)

Applies only if provider avails foreign trade policy benefits OR deals with specified services or technologies

The same condition appears in the Section 10(1) proviso for search and seizure of services and technology.

Deemed prohibition (Section 3(3))

Goods under an Order under Section 3(2) = goods prohibited under Section 11, Customs Act, 1962

Customs Act provisions then apply accordingly.

No licence unless required (Section 3(4))

No permit or licence needed for import or export of goods, and no goods prohibited, except as required under the Act, rules or orders

Freedom is the default; restriction is the exception.

Licence (Section 2(g))

Licence to import or export, including a customs clearance permit and any other permission issued or granted under the Act

The definition is wide.

Power under Section 5

Central Government → formulates and announces FTP → by notification in the Official Gazette

The power is exercised from time to time. It is enabling ("may"), not a duty with a fixed period.

Amendment

Amendment of FTP → "in like manner" → by Gazette notification

The amendment uses the same route as the original announcement.

SEZ proviso

FTP applies to SEZs → with exceptions, modifications and adaptations specified by Gazette notification

The Central Government must direct this by notification. It covers goods, services and technology.

Role of the Director General (Section 6)

DGFT advises on formulating FTP and is responsible for carrying it out

Powers under Sections 3, 5, 15, 16 and 19 cannot be delegated to the DGFT under Section 6(3).

Related source of power (Section 3)

Orders under Section 3 → facilitate imports and increase exports; prohibit, restrict or regulate

Section 3(4): no permit or licence is needed for import or export except as required under the Act, rules or orders.

Appointment

Central Government may appoint any person as DGFT (section 6(1))

Appointing authority is the Central Government. The Act does not prescribe any qualification.

Functions of DGFT

Advise on formulating foreign trade policy + be responsible for carrying it out (section 6(2))

Policy is formulated and announced by the Central Government under section 5, by notification in the Official Gazette.

Delegation of powers

Central Government Order in the Official Gazette → powers exercisable also by DGFT or a subordinate officer (section 6(3))

Applies to powers under the Act except sections 3, 5, 15, 16 and 19. The Order specifies the cases and conditions.

Suspension or cancellation of IEC

Notice in writing + reasonable opportunity of representation (and hearing if desired) → suspend or cancel (section 8(1))

The DGFT or an officer authorised by the DGFT acts. After suspension or cancellation, the person can import or export only under a special licence granted by the DGFT (section 8(2)).

Recovery of penalty

Section 11(5): deduction by DGFT or officers, customs recovery, then Collector of the District or detention and sale of property

Under section 11(7), the Adjudicating Authority may suspend the IEC of a person who fails to pay a penalty until it is paid or recovered.

IEC requirement

No import or export without an IEC granted by the DGFT or authorised officer

Section 7. For services or technology, the IEC is needed only if the provider takes foreign trade policy benefits or deals with specified services or technologies.

Control of trade by Order

Central Government Order in Official Gazette → prohibit, restrict or regulate imports and exports

Section 3(2). For services or technology, it applies only where the provider avails policy benefits or deals with specified services or technologies.

Deemed prohibition

Goods under a Section 3(2) Order = goods prohibited under Section 11, Customs Act, 1962

Section 3(3). The Customs Act then applies accordingly.

Freedom rule

No permit or licence needed, no goods prohibited, except as required under the Act, rules or orders

Section 3(4). Use it as your opening point.

Suspension or cancellation of IEC

Ground → written notice → reasonable opportunity to represent in writing (and hearing if desired) → order of suspension for a stated period, or cancellation

Section 8(1). Done by the DGFT or an officer authorised by him, who may also call for records or information.

Effect of suspension or cancellation

Trade only under a special licence granted by the DGFT

Section 8(2). The licence is granted in the prescribed manner and on prescribed conditions.

Quantitative restrictions

Serious injury or threat to domestic industry → notification → initial limit 4 years → extendable → maximum 10 years

Section 9A. No restriction on goods from a developing country while its share is up to 3%, or aggregate up to 9% for several such countries.

Source of power to announce schemes

Section 5, FTDR Act: Central Government may formulate, announce and amend the Foreign Trade Policy by notification in the Official Gazette

Schemes such as Advance Authorisation, EPCG and RoDTEP are part of the policy and procedures made under this power.

IEC requirement

Section 7: no import or export except under an IEC

For services or technology, the IEC is needed only if the provider takes benefits under the policy or deals with specified services or technologies.

Compliance with the policy

Section 11(1): no export or import except in accordance with the Act, rules, orders and the policy in force

Scheme conditions form part of the policy, so breach is a contravention.

Penalty for contravention

Section 11(2): not less than ₹10,000 and not more than five times the value of the goods, services or technology, whichever is more

Applies to a person who makes, abets or attempts an export or import in contravention.

Penalty for false documents

Section 11(3): not less than ₹10,000 or more than five times the value concerned, whichever is more

Applies when a declaration or document is submitted to the DGFT knowing it is forged, tampered with or false in a material particular.

Confiscation and redemption

Section 11(8) and (9): goods, packages and conveyances liable to confiscation; release on payment of redemption charges equal to market value

Confiscation is by the Adjudicating Authority.

Scheme comparison

Advance Authorisation = duty-free inputs; EPCG = concessional duty on capital goods; RoDTEP = refund of embedded taxes; SEZ = concessions under SEZ Act, 2005

Remember the object of each scheme: inputs, machinery, embedded taxes, zone-based benefits.

Compliance rule (Section 11(1))

Export or import only as per the Act + rules and orders + Foreign Trade Policy in force

Any export or import outside these is a contravention.

Penalty for contravention (Section 11(2))

Penalty: not less than ₹10,000 and not more than 5 × value of goods, services or technology, whichever is more

Applies to a person who makes, abets or attempts a contravening export or import. ₹10,000 is the minimum, not an alternative upper limit. Where 5 × value is below ₹10,000, apply the Act's 'whichever is more' wording as stated.

Penalty for false documents (Section 11(3))

Penalty: not less than ₹10,000 and not more than 5 × value of goods, services or technology, whichever is more

Applies where a person signs or uses a forged, tampered or materially false document, knowing or having reason to believe so.

Settlement (Section 11(4))

Admission of contravention on notice → Adjudicating Authority may determine an amount by way of settlement

Only in such classes of cases and manner as prescribed.

IEC action (Section 8(1))

Notice in writing + reasonable opportunity (written representation, hearing if desired) → suspend for a specified period or cancel

DGFT or an officer authorised by him acts. They may also call for records or information.

Effect of IEC suspension or cancellation (Section 8(2))

No import or export except under a special licence granted by the DGFT

Special licence is granted in the prescribed manner and subject to prescribed conditions.

Non-payment of penalty (Section 11(7))

IEC may be suspended by the Adjudicating Authority till the penalty is paid or recovered

This is in addition to the recovery modes in Section 11(5).

Confiscation and redemption (Section 11(8) and (9))

Goods, package, covering, receptacle and conveyances liable to confiscation; release on redemption charges equal to market value

Done by the Adjudicating Authority, subject to prescribed conditions.

Licence suspension (Section 9(4)) and appeal (Section 9(5))

Reasons recorded in writing + reasonable opportunity of being heard; appeal as under Section 15

Applies to licence, certificate, scrip or any instrument bestowing financial or fiscal benefits.

Quick revision

• The Central Government announces and amends the foreign trade policy by notification in the Official Gazette (Section 5).
• Under Section 3, the Government may make Orders by publishing them in the Official Gazette to develop and regulate foreign trade.
• Goods under a Section 3(2) Order are deemed prohibited under section 11 of the Customs Act, 1962.
• Section 3(4): no permit or licence is needed for import or export unless required under the Act, rules or orders.
• Section 7: no import or export without an IEC granted by the Director General or an authorised officer.
• For services or technology, an IEC is needed only if the provider takes policy benefits or deals with specified services or technologies.
• Section 8: suspension or cancellation needs a written notice stating grounds and a reasonable opportunity to represent and be heard.
• After suspension or cancellation, import or export is possible only under a special licence granted by the Director General.
• Section 11(2): penalty is at least ₹10,000 and up to five times the value of the goods, services or technology, whichever is more.
• Section 11(3): using a forged, tampered or materially false document attracts a similar penalty, where the person knows or has reason to believe it is false.
• Unpaid penalty can be recovered like a customs dues, and the IEC may be suspended until it is paid or recovered (Section 11(7)).
• Confiscated goods may be released on payment of redemption charges equal to market value (Section 11(9)).

Common mistakes

• Saying the Act regulates only goods. Fix: Remember the 2010 amendment: Section 2(e) and Section 3(2) cover goods, services and technology.
• Saying the Government regulates all services and technology without condition. Fix: State that for services and technology, regulation applies only when the provider avails foreign trade policy benefits or deals with specified services or technologies.
• Saying the Director General of Foreign Trade announces the Foreign Trade Policy. Fix: Write that the Central Government announces it under Section 5. The DGFT advises on it and carries it out under Section 6(2). Section 6(3) bars delegation of the Section 5 power.
• Stating that the policy must be announced every five years. Fix: Section 5 says only "from time to time". Do not attach a fixed period to the section.
• Saying the DGFT formulates the foreign trade policy. Fix: Remember section 5 gives the formulation and announcement power to the Central Government. Under section 6(2) the DGFT advises and carries out the policy.
• Saying all powers of the Government can be delegated to the DGFT. Fix: Learn the excluded sections: 3, 5, 15, 16 and 19. Section 6(3) allows delegation of every other power under the Act.
• Saying a licence is always required for every import or export. Fix: Open with Section 3(4): no licence is needed unless the Act, rules or orders require it.
• Saying an IEC is needed for all services and technology. Fix: State that for services or technology the IEC is needed only when the provider takes policy benefits or deals with specified services or technologies.
• Saying the schemes are written in the FTDR Act itself. Fix: Say the Act gives power under section 5, and the schemes are announced in the Foreign Trade Policy and its procedures.
• Treating EPCG as a scheme for raw materials. Fix: Link Advance Authorisation to inputs used in the export product and EPCG to capital goods or machinery.

Exam tips

• Learn Section 2(e) as a structure: goods first, then services or technology with four modes each way, then the SEZ proviso.
• Always quote the conditional proviso for services and technology in Sections 3(2) and 10(1) when the question is about scope.
• Write section numbers beside each point. ICSI-style answers earn marks for provision, analysis and conclusion.
• For short notes, add one line on Section 20: repeal of the 1947 Act and the 1992 Ordinance, with savings.
• Keep a one-line definition ready for licence, technology, services, service supplier and specified goods or services or technology.
• Learn the wording of Section 5 almost by heart: "from time to time", "notification in the Official Gazette", "in like manner". Examiners reward exact phrases.
• Always pair Section 5 with Section 6. A common question asks who frames the policy and who implements it.
• Mention the SEZ proviso whenever the question refers to SEZs.