Wt/tpr/M/313/Add. 1 31 July 2015

B. Trade Policies by Sector

Banking

(Page 111, para 4.58)
5. Pursuant to the revised guidelines issued by the Reserve Bank of India (RBI) on priority sector lending, foreign commercial banks with 20 or more branches must achieve overall priority sector target of 40% of adjusted net bank credit (ANBC) or a credit equivalent amount of off balance sheet exposure (OBSE), whichever is higher, along with the sub-targets for agriculture and weaker sections category within a maximum period of five years ending on 31 March 2018, as per the action plans submitted by them as approved by RBI. Other foreign banks must achieve overall priority sector target of 32% of their ANBC/credit equivalent of OBSE.
Question: Do the revised guidelines apply to domestic banks? If so, is there any difference between the requirements for foreign and domestic banks? What would be the consequences for those banks failing to achieve the target, if any?
Reply: The details of the eligible priority sector are available in our circular on Priority Sector Lending-Targets and Classification FIDD.CO.Plan.BC.54/04.09.01/2014-15 dated April 23, 2015. (Available at https://rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0)
(Page 114, para 4.73)
6. The Indian Government has proposed to set up, as a part of a special economic zone (SEZ), an International Financial Services Centre (IFSC) at Gandhinagar, Gujarat and the IFSC Banking Units will be regulated by RBI.
Question: We are interested to know more about the scope and the latest development of the IFSC as well as the corresponding guidelines for the entities to be established in the IFSC. Would there be any difference in the requirements for and/or the benefits of setting up offshore banking units in the IFSC, as compared with other SEZs? Would there be any measures to encourage or attract more foreign-invested banks to the IFSC?
Reply: International Financial Services Centre (IFSC) has been set up under Section 18(1) of Special Economic Zones Act, 2005.
IRDAI has issued the IRDAI (IFSC) Guidelines, 2015 for establishing an IFSC Insurance Office (IIO). These Guidelines are available at:

https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo2465&flag=1
Maritime Transport

(Page 125, para 4.121)
7. Vessel-sharing agreements of the liner-shipping industry have been exempted from Section 3 of the Competition Act 2002 since December 2013 and will be valid until February 2016 subsequent to several extensions. During the first exemption period, 30 vessel-sharing agreements were filed with the authority.
Question: We would like to know more about the rationale behind this exemption. What is the view of your authority on the impact of the vessel-sharing agreements on the competitiveness of the liner-shipping industry and the efficiency of the market? Is there any plan to remove such exemption in future?
Reply: Vessel Sharing agreement [VSAs], which was initially exempted from the provisions of section 3 of the Competition Act, 2002, for a period of one year w.e.f. the 11th of December 2013 until the 10th of December 2014] has been exempted for one more year w.e.f. the 5th February, 2015 up to the 4th February 2016, after a joint review of the said exemption conducted by the Competition Commission of India and the Directorate General of Shipping, Government of India, for ease of doing business in the liner shipping industry in India, without however, compromising the core competition principles. The evaluation of benefits of the exemption to the industry is expected to be carried out in August–September, 2015 i.e. after a considerable utilization of period of exemption by the shipping lines. The view of all stakeholders would be taken in this regard. Further, at present, the exemption is valid up-to 04.02.2016, and there is no specific plan to withdraw the exemption before that period.
(Page 126, para 4.125)
8. The Ministry of Shipping has issued the Guidelines for Determination of Tariffs for Projects at Major Ports 2013 with a view to liberalizing certain aspects of tariff regulations to invite more private investment in the port sector.
Question: How were the Guidelines implemented in the past year? Is there any increase in foreign investment? Will there be any review on the effectiveness of the Guidelines in inviting more private investment?
Reply: In 2013, Ministry of Shipping issued Guidelines for Determination of Tariff for Projects at Major Ports with a view to liberalize certain aspects of tariff regulation in order to invite more private investment in the port sector. These guidelines are adhered to while awarding projects for port development. There has been positive response from port operators and investors to these guidelines. The Tariff guidelines are regularly reviewed based on feedback received from stakeholders and with a view to make them more investor friendly.

Indonesia

GOVERNMENT REPORT
1 ECONOMIC ENVIRONMENT

1. 
   Recent Economic Developments
   

Page 16 Para 5.3
"A major outcome of the Bali Ministerial Conference is the decision on a Trade Facilitation Agreement (TFA). India is a party to this decision and would abide by the obligation to notify its Category A and B commitments in accordance with the provisions of the Agreement. India has undertaken a host..."
Question: Could India please provide its intention to notify its Category A commitments under TFA that the original deadline was the end of July 2014?
Reply: India is in the process of finalizing category A commitments. The Notification and ratification timelines have been kept open ended as per the Protocol acceded to, in WTO on 27.112014.
SECRETARIAT REPORT
SUMMARY

Page 8 Para 1
"During the period under review, India continued its efforts to liberalize and facilitate trade, such as through the introduction of self-assessment in customs procedures and the elimination of state-trading requirements for some agricultural products. India also proceeded with further structural reforms including by eliminating price controls on diesel and relaxing foreign direct investment (FDI) restrictions in some sectors. Nonetheless, the tariff structure remains complex and the simple average MFN tariff rate increased during the review period."
Questions:

1. 
   Could India elaborate more on the self-assessment in customs procedures? Which customs procedures will the self-assessment cover?
   

Reply: Self-assessment is mandatory for all exporters. Every exporter is required to self-assess the duty and the same may be verified by proper officer of Customs. In case of any discrepancy, the assessment made by exporter may be re-assessed by the officer of Customs. Thus, self assessment covers both import and export procedures under the Customs Act, 1962.

2. 
   Which government institution is in charge of this self-assessment?
   

Reply: Self-assessment of Customs duty is the responsibility of the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India.

3. 
   Has the program (self-assessment in customs procedures) had a positive impact on international trade in India? If so, please elaborate?
   

Reply: Yes, self-assessment in Customs procedures was introduced with an objective of curtailing time of clearance and the associated costs by relying more on the declarations filed by importer and exporter and subjecting only perceived to be risky consignments for examination and re assessment and not all consignments in a routine manner. By increasing facilitation level under self-assessment regime, the clearance time is gets reduced considerably.
Page 10 Para 9
"India has continued to streamline customs procedures and implement trade facilitation measures. With a view to facilitating trade, India adopted the use of self-assessment in its customs procedures in 2011, and around 97.6% of India's imports were processed via the risk management system. Despite the implementation of these measures India's import regime remains complex, especially its licensing and permit system, and its tariff structure, which has multiple exemptions, with rates varying according to product, user or specific export promotion programme."
Question: Will the Goverment of India simplify its complex import regulation, e.g. licensing and permit system, as well as its tariff structure?
Reply: Post Economic Liberalization, of early 90s, India has a considerably liberalized and simplified import regime. India's autonomous reforms for streamlining custom procedures and implementing trade facilitation are based on international best practices & standards. Introduction of new initiatives and expanding scope of existing facilities such as EDI, RMS, e-Payment, the ACP as well as direct delivery of containers at the port rather than clearing them after being brought to the container freight stations, introduction of self-assessment for both imports and exports, automation of transshipment procedures etc. contributed to the reduction of customs clearance time.
2 TRADE AND INVESTMENT REGIME

2.2 Trade Policy Formulation and Objectives

2.2.2 Trade policy goals
Page 26 Para 2.13
"Increasing India's share in global exports remains the main thrust of the Government's trade policy goals. The main goal of the FTP 2009-14 was to make India a global player in world trade by doubling its share of global trade by 2020. This was to be achieved through fiscal measures such as tax incentives, credit for export schemes, institutional changes, rationalization of procedures, diversification of export markets and increased market access, including through regional trade agreements. The FTP is announced every five years and reviewed and adjusted annually. The new FTP for 2015-2020 was released on 1 April 2015. Its goal is to make India a significant participant in international trade and to raise India's share of global exports from 2% to 3.5% by 2020. This is expected to be achieved by providing a sustainable and stable policy environment for foreign merchandise and services trade; linking rules, procedures and incentives for trade with other recent initiatives such as "make in India", "digital India" and "skills India"; promoting the diversification of India's exports by assisting key sectors to become more competitive; and creating an architecture for India's engagement with key regions of the world. The acceleration in exports is expected to be achieved through exemption and remission of indirect taxes on inputs for producing final export products, imports of capital goods at concessional rates of duty, and by stimulating services exports and focusing on specific products and markets."
Questions:___What_is_the_current_progress_of_the_implementation_of_eBiz__Reply'>Questions:

1. 
   Could India elaborate more on the significant changes between the new FTP (2015 – 2020) with the previous FTP?
   

Reply: India's new Foreign Trade Policy (FTP) for 2015-2020 was released on 1.4.2015. The main difference between the new Foreign Trade Policy and the previous one is that FTP 2015-20 introduces two new schemes. The "Merchandise Exports from India Scheme" (MEIS) is for export of specified goods to specified markets. The "Services Exports from India Scheme" (SEIS) is for increasing exports of notified services. These replace multiple schemes earlier in place, each with different conditions for eligibility and usage of scrips.

2. 
   Has the previous FTP achieved its goals?
   

Reply: It would be evident from the fact that over last ten years, India's merchandise trade increased manifold from US$ 195.1 billion in 2004-05 to US$ 764.6 billion in 2013-14. As per the World Trade Organization (WTO), India's share in global exports and imports increased from 0.8 per cent and 1.0 per cent respectively in 2004 to 1.7 per cent and 2.5 per cent in 2013. Its ranking in terms of leading exporters and importers improved from 30 and 23 in 2004, to 19 and 12 respectively in 2013. While India's total merchandise trade as a proportion of gross domestic product (GDP) increased from 29.0 per cent in 2004-05 to 41.8 per cent in 2013-14, India's merchandise exports as a proportion of GDP increased from 12.1 per cent to 17.0 per cent during the same two time periods. The export performance was achieved despite the global uncertainty, and volatility in global commodity prices since 2008.
2 TRADE AND INVESTMENT REGIME

2.4 Investment Regime

2.4.1 Legal framework for business
Page 30 Para 2.30
"Establishing a company in India requires investors to register or obtain licences from various Government agencies, both in the Central and relevant State Governments. This is time consuming and confusing. The Department of Industrial Policy Promotion based in the Ministry of Commerce and Industry (DIPP) indicates that some 16 steps must be completed before an investor can establish a company. This has led to India being consistently ranked poorly by the World Bank's "starting a business" ranking (179 out of 189 economies in 2014 compared to 177 in 2013). To streamline the process, the Government through the DIPP is establishing "eBiz", a web-based portal which is a one-stop shop for delivery of services to investors by the Government which is expected to address the needs of business from inception through its lifecycle. This is expected to significantly reduce the amount of time and money spent by investors in obtaining licences to start a business. According to the September 2014 "Make in India" initiative of the new Government, all Central and State Government departments and ministries were expected to be integrated in eBiz by end-2014. The project which is being operated as a public-private partnership covers five pilot States during the first year covering 65 services (18 central Government and 47 State services, with a further 21 (8 Central and 13 State) services to be added during the second and third years of the project. The project is also expected to be extended to a further five States. The Government expects to provide over 200 State and central Government services through this platform during the next seven years."
Questions:

1. 
   What is the current progress of the implementation of eBiz?
   

Reply: Out of the 26 Central Services identified for integration with eBiz, 14 services have already gone live. Other services are expected to be integrated in this financial year. 24 State services of the 10 pilot States are being implemented.

2. 
   Has the program had a positive impact on streamlining the process of establishing company in India?
   

Reply: Ebiz Project will lead to savings in time, cost and efforts of entrepreneurs. DIPP is attempting a common application form and process for incorporation of a company, allotment of Permanent Account Number (PAN) & Tax Deduction Account Number (TAN) and employer registration with Employees' State Insurance Corporation (ESIC) & Employees' Provident Fund Organization (EPFO).
2 TRADE AND INVESTMENT REGIME

2.4 Investment Regime

2.4.1 Legal framework for business
Page 32 Para 2.34
"In addition to compulsory industrial licensing and reservations for the public sector, environmental clearance under the Environment Protection Act, 1986, is required from the Ministry of Environment and Forests, for 29 industries prior to establishing industrial units. At the level of State Governments, companies are subject to land use, and industrial location laws. Most States also provide incentives for investment."
Question:

1. 
   Please identify the 29 industries that have the above-mentioned additional requirements?
   

Reply: The details of the specific industries that require prior environmental clearance are available at the following link: http://envfor.nic.in/legis/eia/so1533.pdf
3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measure Directly Affecting Imports

3.1.1 Customs procedures and requirements

Page 35 Para 3.4
"India uses a risk management system (RMS) as a trade facilitation measure to selectively screen only high and medium-risk cargo for customs examination. As at end October 2014, about 97.6% of India's imports was processed via RMS. The authorities indicate that RMS for processing imports is operational at almost all customs offices."
Question: What are the RMS criteria for determining a high and medium risk cargo?
Reply: There are large numbers of parameters to determine the nature of risk associated with cargo. This may include source country, type of commodities, type of importers, compliance record of importer/exporter etc.

Page 35 Para 3.5
"Importers with a good track record and complying with qualifying criteria are entitled to be accredited for special clearance procedures under the Accredited Client's Programme (ACP). As at 31 October 2014, 251 ACP importers were allowed to self-assess their consignments with no need for examination, with a view to meeting India's commitments to simplify and harmonize Customs' procedures under the revised Kyoto Convention."
Question:

1. 
   Could India provide more information on the qualifying criteria required to obtain a special clearance procedure under the Accredited Client's Programme (ACP)?
   

Reply: The eligibility criteria for an importer to qualify under the "Accredited Clients Program" is as follows:

i.They should have imported goods valued at Rs. Ten Crores [assessable value] in the previous financial year; or paid more than Rs. One Crore of Customs duty in the previous financial year; or, in the case of importers who are also Central Excise assesses, paid Central Excise Duties over Rs. One Crore from the Personal Ledger Account in the previous financial year, or they should be recognized as "status holders" under the Foreign Trade Policy

ii.They should have filed at least 25 Bills of Entry in the previous financial year in one or more Indian Customs stations.

iii.They should have no cases of Customs, Central Excise or Service Tax, as detailed below, booked against them in the previous three financial years.

1. 
   Cases of duty evasion involving mis-declaration / mis-statement/collusion / willful suppression / fraudulent intent whether or not extended period for issue of SCN has been invoked.
   
2. 
   Cases of mis-declaration and/or clandestine/unauthorized removal of excisable / import / export goods warranting confiscation of said goods.
   
3. 
   Cases of mis-declaration / mis-statement / collusion / willful suppression / fraudulent intent aimed at availing CENVAT credit, rebate, refund, drawback, benefits under export promotion/reward schemes.
   
4. 
   Cases wherein Customs/Excise duties and Service Tax has been collected but not deposited with the exchequer.
   
5. 
   Cases of non-registration with the Department with intent to evade payment of duty/tax".
   

iv.They should also not have any cases booked under any of the Allied Acts being implemented by Customs.

v.The quality of the submissions made by the applicants to Customs should be good as measured by the number of amendments made in the bills of entry submitted by them in relation to classification of goods, valuation and claim for exemption benefits. The number of such amendments should not have exceeded 20% of the bills of entry during the previous financial year.

vi.They should have no duty demands pending on account of non-fulfillment of Export obligation.

vii.They should have reliable systems of record keeping and internal controls and their accounting systems should conform to recognized standards of accounting. They are required to provide the necessary certificate from their Chartered Accountants in this regard as per format given in the Application form.

Page 35 Para 3.6
"To import specific goods, in certain instances, certificates of registration and import permits (e.g. certificates of origin and sanitary and phytosanitary certificates) issued by different agencies are required. These certificates must be submitted at the time of filing the bill of entry."
Questions:

1. 
   Could India identify which products are on the list of specific goods?
   

Reply: In case of import of agricultural products, marine products, processed food items, meat and meat products, SPS certification is required.

2. 
   Could India specify the names of the different agencies which issue the import permits?
   

Reply: Some of the agencies issuing import permits are:-

i.Directorate General of Foreign Trade (Department of Commerce),

ii.Directorate of Plant Protection, Quarantine & Storage (Department of Agriculture & Cooperation),

iii.Ministry of Environment, Forests & Climate Change,

iv.Department of Animal Husbandry, Dairying and Fisheries

Page 35 Para 3.7
"Regarding time required for customs clearance, the mean evacuation time for import consignments at Chennai Port was 8 days and 19 hours, according to a study conducted by the Central Board of Excise and Customs. The authorities consider that the introduction of EDI, RMS, e-Payment, the ACP as well as direct delivery of containers at the port rather than clearing them after being brought to the container freight stations, and a provision for self-assessment contributed to the reduction of customs clearance time."
Question:

1. 
   Could India describe any other initiatives that may also have contributed to the reduction of time required for customs clearance?
   

Reply: Indian Customs has extended 24x7 Customs Clearance Facility for specified imports and export to 18 sea ports covering all major sea ports. Similarly the facility has been extended to 17 air cargo complexes for specified imports and all exports."Single Window Customs Clearance" by integration other regulatory agencies/Departments with Customs is also under implementation. Furthermore, to dispense with physical documents and its submission to Customs, adoption of digital signature in phases have been commenced. This will enable paperless trade and will reduce compliance cost considerably. Indian Customs has also reduced significantly the number of mandatory documents for general import and export to three each. Further a mechanism has been put in place in form of high-level administrative body i.e "Customs Clearance Facilitation Committee" (CCFC) at each seaport and airport with the responsibility of ensuring expeditious Customs clearance of imported and export goods. The Committee include senior functionaries of other regularity agencies/departments such as Food safety and Standards Authority of India, Plant Quarantine, Animal Quarantine, Drug Controller of India etc. The CCFC is mandated to meet regularly to remedy constraints impacting clearance of imported and export goods. A Central CCFC has also been set up to oversee expeditious clearance of import and export goods.
3 TRADE POLICIES AND PRACTICES BY MEASURE