World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

(2) Measures Directly Affecting Imports

(ii) Customs valuation and clearance

Australia 63, 64, 65, 66, 67:

Paragraph 21, page 40 of the Secretariat report notes that a landing charge of 1% of the c.i.f. value is added to the c.i.f. value to calculate a good's transaction value.

60. 
    Could India explain the relationship between the "landing charge" and the actual costs incurred in the Government's handling of freight at the port of importation? Could India please explain what costs of the Government the charge is intended to cover?
    

Reply: Article 8.2 of the Customs Valuation Agreement (CVA) states that, in framing its legislation, each Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, the loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation. India has provided for the inclusion in the assessable value of landing charges which represent the cost of unloading and handling charges of the imported goods at the port of importation.

The landing charges are not paid to the Government, nor are they intended to cover the costs incurred by the Government. The charges are included in the customs value of goods for levying duties.

60. 
    Is the landing charge applied at the same rate of 1% of c.i.f. regardless of the mode of transport under which goods are imported (i.e. sea carriage, rail, air, truck)?
    

Reply: The landing charges are applied at the same rate regardless of the mode of transport.

60. 
    Is the charge applied at the same rate of 1% of c.i.f. regardless of the type of good imported, the amount of time those goods spend at the port of importation, the complexity in handling such goods, and the infrastructure required to handle such goods?
    

Reply: Yes.

60. 
    Is the charge added to the transaction value of the goods, even if the commercial cost of handling the goods at importation has already been captured in the "price actually paid or payable" by the importer?
    

Reply: Article 8.2 of the Customs Valuation Agreement (CVA) states that, in framing its legislation, each Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, the loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation. India has provided for the inclusion in the assessable value of landing charges which represent the cost of unloading and handling charges of the imported goods at the port of importation.

The landing charges are added to the customs value of goods for levying duties.

60. 
    Has India considered applying a landing charge based on a specific rate – i.e. Rupees per shipment   rather than the current ad valorem based rate?
    

Reply: No.

(iv) Tariffs

(a) Applied tariff structure

Australia 68:

Table III.5 at page 46 of the Secretariat report suggests that India maintains a high effective applied tariff rate on transport equipment, including automotive goods.

60. 
    Given the negative impact of this high rate on trade development and domestic industry efficiency, does India intend to reduce these applied tariff rates?
    

Reply: India has been reducing its applied tariff autonomously over the years. Any further reduction has to be judged against the sensitivities of the sector, its stage of development and the likely impact on employment and revenue. Hence it would be difficult to predict the future action at this stage.

(v) Other charges affecting imports

Australia 69, 70, 71:

Paragraph 43, page 50 of the Secretariat report states that a Special Additional Duty (SAD) of 4% is applied on "imports, with few exceptions (14.8% of tariff lines)".

69. Could India provide details of the types of goods which do not attract the SAD?

70. Why does India not apply the SAD on these goods?

71. Is the list of imports subject to the SAD routinely amended by India? If yes, are amendments made on a yearly basis, or at the discretion of authorities?

Reply: The list of goods exempt from Special Additional Duty is provided in notification No. 20/2006 Customs dated 1.3.2006 and notification No. 22/2011 Customs dated 1.3.2011. Generally speaking, these are goods that are exempt from the payment of state VAT. Since Special additional duty is a duty equivalent to internal taxes, it is not applied to these goods. In addition to these listed exemptions, exemption is also available to goods imported for subsequent sale by way of a refund which can be claimed if proof of payment of VAT on the imported goods is produced. Further, those goods that are clearly intended for retail sale (such as pre packaged goods intended for retail sale in relation to which, it is required under a statute to declare the retail sale price; readymade garments; mobile phones; watches; and medicaments have also been exempted from 4% special CVD, as a trade facilitation measure to obviate the process of collecting duty and refunding the same upon payment of state VAT.

Although the Central Government is empowered to provide exemption for special additional duty at any time, the list of imports subject to special CV duty are generally reviewed at the time of annual budget exercise.

Australia 72, 73, 74:

The report states in footnote 56 to paragraph 43 that "Some 12 lines in HS 71 (articles of jewellery) have SAD duty of 1%."

72. Could India explain why these articles attract a lower SAD duty than other goods subject to the duty?

73. Have these goods always attracted a lower SAD duty, or has the SAD rate for these goods been amended over time?

74. Could India please provide details of other goods which have received a different SAD duty rate than the standard 4 % ad valorem rate.

Reply: Being a duty equivalent to internal taxes, special additional duty (SAD or special CVD) is levied in lieu of taxes such as state VAT, sales tax, levied or collected by state government or local taxes/charges. Articles of jewellery are subject to 1% special CVD to provide national treatment to imported goods since like domestic goods attract state VAT at the rate of 1%.

These goods have attracted a lower special CVD rate ever since the introduction of this levy in March 2006.

The lists of goods exempt from 4% special CVD are provided under notification No. 20/2006 Customs dated 1.3.2006 and notification No. 22/2011 Customs dated 1.3.2011.

(ix) Technical regulations and standards

(e) Labelling

Australia 75:

Paragraph 114, page71 of the Secretariat report outlines India's labelling requirements and costs associated with them.

75. 
    Could India explain whether it intends to relax food labelling requirements, in particular those that relate to sale price and language that may differ across states?
    

Reply: The matter is not under consideration at present.

Australia 76, 77, 78:

Paragraph 115, page 71 states that while there is no mandatory labelling requirement for genetically modified (GM) products, "legislation is in the pipeline".

75. 
    Could India provide information on whether it has conducted any regulatory impact assessments relating to business costs associated with the mandating of new labelling requirements for GM food and if so, provide the key findings of those assessments?
    

Reply: As the legislation is still in the pipeline, no details can be given at this stage.

75. 
    Does the Indian Government consider food made or processed using GM or nanotechnology and which has passed the mandatory food safety tests as posing a food safety risk?
    

Reply: Procedures and standards have been laid down to assess the safety aspects of food. Any food item which follows the same is considered safe.

75. 
    Could India explain how the Indian Government intends to enforce the new GM labelling regime, e.g. audits, testing etc.?
    

Reply: As the legislation is still in the pipeline, no details can be given at this stage.

(3) MEASURES DIRECTLY AFFECTING EXPORTS

(vii) Export Support

(b) Drawback

Australia 79, 80:

Paragraph 161, page 86 of the Secretariat report refers to the "drawback system in India" and states that "all industry" drawback rates on a number of products have decreased compared with those in force in 2009 10 and that "to discourage exports, and in line with measures taken by the authorities to contain increases in the domestic price of cotton, exports of cotton yarn (HS 5205, 5206, and 5207) have not been covered by the drawback schedule since April 2010."

75. 
    Could India clarify whether its drawback system provides a full refund of customs duties on the applicable imported goods and what other factors are taken into account apart from changes in tariff rate duties in reviewing and revising the amount of drawback?
    

Reply: Under the duty drawback scheme, the duty or tax chargeable on imported materials and used in manufacture of export goods is refunded to the exporters. In reviewing and revising the rates of drawback, the factors taken into consideration, apart from the changes in duty rates include: the average quantity of input materials and average of prices of input materials used in the manufacture of export goods, the average amount of duties paid on the input materials used in the production process including that paid on intermediate products and on materials wasted in the process of manufacture. The duties paid on packing materials are also taken into account.

75. 
    Could India explain the basis for altering the level of the drawback, to the extent that it is not payable on some products (particularly inputs to further manufacture) for extended periods (as in the case of cotton yarn)?
    

Reply: As mentioned above, in reviewing and revising the rates of drawback, the factors taken into consideration, apart from the changes in duty rates include: the average quantity of input materials and average of prices of input materials used in the manufacture of export goods, the average amount of duties paid on the input materials used in the production process including that paid on intermediate products and on materials wasted in the process of manufacture. For this purpose, detailed cost and other data is collected from the trade and industry and the administrative ministries. It is often noticed that the detailed cost and other data are not available for determining the duty drawback rates. In the absence of complete information, the drawback rates are not notified. It is relevant to mention here that the drawback rates are not notified in respect of several export goods.

Refund of duty paid on inputs used in the manufacture of exported goods under the drawback scheme is not the sole route available to the exporter for neutralization of duty incidence. The duty incidence on cotton yarn can be neutralized under other schemes, such as, under advance authorization scheme.

Australia 81:

Australia notes that the extent to which duties and services taxes are not able to be refunded could be construed as a tax on exports, which would discourage exports and suppress domestic prices of the relevant goods.

75. 
    Does India consider that the reduction or elimination of drawbacks provides a subsidy to further manufactured goods that use the relevant goods as an input (e.g. jeans made from the cotton yarn)?
    

Reply: Under the WTO rules, a subsidy shall be deemed to exist if there is a financial contribution by a government or any public body within the territory of a Member or there is any form of income or price support and a benefit is conferred. The reduction or elimination of duty drawback on a particular item does not constitute a subsidy.

Australia 82:

The Secretariat report, paragraphs 165 and 166, page 88, refer to a number of export incentive schemes, including schemes aimed at providing duty and tax concessions, such as "(iii) reward schemes granting exporters duty credits; and (iv) the Export Promotion Capital Goods Scheme, which allows exporters to import capital goods, at concessional or zero duty rates, subject to an export obligation." The report notes that "special schemes are also in place for gems and jewellery, and for export and trading houses (Table AIII.6)".

75. 
    Does India consider that these schemes provide a subsidy contingent upon export performance?
    

Reply: Several of the schemes detailed in the Secretariat Report are in the nature of duty exemption/duty remissions and are not subsidies within the meaning of ASCM. The duty exemption/remission schemes are based on standard input output norms (SION), with specified inputs along with quantity allowed for import. There is a clear co relation between the items permitted for duty free import and their quantity with the corresponding export product. There is no element of subsidy in these schemes as there is an appropriate verification mechanism to check whether any excess quantity of duty exempt material has been allowed for import.

Australia 83:

Paragraph 168, page 88 of the Secretariat report notes that duty concessions granted under the Duty Entitlement Passbook Scheme to exporters of cotton yarn were suspended, for six months, to reduce exports in an attempt to control the domestic price of cotton.

75. 
    Does India consider that this suspension provided a subsidy to further manufactured goods that used the cotton as an input (e.g. jeans)?
    

Reply: The suspension of DEPB on cotton yarn does not provide a subsidy as there is no additional benefit of duty neutralisation scheme to the domestic industry manufacturing the value added goods.

(4) MEASURES AFFECTING PRODUCTION AND TRADE

(iv) Government Procurement

(a) Overview

Australia 84:

Paragraph 220, page 106 of the Secretariat report states that the authorities consider public procurement as an important instrument of government policy, used to obtain certain socio economic objectives such as developing indigenous industries and micro, small, and medium scale industries.

75. 
    How does India define "micro industry" and what are the criteria for being considered such an industry?
    

Reply: As per MSMED Act, 2006, an enterprise engaged in the manufacture or production of goods, with an investment in plant and machinery not exceeding twenty five lakh rupees, is defined as "micro enterprise".

IV. DEVELOPMENTS IN SELECTED SECTORS

(1) AGRICULTURE

(i) General Overview

Australia 85:

We note the comment in paragraph 8, page 127 of the Secretariat report that increasing agricultural production in India requires shifting away from a 'subsidy based, protected regime' for agriculture.

75. 
    How does India view the World Bank's priority areas for support in India, particularly the priority to enhance agricultural productivity by creating a more productive, competitive and diversified agricultural sector by shifting public expenditures to productivity enhancing improvements?
    

Reply: India's priorities and agriculture development strategies are reflected in India's Five Year Plan documents. India is currently implementing agriculture competitiveness projects in Maharastra and a few other States.

(ii) Agricultural Policy Objectives

(a) Measures affecting imports

Australia 86, 87:

Paragraph 17, page 129 of the Secretariat report states that India tends to frequently modify tariffs on food staples, such as wheat, pulses, rice, sugar, and vegetable oils. This variability, as well as the complex process for the notification of tariff rate changes, creates uncertainty and acts as an impediment to trade.

75. 
    Could India explain why it modifies tariff rates on food staples?
    
76. 
    Would a more stable tariff regime provide greater certainty, not only for traders, but also commercial agricultural enterprises in the Indian market?
    

Reply: Production of wheat, rice and other cereals fall in certain years on account of drought and other natural calamities. There are, however, years of much better rainfall resulting in surplus production in the economy. India does modify tariffs to respond to these situations. An inflexible tariff policy is not workable in such a production and demand scenario.

Australia 88:

The Secretariat report notes in paragraph 23, page 131 that India operates a complex system of sanitary import permits, import licenses and restricted ports for the import of certain animal products. We note in particular the Department of Animal Husbandry, Dairy and Fisheries position of setting general import policies for animals and animal products which operate on the basis of the lowest common denominator rather than undertaking a specific country risk assessment for such products. The Department's policies on lamb, goat and pig meat are a good example of this policy in practice.

88. 
    Could India explain whether there are plans to simplify this regime?
    

Reply: Import restrictions are maintained on live animals, meat and other animal products primarily in terms of quarantine certificates. The sanitary import permits (SIP) in no way act as non tariff barrier to trade and in the current regime, application for SIP in case of fish/fishery products are processed on fast track and SIPs are issued within the reasonable time lines.

(b) Measures affecting Exports

Australia 89:

The report notes in paragraph 25, page 131 of the Secretariat report that the 11^th Five Year Plan places 'special emphasis on promoting production and exports of commercial crops and agri based processed products'.

88. 
    In order to achieve an increase in agricultural exports, does India consider that agricultural producers require stable trade policy in addition to initiatives such as the revitalization of plantations, and the provision of tax incentives?
    

Reply: India trade policy with respect to fruits, vegetables and other commercial crops has been quite stable.

Australia 90:

Paragraph 26, page 131 states that since 2007, some agricultural products have been subject to export restrictions and prohibitions, including non basmati rice, wheat, pulses, edible oils, milk powder, casein and casein derivatives and onions. However, India is increasingly a significant exporter of commodities such as rice, oilcakes, bovine meat, tobacco and cotton.

88. 
    Given this, can India indicate how its export prohibition and restrictions comply with Article 12.2 of the Agreement on Agriculture?
    

Reply: The various measures by India to, inter alia, ensure domestic supply, are taken in terms of relevant GATT/WTO provisions.

Australia 91, 92:

We note that paragraph 29, page 132 of the Secretariat report refers to India's last export subsidy notification in 2002. Paragraph 30, page 132 also refers to additional export incentives. We acknowledge that India has made an additional export subsidies notification in 2011, concerning export subsidy commitments for the marketing years 1995 96 and 2001 02 to 2003 04.

88. 
    Can India advice when it intends to notify any export subsidies provided in the years since marketing year 2003 04?
    

Reply: India's notification to the WTO, G/AG/N/IND/8 dated 15 July 2011, related to export subsidy commitments for the marketing years 1995 96 and 2001 02 to 2003 04. Work is underway on India's notifications for the subsequent years.

88. 
    According to India's export subsidy notifications, there were significant fluctuations in the value of export subsidies provided in each year notified. Can India please advise the reasons behind the fluctuations in the value of export subsidies?
    

Reply: Export subsidies provided to agricultural products in 1995 96 and 2001 02 to 2003 04 were covered by Article 9.4 of the Agreement on Agriculture.

(c) Internal Measures

Australia 93:

The Secretariat report notes in paragraph 33, page 133 that direct or explicit subsidies to agriculture as reported in the Central Government's annual Budget amounted to Rs 1,413.5 billion (2.2% of GDP) in 2009/10, up from Rs 571.3 billion (1.3% of GDP) in 2006/07.

In contrast, total agricultural support in OECD countries averaged 0.89 % of GDP for 2007 2009, representing a decline from an average of 2.25 % of GDP in 1986 88.

88. 
    Does India consider the level of Indian government expenditure on subsidies to agriculture to be sustainable into the future?
    

Reply: There is no separate classification of subsidies to agriculture in the central government Budget. The figure of Rs 1413.5 billion is the total subsidies outgo in 2009 10 and not the explicit subsidies to agriculture alone as incorrectly indicated in the Secretariat's Report.

REPORT BY INDIA

II. ECONOMIC ENVIRONMENT

(6) Challenges

(ii) Agricultural growth and food security

Australia 94:

88. 
    Given the Indian Government's concerns about food security and supply, and policy objective to ensure food security, what steps are being taken to liberalise the import of processed foods into India?
    

Reply: Indian Government is concerned about the issue of food security, and plans to tackle the problem by enhancing agriculture production and productivity.

BRAZIL

Brazil 1:

Report by the Secretariat

II. Trade Policy Regime: Framework and Objectives

(3) Trade Agreements and Arrangements

(ii) Regional Trade Agreements

Paragraph 20. "However, despite this generally positive view of regional agreements, India has some reservations regarding regionalism because of its complexity and possible trade diversion"

Could you India please indicate whether concrete examples of trade diversion caused by regional trade agreements have already been identified?

Reply: India believes that RTAs complement the multilateral rule based trading regime. India's concerns on regionalism stem not from possible trade diversion but from the multiple tariff differentials, complicated rules of origin and the duty inversion effect of RTAs and how these could act as a disincentive for local manufacturing.

India has not yet identified any concrete examples of trade diversion caused by RTAs.

Brazil 2:

Report by the Secretariat

III. Trade Policies and Practices by Measure

(4) Measures Affecting Production and Trade

(i) Incentives

Micro and small enterprises

Paragraph 189

Could India please provide more details on the agenda of actions in order to provide relief and stability to MSMEs? Is there an assessment of the results achieved so far?

Reply: The Government of India's Task Force on Micro, Small and Medium Enterprises (MSME) finalized its report in January, 2010 and made 85 recommendations in major thematic areas of (1) credit, (2) marketing, (3) labour, (4) rehabilitation and exit policy, (5) infrastructure, technology and skill development, (6) taxation and (7) issues of MSMEs in North Eastern India and State of Jammu and Kashmir. The implementation of the recommendations is being monitored by a high level steering group to oversee the implementation and follow up action. Further details are available on website http://msme.gov.in/. Action has been completed on a substantial number of recommendations while other recommendations are at different stages of implementation.