Deemed Exports & Categories of Exporters

Submitted by: Arshpreet Kaur Atish Thakur Ashish Sangar Anurag Sharma

Definition
Deemed Exports refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange.

Deemed Exports
Supply of goods shall be regarded as Deemed Exports provided goods are manufactured in India.

The goods from domestic tariff area (DTA) are supplied to manufacturer-exporters in export processing zone units (EPZ) and the payments are received in Indian Rupees.

Supplies regarded as deemed exports

Supply of goods against Advance Authorisation / Advance Authorisation for annual requirement / DFIA. Supply of goods to EOU / STP / EHTP / BTP.

Supply of capital goods to EPCG Authorisation holders.

Contd.
Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF under International Competitive Bidding (ICB). Supply to projects funded by UN Agencies.

Contd..
Supply of goods to any project or purpose in respect of which the MoF, by notification permits import of such goods at zero customs duty. Supply of marine freight containers by 100% EOU provided said containers are exported out of India. Supply of goods to nuclear power projects through competitive bidding as opposed to ICB.

Source: Foreign Trade Policy (2009-2014)

Benefits for deemed exports

Advance Authorisation / Advance Authorisation for annual requirement / DFIA. Deemed Export Drawback. Exemption from terminal excise duty where supplies are made against ICB.

Procedure for claiming benefits

The Suppliers of the goods under Deemed Exports should make application to the regional licensing authority concerned claiming the benefits of Deemed Exports.

The applications should be made in the forms given in Appendix 17 of Hand Book of Procedures of export and Import Policy, along-with documents prescribed therein.

Who gets these benefits ?

Power projects/refineries.
Projects funded by World Bank / ADB/ JBIC/IFAD/OPEC/SIDA/ UN Agencies.

Advance authorization holders, DFIA holders, EPCG holders.

Issues relating to deemed exports

UNDER THE SALES TAX LAW IN INDIA Form H Not mandatory. Goods purchased must be exported in the same form.
1. 2. 3. 4. Coffee and coffee powder Paddy and rice Chassis and buses Rough granite and polished granite.

Purchase tax and exports.

Pruning of deemed export benefits

Large scale misuse over several years, especially by power companies.

Fake claims by certain suppliers, especially firms that supplied boilers, turbines and generator.

Contd.

In 2010-11, the DGFT noticed deemed export dues to the tune of about Rs 5,000 crore were not paid.

The move is aimed at saving about Rs 2,000 crore annually.

Amendments in deemed export policy

An amendment was carried vide notification no. 92 dated 28-12-2011 to allow benefit of deemed export to supplies made to non-mega power projects only under Para 8.3(a) of FTP, viz., Advance Authorization / Advance Authorization for annual requirement / DFIA.

Amendments contd..

Now, deemed export policy has further been amended to deny the deemed export benefit to all supplies made to nonmega projects. Notification no. 107 dated 21-3-2012

Changes
The Supply of cement, fuel and steel will not get duty incentives if used for projects or manufacturing of goods that enjoy the deemed export status.
These benefits are usually accorded to capital goods to bring down the cost of infrastructure building and manufacturing of goods. The idea is to promote manufacturing and infrastructure building.
Source: Business Standard

Exports
Exports are one of the oldest forms of economic transfer, and occur on a large scale between nations that have fewer restrictions on trade, such as tariffs or subsidies.

Country-wise breakup of Exports

India is leading exporter of gems and jewellery, textiles, engineering goods, chemicals, leather manufactures and services. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. Other imported products are: machinery, gems, fertilizers and chemicals. Main trading partners are European Union, The United States, China and UAE.

This data is for 2010 11 and taken from the Commerce Ministry website.

Trade Balance

Direct and Indirect Export

Basically there are two methods of exporting
(A) Direct

Exporting: In direct exporting, the export is undertaken directly by the manufacturer. The manufacturing firm makes its own arrangement to export its products either within the existing sales network or by creating a separate export department of division. This type of exporters is known as manufacturer exporters.

(B) Indirect Exporting :The manufacturer does not directly export to foreign buyers. The manufacturer exports through intermediaries such as merchant exporters, export houses, all forms of trading houses, export consortia etc.

Manufacturing Exporter
Who dont want to operate through intermediaries. May engage agents or depute representatives abroad to book order

Manufacturing Exporter
Either within the existing sales network or by creating a separate export department of division.

Manufacturing Exporter

Manufacturing Exporter

Manufacturing Exporter
Global Manufacturing Competitiveness Index

Manufacturing Exporter
Indias Position

Types Of Manufacturing Exporters

Selling through distributors
Distributor, purchases the product from the manufacturer and sells them at profit. To develop their own international marketing capability.

Selling through distributors

Use a distributor if you:
Need to maintain inventory on the foreign country. Do not want to maintain your own distribution network.

Types Of Manufacturing Exporters

Selling through foreign retailers
These transactions often involve consumer products. Effective in countries that have large retail chains.

Types Of Manufacturing Exporters

Selling directly to end user
Selling overseas may incur some added costs. The seller is responsible for: Shipping Payment collection Product support and service

Types Of Manufacturing Exporters

Selling through World Wide Web
Time difference is no longer a problem (24*7) No travel costs.

The Brighter Side(Advantages)

Goodwill Optimum Production Capacity Export Obligation Direct Control Export Incentives First Hand Information Higher Price

Disadvantages

High Degree of Risk More Investment Lacks Specialization High Overhead Unsuitable to small firms

Categories under Indirect Exporters Exporters

Merchant Exporters Brokers Trading Houses Manufacturers

Merchant Exporters
Buys the goods and then resells them to its foreign contacts at a mark up. Acts in the same role as a domestic wholesaler. A class of export merchant is the export vendor, which specializes in purchasing surplus or poor quality goods that producers can't profitably sell domestically.

Merchant Exporters (Contd)

The Exporters who do not have their manufacturing/processing/growing facility and source the product from others and exports. A merchant exporter basically guards the interests of the manufacturers, as well as, the end clients, keeping the long term interests of all the people involved, in view.

Trading Houses
Trading House is appropriate if the manufacturer do not have the resources to service a distribution channel in the market. Can be both exporters and importers. They are knowledgeable about their markets, know the customers' needs, the communication problems in foreign markets, and the cultural problems in the market. They usually handle packing, shipping, and documentation and thus relieve the producer of many of the tedious tasks required for exporting

Brokers & Manufacturers

A local export broker works on a commission basis, and is similar to an overseas agent or broker.
Usually a specialist in certain bulk commodities or manufactured products, brokers are then in a good position to find buyers for those products in many areas of the world.

Some manufacturers buy many components or parts from other domestic manufacturers, either for use in the products they export or to complement their export product line.

Advantages
Less Risk Less Investment Specialization Suitable to small firms Technical guidance After sale service Less Overhead

Disadvantages
Lower Price No export incentives Excessive dependence Second hand information Lack of control Lower Sale

Thank You