Indirect Tax Laws · Foreign Trade Policy

FT(D&R) Act 1992 and Legal Framework of Foreign Trade Policy

Updated 5 October 2026 · Fact-checked

The Foreign Trade (Development and Regulation) Act, 1992 is the parent law of Foreign Trade Policy 2023. It lets the Central Government regulate imports and exports, announce the policy, and appoint the DGFT to run it. To solve questions, identify the power used, check IEC or licence, then apply the penalty or Customs link.

Understand FT(D&R) Act 1992 and Legal Framework of FTP

Foreign Trade Policy (FTP) 2023 is not a statute. It is a policy document. It gets its legal force from the Foreign Trade (Development and Regulation) Act, 1992 (the FT(D&R) Act). Without the Act, the FTP would only be advice.

The Act does three big things. First, it empowers the Central Government to develop and regulate foreign trade by facilitating imports and increasing exports. Second, it lets the Government prohibit, restrict or regulate imports and exports of goods, and also services and technology, by an order in the Official Gazette (Section 3). Third, it lets the Government formulate and announce the FTP and amend it from time to time (Section 5).

The Director General of Foreign Trade (DGFT) is the officer appointed under the Act (Section 6). The DGFT advises the Central Government in formulating the policy and is responsible for carrying it out. In practice, DGFT issues the Foreign Trade Policy details through the Handbook of Procedures, public notices and notifications, and grants licences, authorisations and the Importer-Exporter Code.

Two control tools sit in the Act. The Importer-Exporter Code (IEC): no person can import or export unless he holds an IEC granted by the DGFT (Section 7), unless an exemption applies, for example import or export for personal use that is not commercial. Under Section 8(1) and (2), the DGFT may suspend or cancel an IEC or licence if the holder contravenes the Act, rules, orders or the FTP. Cancellation or suspension, other than interim suspension pending inquiry, requires giving the holder a reasonable opportunity of being heard. The IEC or licence can also be suspended pending inquiry, and this interim suspension does not need a prior hearing. The licence: where goods are restricted, import or export is allowed only against a licence or authorisation, as the order under Section 3(2) and the FTP provide.

The Act links with the Customs Act, 1962 through Section 3(3) of the FT(D&R) Act. Goods to which an Order under Section 3(2) applies, whether the Order prohibits, restricts or regulates their import or export, are deemed to be goods whose import or export is prohibited under Section 11 of the Customs Act. Customs powers such as seizure and confiscation can then apply to them.

The Act also has its own penalty for contravention. Under Section 11(2), the penalty is not less than ₹10,000 and not more than five times the value of the goods, services or technology in respect of which the contravention is made or attempted. Where five times the value is below ₹10,000, the minimum of ₹10,000 still applies. The Act also has adjudication and appeal provisions.

Key rules to remember

Source of legal force: FTP 2023 = policy announced by Central Government under the FT(D&R) Act, 1992 (Section 5); FTP is notified in the Official Gazette and can be amended in the same way.
Power to regulate trade: Section 3: Central Government may facilitate, prohibit, restrict or regulate imports and exports by Order; Covers goods, services and technology. Not an unlimited power over domestic trade.
Customs link: Goods to which an Order under Section 3(2) applies (prohibited, restricted or regulated) = deemed prohibited under Section 11 of the Customs Act, 1962 (Section 3(3), FT(D&R) Act); This is why Customs can seize and confiscate such goods, including restricted goods imported without the required licence.
Role of DGFT: DGFT (Section 6) = advises on FTP + implements it; Issues IEC, licences and authorisations, and notices that run the policy.
IEC rule: No import or export without IEC from DGFT (Section 7), except exempt cases; Under Section 8(1) and (2), DGFT may suspend or cancel an IEC or licence for contravention of the Act, rules, orders or FTP. Cancellation or suspension, other than interim suspension pending inquiry, requires a reasonable opportunity of being heard. Suspension can be made pending inquiry.
Penalty for contravention: Penalty (Section 11(2)) = not less than ₹10,000 and not more than five times the value of the goods, services or technology involved; Applies to contravention made or attempted. If five times the value is below ₹10,000, the minimum ₹10,000 still applies. Always state the value on which it is computed.

How to solve FT(D&R) Act 1992 and Legal Framework of FTP questions

Use this order for any theory or case question on the Act and legal framework of FTP. It keeps the answer in provision, facts, conclusion form.

1Read the facts and find the act done: import, export, applying for IEC, dealing in restricted or prohibited goods, or breaking a licence condition.
2Name the legal source: the FT(D&R) Act, 1992, and whether the power is Central Government's (order, policy) or DGFT's (IEC, licence, implementation).
3State the rule in plain words: for example, no import or export without IEC, or restricted goods need a licence.
4Check for an exemption or exception, such as personal use or a licence-free category, before applying the rule.
5Apply the consequence: suspension or cancellation of IEC or licence under Section 8, penalty under Section 11(2), or Customs action. Under Section 3(3), goods covered by an Order under Section 3(2), whether prohibited, restricted or regulated, are deemed prohibited under Section 11 of the Customs Act.
6If a number is asked, compute five times the value and compare it with ₹10,000. The penalty is not less than ₹10,000 and not more than five times the value. If five times the value is below ₹10,000, the minimum ₹10,000 still applies.
7Mention the procedural safeguard: reasonable opportunity of being heard before cancellation or suspension, other than interim suspension pending inquiry.
8Close with a one-line conclusion that answers the question asked.

Quickest way: Who, what, which consequence

When to use it: Use this for MCQs and short notes when you have under three minutes.

Who acts? Central Government for policy and orders, DGFT for IEC and licences.
What is the trade act? Import or export, with or without IEC or licence. Is the good covered by an Order under Section 3(2)?
Which consequence? IEC or licence suspension or cancellation, Act penalty, or Customs action for goods covered by an Order under Section 3(2).
Check the number: penalty is not less than ₹10,000 and not more than five times the value involved.

Common mistakes in FT(D&R) Act 1992 and Legal Framework of FTP

Treating the FTP as an Act of Parliament.
The policy is long and has rules, so it feels like a statute.
Fix: Write that the FTP is announced by the Central Government under Section 5 of the FT(D&R) Act. The Act is the law; the FTP is the policy under it.
Saying the DGFT makes the policy on his own.
DGFT issues most public notices, so students assume it is the policy maker.
Fix: The Central Government formulates and announces the FTP. DGFT advises on it and carries it out.
Forgetting the link with the Customs Act.
Students study the FT(D&R) Act and Customs as separate chapters.
Fix: Cite Section 3(3) of the FT(D&R) Act: goods to which an Order under Section 3(2) applies, whether prohibited, restricted or regulated, are deemed prohibited under Section 11 of the Customs Act, 1962.
Saying IEC is needed for every import and export without exception.
The rule is learnt as an absolute statement.
Fix: State the rule and add that certain cases are exempt, for example personal use that is not commercial.
Cancelling an IEC in the answer without any hearing.
Students focus on the penalty and skip the safeguard.
Fix: Add that cancellation or suspension under Section 8, other than interim suspension pending inquiry, requires giving the holder a reasonable opportunity of being heard.
Quoting the penalty as a fixed ₹10,000, or leaving out the five-times-value part.
The minimum figure is the easiest to remember, and the five-times-value ceiling is skipped.
Fix: Quote Section 11(2): not less than ₹10,000 and not more than five times the value involved.

Worked examples

Example 1

Kavya Traders, Surat, imports 2,000 units of an item whose import is restricted under the FTP. It has a valid IEC but no licence. The goods are valued at ₹1,00,000. Discuss the legal position and the penalty range under the FT(D&R) Act, 1992.

Show the solution

Provision: Section 3 lets the Central Government restrict imports by order. Restricted goods can be imported only as the order and the FTP allow, which means against a licence or authorisation.
Facts: Kavya has an IEC but no licence. The IEC alone does not permit import of restricted goods.
Contravention: the import breaches the Act, the order and the FTP, so the Section 11(2) penalty applies.
Customs link: the goods are covered by an Order under Section 3(2). Under Section 3(3), they are deemed to be goods whose import is prohibited under Section 11 of the Customs Act. So Customs can seize and confiscate them.
Penalty range: minimum ₹10,000. Maximum = five times the value = 5 × ₹1,00,000 = ₹5,00,000. Since ₹5,00,000 is above ₹10,000, the range is ₹10,000 to ₹5,00,000.

Answer: Kavya has contravened the Act. Under Section 11(2), a penalty of not less than ₹10,000 and not more than ₹5,00,000 can be imposed. Because of Section 3(3), the goods are also deemed prohibited under Section 11 of the Customs Act, so Customs can seize and confiscate them.

Example 2

Rohit exports handicrafts through a firm whose IEC has been used for export of goods that were misdeclared, in breach of the FT(D&R) Act, rules, orders or the FTP. DGFT proposes to cancel the IEC. Advise on DGFT's power and how it should be exercised.

Show the solution

Provision: Section 7 makes the IEC compulsory for import and export. Under Section 8(1) and (2), DGFT may suspend or cancel the IEC if the holder contravenes the Act, rules, orders or the FTP. Suspension can be made pending inquiry.
Facts: the power arises only if the misdeclaration actually breaches the Act, rules, orders or the FTP. Here it is stated that it does, so DGFT has grounds to act.
Safeguard: cancellation must follow giving the holder a reasonable opportunity of being heard. Only interim suspension pending inquiry is an exception to this.
Effect: after cancellation, the firm cannot lawfully import or export, as it no longer holds a valid IEC.
Other action: a penalty under Section 11(2) can also be imposed through adjudication, and an appeal lies against the order.

Answer: DGFT can cancel the IEC for the contravention, but only after a reasonable opportunity of being heard. It can also suspend the IEC pending inquiry without a prior hearing. The firm cannot trade until it has a valid IEC, and a separate penalty under the Act is possible.

Exam tips

Open every theory answer with the source: FTP 2023 is announced under the FT(D&R) Act, 1992. It earns the first mark easily.
Separate the Central Government (orders, policy, Section 3 and 5) from DGFT (IEC, licences, implementation, Section 6) in every answer.
In case MCQs, check whether the person already holds an IEC or a licence. Having one does not cover the other.
Add the Section 3(3) Customs deeming link when goods are covered by an Order under Section 3(2). It applies to prohibited, restricted and regulated goods.
Write the penalty as a range under Section 11(2) and show the five-times computation if a value is given. The minimum is ₹10,000 and the maximum is five times the value.

Practice questions from Foreign Trade Policy

FT(D&R) Act 1992 and Legal Framework of FTP: frequently asked questions

What is the FT(D&R) Act, 1992 in simple words?

It is the law that gives the Central Government power to develop and regulate India's foreign trade. It covers imports and exports of goods, services and technology, and it is the legal base of the Foreign Trade Policy.

What is the role of DGFT under the FT(D&R) Act?

The DGFT is appointed under the Act and advises the Central Government on formulating the FTP. The DGFT is also responsible for carrying out the policy, which includes granting IEC, licences and authorisations.

Is Foreign Trade Policy 2023 a law?

The FTP is not a statute. It is a policy announced by the Central Government under the FT(D&R) Act, 1992, and its conditions are enforceable because the Act makes contravention of the FTP punishable.

What happens if someone imports or exports without an IEC?

It is a contravention of the Act, which attracts a penalty and possible suspension or cancellation action. Under Section 11(2), the penalty is not less than ₹10,000 and not more than five times the value of the goods, services or technology involved.