International trade and commercial transactions in India: overview
A Q&A guide to the regulation of international trade and commercial transactions in India.
The Q&A covers key matters relating to sale of goods contracts, including rules on formation, price and payment, delivery, passing of title and risk, variation and assignment, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods, imports, trade remedies, exports and international trade restrictions.
To compare answers across multiple jurisdictions, visit the international trade and commercial transactions Country Q&A tool.
This Q&A is part of the International Trade and Commercial Transactions Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/internationaltrade-guide.
India is a founding member of the World Trade Organization (WTO) and a strong advocate of the multilateral trading system.
India's trade policy is largely driven by domestic consumption considerations and frequent fluctuations in commodity prices. The tariff structures are complex, as is the micro trade policy, which is constantly updated through notifications and other delegated legislations. The Indian Government is committed to fiscal consolidation but continues to post a deficit.
The trade liberalisation process is continuing and India has introduced several measures to aid international trade, for example:
Self-assessment customs procedures.
Enhancing the scope of advance rulings.
Structural reforms (such as relaxing foreign direct investment (FDI) norms in certain sectors).
Investing in infrastructure.
Streamlining consumer subsidies.
Simplifying the regulatory environment.
Introduction of goods and service tax (GST).
Increasing predictability in the trade and investment climate.
India continues to remain an important player in the WTO dispute settlement mechanism. In 2014, India achieved a significant victory against the US regarding the offsetting duty on steel exported by India. However, the prohibitions imposed by India on the importation of various agricultural products from the US were held to violate the WTO Agreements. There is currently one dispute (relating to domestic content requirements under India's solar policy) that is pending at the WTO.
Recently, the procedures adopted by India's investigating authority (responsible for conducting anti-dumping investigations) have been called into question before India's constitutional courts. The matters are currently pending before the courts.
India is party to a number of free trade agreements. A list of the agreements and pending negotiations is available at http://commerce.nic.in/MOC/international_trade_agreements.asp.
One of the important regional trade agreements under negotiations is the Regional Comprehensive Economic Partnership (RCEP). It is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea and New Zealand).
Federal and provincial governments provide several incentives for the production and export of goods. The Indian Government is intending to rationalise the use of subsidies and align it with the WTO disciplines on subsidies.
Contracts for the sale of goods
The Indian legal system is based on common law. In a common law system, the law is developed by the judiciary through their decisions, orders, and judgments. These are also referred to as precedents. Unlike the British legal system, which is largely based on the common law system, the Indian legal system incorporates the common law system with statutory and regulatory law.
A contract evidencing the sale of goods in India is governed by the Sale of Goods Act 1930.
Indian courts can resolve disputes with regard to the sale of goods across international boundaries (if selected as the forum of choice in the contract) by applying principles of private international law.
India has not ratified any international convention on the sale of goods. Therefore, Indian courts do not rely on such conventions when settling a dispute arising out of such contract. However, India is a party to the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention) and as a result rules on international air carriage will apply.
In India, different commercial entities are governed by different laws and regulations. In the case of companies, the authority to enter into a contract on behalf of the company is derived from the incorporation documents (memorandum of association and articles of association). If a public limited company engages in a capital market transaction, the listing agreement with the relevant stock exchange must be adhered to. For partnerships, the partnership deed entered between the partners will determine the authority of each partner to enter into a contract on behalf of the partnership. In the absence of a written agreement between the partners, the authority granted to a partner will be determined by a course of their dealing. Public bodies are incorporated by an enabling legislation that lays down its functions and duties. The enabling legislation will determine the authority or capacity to enter into a contract by a public body. For example, the Food Corporation of India was set up as a body corporate by the Food Corporations Act, 1964 with the capacity to enter into a contract with any person. In the case of an agent, the authority for entering into a contract is determined by his arrangement with the principal (that can be expressed or implied). An agent that is authorised to act on behalf of a principal has the authority to do everything within the law that is necessary to perform the act.
In India, persons who are competent to enter into legal obligations can form binding contracts if:
They have consented freely to the rights and obligations in the agreement.
The consideration exchanged under the agreement is lawful.
The parties must have exchanged offers and communicated an unqualified and absolute acceptance of their mutual rights and obligations to conclude a binding agreement. The binding agreement is enforceable by law and constitutes a contract under Indian law.
Indian law recognises oral and documented contracts. A documented (including electronic) contract must be validly executed by each of the contracting parties and adequate stamp duty paid (as per the requirements of the relevant state) if executed in India. Documents in an electronic form will be accepted as valid evidence if they satisfy certain requirements. Electronic documents can be admitted as evidence so long as the computer in which it is stored or reproduced from meets certain specified requirements under laws dealing with evidence. The Indian laws do not prescribe a formal language to be used for the purpose of entering into contracts. The parties can agree and stipulate a language to be used for the purpose of the contract as well as any communication, hearings or visual materials or documents relating to the contract. In the absence of any such stipulation, English is the commonly preferred language.
Indian law recognises oral and electronic forms of contracts. An electronic contract must be validly executed by each of the contracting parties and adequate stamp duty paid (as per the requirements of the relevant state) if executed in India. Documents in an electronic form will be accepted as valid evidence if they satisfy certain requirements. For example, the computer where the documents are stored or reproduced must meet certain specified requirements under laws dealing with evidence. Indian laws do not prescribe a formal language to be used for the purpose of entering into contracts. The parties can agree on the language to be used for the contract, including any communication, hearings or visual materials or documents relating to the contract. In the absence of any agreement, English is the most common language used.
Price and payment
If price provisions are not agreed by the parties in the contract, the purchasing party must pay to the selling party a reasonable price that will be determined by the facts of each particular case. If agreed by the parties, the pricing provisions can also be determined by the valuation of a third party.
Contractual conditions relating to time are not essential to the contract unless agreed by the parties.
The method and mode of payment must follow traditional banking channels through an authorised dealer bank registered with the Reserve Bank of India (RBI). This is more relevant for cross- border transactions, where approval from the RBI may also be required. Letters of credit is the preferred mode of payment, particularly with regard to international trade. A letter of credit is an arrangement where a bank acts as an intermediary between the buyer and the seller, to ensure that payment is effected on fulfilment of the terms of credit in a timely manner. With respect to international trade, the letter of credit issued by the bank must adhere to the monetary and time limits prescribed in the foreign exchange control laws.
Indian laws provide for situations where delivery provisions in a contract are not agreed by the parties. If the time for delivering the goods is not fixed by the contract, the seller must deliver within a reasonable time. The method of delivery is not prescribed under law, but any act that has the effect of putting the goods in the possession of the buyer (or any person authorised by the buyer) is sufficient to constitute delivery. The place for delivery (unless otherwise agreed) must be the place where the goods were:
At the time the sale was made.
When the agreement to sell was made.
If the goods do not exist at the time of the agreement, the goods must be delivered to the place where they are manufactured or produced.
Passing of title and risk
The passing of title of the goods will depend on the status of the deliverable goods. If the seller is bound by terms in the contract to administer a process in order to render the goods deliverable, the title will not pass to the buyer unless the process is administered. If the contract provides that the seller must weigh, measure, test or do any other act to ascertain the price of the goods, the title will not pass to the buyer unless the specific act has been carried out. If the subject of sale cannot be determined or is a future good that is specified in the contract, the title will pass to the buyer with the agreement of the buyer or the seller. If the goods are delivered to the buyer subject to his approval or on a "sale or return" basis, the title will pass to the buyer on the:
Buyer's approval or acceptance.
Expiry of the timeframe for the return of goods (if the buyer retains the goods without giving notice of rejection).
Expiry of a reasonable period of time (if the contract does not specify time).
The risk in relation to the goods passes along with the property in the goods, unless otherwise agreed by the parties. If title to the goods is transferred to the buyer, the goods will be at the buyer's risk, regardless of whether delivery has been made. If the goods are delayed due to the fault of either of the parties, the risk will lie with the defaulting party. In India, International Commercial Terms (Incoterms) are not relied on. However, in cross-border transactions, Incoterms can be referred to as agreed by the parties.
Variation and assignment
Contractual rights can be transferred in India by assignment, novation or sub-contracting.
Assignment is the transfer of rights or obligations held by one party under a contract to another party. Under Indian contract law, any type of contract can be assigned if the parties consent to it. The current judicial trend in India provides that rights under a contract are freely assignable unless the:
Contract is of a personal nature.
Rights are incapable of assignment either under law or under an agreement between the parties.
Obligations cannot be assigned without the consent of the promisee, in which case it will operate as a novation. When a new contract is substituted for an existing contract so as to discharge it, it is called a novation. The new contract can either be between the existing parties or between different parties.
The parties also have the option to enter into a separate agreement with a third party for the performance of part or all of the obligations arising from an existing contract. The separate contract entered with a third party is a sub-contract that is independent from the existing contract.
A waiver of rights under a contract is an intention to not insist on a particular right. In India, the general principle regarding the waiver of contractual obligations is that neither consideration nor an agreement is necessary to constitute waiver. It is up to the promisee to dispense or remit (wholly or in part) the performance made to him or accept any other satisfaction that he considers appropriate.
Enforcement and remedies
In India, the laws governing the sale of goods provide an implied condition that the seller must confirm the quality and fitness of the goods and communicate this to the buyer (either expressly or by implication). In the case of a contract for sale regarding a specified object under a patent or other trade name, there cannot be an implied condition regarding its fitness for purpose. If the seller has a reputation in the marketplace for selling goods of a particular description, the goods sold will be expected to meet the merchantable quality. Any express warranty or condition will not negate the implied conditions or obligations as prescribed by law.
All contracts include representations and warranties. These provide the underlying facts as presented by one party to another with the intention that the other party will rely on them to their detriment.
A representation is the presentation of a fact, either verbally or through conduct, which is made to induce someone to act, and particularly to enter into a contract. A condition is a stipulation that is essential to the main purpose of the contract, a breach of which may result in the repudiation of the contract. A warranty is a stipulation that acts as a guarantee for the main purpose of the contract, the breach of which gives rise to a claim for damages but not the right to reject the goods and treat the contract as repudiated.
If consent to an agreement is caused by misrepresentation, the contract is voidable at the option of the party who provided the consent.
In India, the doctrine of privity does not confer any rights or impose obligations arising under a contract on any person except the parties to the contract. The Indian courts generally apply the doctrine. However, there are certain common exceptions, including:
"Third party beneficiaries", where two parties to a contract confer benefits on a third party who has not signed the contract, with an intention that the third party will be able to independently enforce the right. This is the most common exception to the doctrine of privity.
Beneficiaries of a trust.
Family arrangement and marriage settlements.
Under the law of tort.
Creation of charges or covenants running with land.
In India, a contract is rendered invalid if:
It is not entered into by free consent.
Parties to the contract are incapable of entering into a contract.
Performance of the contract is impossible.
There is no consideration or the contract is unlawful in nature.
It is a contract of wager.
It is uncertain in nature.
It limits legal proceedings.
Misrepresentation under a contract occurs when a party to the contract provides false information, believing it to be true without any intention to deceive the other party but making him act on the false information with regard to the subject of the contract.
A contract is rendered void if both the parties to the contract are mistaken about the essential facts of the transaction.
Main performance rules
The parties to a contract must either perform or offer to perform their respective promises unless performance is dispensed or excused under the applicable laws in India. The parties must perform exactly what they have undertaken to do, within the time specified and at the standard required by the contract. The standard of obligation can vary according to the type of contract. A contract can require reasonable care, due diligence or the use of best or reasonable endeavours as a standard for performance.
Main discharge rules
A contract creates a legal obligation that exists until discharged. Performance of the promise is the principal and most usual mode of discharge. Parties to a contract can also discharge a contract by novation, rescission or alteration through a subsequent agreement. When a contract is of a continuing nature and a party commits a breach, the innocent party has an option to terminate the contract, unless the party indicates its intention to continue with the contract. Frustration of a contract is a ground for discharge from performance. This occurs when certain events happen after formation of the contract which are beyond the control of the party required to perform an obligation. Force majeure is also covered within the doctrine of frustration, if the contracting party claiming the benefit of a force majeure event could not have reasonably foreseen such an event. In India, commercial impossibility will not allow a party to be discharged from its obligations.
If either party to the contract repudiates the contract before the day of delivery, the other party can treat the contract as subsisting and wait until the delivery or sue the other party for damages for breach of contract. The seller and buyer are also entitled to file a suit for specific performance of the contract without giving the other party an option to retain the goods on payment of damages. Both the seller and the buyer have the right to recover interest or special damages in case the law governing the contract entitles the buyer or the seller to do so.
Exclusion of liability
Exclusion clauses must clearly indicate the nature of liability being excluded. Some clauses seek to completely exclude liability, whereas some clauses put a limit on liability, for example by:
Capping the amount payable in damages on a breach.
Restricting the types of loss recoverable or the remedies available.
The law provides that for a contract of sale the parties have unlimited bargaining powers. However, the parties cannot exclude liability for non-performance or performance that is substantially different from the contract. In addition:
Any exclusion of liability for negligence must be expressed clearly.
Neither party can exclude liability for their own fraud exercised on the other party.
Choice of law
Contracting parties have the right to choose the governing law under a contract. The choice of law must be bona fide (in good faith) and legal. The choice of law must also not be against public policy.
The courts in India will recognise and enforce a right under foreign law, provided the enforcement is not inconsistent with the laws and policies of India. A choice of law is not bona fide if the intention for the choice of law was to try and avoid a provision being enforced under the proper law of the contract.
If the contracting parties do not include governing law provisions, the Indian courts will select the applicable law based on the country or legal system with which the transaction has its closest and most real connection. The courts can also look at the intention of the parties to determine the applicable law.
Choice of jurisdiction
The parties to the contract can include a forum selection clause to determine which court to refer any potential dispute. Therefore, the local courts do recognise the right of the parties to choose a foreign forum. However, the parties cannot confer jurisdiction on a court that does not possess jurisdiction in the first place.
In India, cases of breach of contract are initiated in a court by applying the local rules of the jurisdiction where the cause of action arises. A lawsuit can therefore be filed at the place where the:
Contract was made.
Contract was to be performed and where the breach took place.
Money for the performance was expressly or impliedly payable.
Lawsuits relating to the sale of goods can also be filed at the place where the goods are deliverable.
Arbitration clauses are common in a contract for the sale of goods. India is also a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) and foreign awards are recognised and enforceable under Indian arbitration laws. However, the enforceability of foreign awards in India is subject to certain conditions as provided by local laws. A foreign award that is enforceable must be treated as binding on the parties.
Storage of goods
If goods are stored in a warehouse, the warehouse keeper or his duly authorised representative will issue an acknowledgement for the storage and receipt of the goods in writing or in an electronic form. Indian laws recognise such an acknowledgement (referred to as a "warehouse receipt" or "warehouse keeper's certificate") as a valid document of title if it contains the necessary particulars prescribed by the relevant law. Such instruments can be negotiable or non-negotiable in nature. Warehouse receipts that are negotiable can be traded, sold, exchanged, and used as collateral support for short term financing. A warehouse keeper who wants to issue a non-negotiable warehouse receipt must specifically state in the receipt the words "non/not negotiable".
A warehouse keeper can only start a warehousing business if he obtains a registration certificate for the related warehouse from the Warehousing Development and Regulatory Authority (WDRA). In order to constitute a valid document and convey title to the receipt holder, a warehouse receipt issued by the warehouse keeper must contain the following information:
Warehouse registration number and date until it is valid.
Name of the warehouse and its complete postal address.
Name and address of the person by whom or on whose behalf the goods are deposited.
Date of issue of the warehouse receipt.
Statement that the goods received will be delivered to the holder of the goods, or another named person.
Rates of storage and handling charges.
Description of the goods (quantity, quality, grade).
Market value of the goods at the time of deposit.
Private markings of the depositor on the goods or packages (if any) except in the case of fungible goods.
Name of the insurance company indemnifying for fire, flood, theft, burglary, misappropriation, riots, strikes or terrorism.
Whether the warehouse receipt is negotiable or non-negotiable (see Question 27).
Statement of the amount of any advance made and of any liability incurred for which the warehouse keeper claims his lien (see Question 28).
Date and signature of the warehouse keeper or his authorised agent.
Declared shelf-life of goods.
The fact that the warehouse keeper holds the lien on the goods deposited for his storage and handling charges.
That the receipt will only be valid until the date of expiry of the declared shelf-life of the goods.
The warehouse keeper will be liable for damages if any of the details above are not included in a negotiable warehouse receipt (see Question 28). However, an omission will not render the receipt invalid.
A warehouse keeper has a lien on goods deposited with him for storage. The lien of the warehouse keeper is for the amount of storage and maintenance charges (including all reasonable charges for storage and preservation of the goods). In the case of a negotiable warehouse receipt (see Question 27), any endorsement made in favour of a bank or warehouse keeper will be taken as evidence of a pledge and the pledgee will have priority over the interest of the holder of the receipt.
The Central Board of Excise & Customs (CBEC) is part of the Department of Revenue under the Ministry of Finance, Government of India. CBEC appoints various customs commissioners for the enforcement of customs laws and regulations at different ports of import and export in India.
There are special investigative departments that have been created to prevent revenue leakage and other violations of customs laws and procedures. The departments include the Directorate of Revenue Intelligence (DRI) and Special Intelligence and Investigation branch (SIIB).
The customs commissioners have been empowered to prevent the evasion of customs duty by demanding customs duty from the importer or exporter by issuing a "show cause notice". The customs commissioners also have the authority to impose fiscal penalties and initiate criminal prosecution against the importer or exporter or other alleged offender under the provisions of the Customs Act 1962 (Customs Act).
Import duties, tariffs and rates
General tariffs and rates
The Customs Act 1962 (Customs Act) regulates the import and export of goods into and out of India. Section 12 of the Customs Act is the charging section, and provides that customs duty is payable on all goods imported into India at rates provided under the Customs Tariff Act 1975 (Customs Tariff Act).
In general, four types of custom duties can be levied when goods are imported into India:
Basic customs duty (BCD) is levied under section 12 of the Customs Act. The duty is levied as a percentage of the assessable value as determined under section 14 of the Customs Act.
Additional customs duty (CVD) is levied under section 3(1) of the Customs Tariff Act. The duty is equal to the excise duty levied for a similar product that is manufactured or produced in India. It is levied as a percentage of the assessable value of goods plus BCD. The duty is levied at rates provided under the Central Excise Tariff Act 1985.
Education cess (at 2%) and higher education cess (at 1%) (customs cess) on the aggregate of duties of customs (BCD and CVD) is also levied on the import of goods into India.
Additional duty of customs (SAD) is levied under section 3(5) of the Customs Tariff Act. SAD is levied at the rate of 4% to counterbalance sales tax, VAT, local tax and any other charges that can be levied on a similar product on its sale, purchase or transportation in India. The duty is levied on the aggregate of the assessable value of goods in addition to BCD, CVD and customs cess.
Goods manufactured and produced in certain specific countries (or preferential countries) are entitled to preferential rates of BCD when exported to India. Certain goods when imported into India from the following countries will be entitled to the preferential rate of duty:
Sri-Lanka, Bangladesh, China and Korea under the Asia Pacific Trade Agreement.
ASEAN (Association of Southeast Asian Nations) countries (including Malaysia, Singapore and Thailand).
SAFTA (South Asian Free Trade Area) countries (including Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka).
MERCOSUR (common market of the South member states) countries (including Argentina, Brazil, Paraguay and Uruguay).
This is not an exhaustive list. There are other countries for which preferential rates of duty have been prescribed.
The preferential rate of BCD on the import of specified goods from any of the above countries will only be available if the imported goods have originated from the countries. A country of origin certificate from the manufacturing or producing country will be required. The procedure for benefiting from the preferential rate of BCD has been specified under various rules issued by the Central Board of Excise & Customs (CBEC).
Non-tariff barriers to imports
The Foreign Trade (Development and Regulation) Act 1992 (FTDR Act) is the primary legal statute for India's trade control system. It authorises the Central Government of India to prohibit, restrict or otherwise regulate the import of goods or services and technology by an order to be published in the Official Gazette.
The Indian Trade Classification (Harmonised System) of Export and Import Items, 2012 (ITC (HS)) has been issued under section 5 of the FTDR Act. The conditions, restrictions, prohibitions that are applicable on the import of goods into India have been specified in the ITC (HS). Schedule I of the ITC (HS) contains the product/chapter-wise import policy, which has been divided into the following three categories:
Free: items that do not require any authorisation or licence.
Restricted: items that require an authorisation or licence.
Prohibited: items that cannot be imported into India.
There are a few restrictions on the import of goods into India, including:
Wild animals (including their parts, fats or oils) are prohibited goods. These goods cannot be imported even if authorisation has been obtained.
The import of marble into India is restricted by the ITC (HS) and can only be imported into India after obtaining a licence. Marble can only be imported in certain quantities.
The import of specified telecom equipment requires authorisation from the Ministry of Telecom.
Decisions passed by the customs commissioner and demanding duty and/or imposing a penalty can be challenged before the appropriate appellate authorities as follows:
Decisions made below the rank of Principal Commissioner of Customs or Commissioner of Customs. Appeals to the Commissioner (Appeals), to be filed within 60 days from the date of the order.
Decisions made by the Principal Commissioner of Customs or Commissioner of Customs. Appeals to the Central Excise, Customs and Service Tax Appellate Tribunal, to be filed within three months from the date of the order.
Decisions by the Commissioner (Appeals) under section 128A of the Customs Act 1962. Appeals to the Central Excise, Customs and Service Tax Appellate Tribunal, to be filed within three months from the date of the order.
Decisions by the Central Excise, Customs and Service Tax Appellate Tribunal (cases relating to determining the rate of duty of customs, and cases relating to determining the value of goods). Appeals to the Supreme Court, to be filed within 60 days.
Decisions by the Central Excise, Customs and Service Tax Appellate Tribunal (cases involving issues other than those provided above). Appeals to the High Court, to be filed within 180 days.
Decisions by the High Court. Appeals to the Supreme Court, to be filed within 60 days.
The Imposition of anti-dumping and countervailing duty measures are governed by sections 9, 9A, 9AA, 9B and 9C of the Customs Tariff Act 1975. The details of the manner in which anti-dumping duty can be imposed and the procedure to be followed in conducting an investigation is governed by the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules 1995.
The details on the manner in which countervailing duty measures can be imposed and the procedure to be followed in conducting an investigation is governed by the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules 1995.
The imposition of safeguard duty is governed by section 8B of the Customs Tariff Act 1975. The details of the manner in which safeguard duty can be imposed and the procedure to be followed in conducting safeguard investigations are governed by the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules 1997.
The Competition Act 2002 was passed by parliament in 2002. The Competition Commission of India and the Competition Appellate Tribunal were established under the Act to regulate competition law in India.
Indian anti-bribery and corruption laws are contained in the following:
Indian Penal Code 1860.
Prevention of Corruption Act 1988.
Prevention of Money Laundering Act 2002.
Right to Information Act 2005.
Central Vigilance Commission Act.
Lok Ayukta (appointed by the people) Acts of states.
The Designated Authority of the Directorate General of Anti-dumping and Allies Duties (Designated Authority) functioning under the Ministry of Commerce is in charge of:
Initiating and conducting investigations.
Recommending the imposition of anti-dumping and countervailing duties.
The Ministry of Finance is empowered to issue notifications imposing the duty based on the recommendation of the Designated Authority.
The Directorate General of Safeguards, functioning under the Ministry of Finance is in charge of conducting investigations and recommending the imposition of safeguard duty. The final findings and recommendations of the Directorate General are considered by the Standing Board on Safeguards under the chairmanship of the Commerce Secretary. The views of the Standing Board on Safeguards are then placed before the Finance Minister for approval.
Investigations and enforcement
Investigation can be initiated by the investigating authority on a suo motu basis (on its own motion) or on the basis of an application filed by or on behalf of a domestic industry. A domestic industry refers to domestic producers:
That are engaged in the manufacture of a similar product.
Whose collective output of the product constitutes a major proportion of the total domestic production.
Foreign parties exporting goods will be considered as interested parties and can make representations, access document and be heard during the investigation.
There is a right of appeal against the decision of the authority for anti-dumping and countervailing duty measures. There is no right to appeal in the case of safeguard action. However, interested parties can always invoke the jurisdiction of constitutional courts.
Section 9C of the Customs Tariff Act 1975 provides for a right of appeal to the Customs Excise and Service Tax Appellate Tribunal (CESTAT). The appeal is filed against the customs notification imposing the duty. The applicable procedure is provided under section 9C of the Customs Tariff Act (interpreted with the CESTAT Anti-Dumping Duty Procedure Rules 1996).
An exporter is required to comply with the following:
An import-export code (IEC) must be obtained from the office of Director General of Foreign Trade (DGFT) by the person intending to export goods out of India.
A shipping bill must be filed with the customs commissioner at the port of export specifying the IEC.
The conditions, restrictions and prohibitions that are applicable on the export of goods out of India are provided in the Indian Trade Classification (Harmonised System) of Export and Import Items, 2012 (ITC (HS)). Schedule 2 of the ITC (HS) contains the export policy regarding export products.
Exports out of India have been divided into three categories in the ITC (HS):
Free: items that do not require any authorisation or licence.
Restricted: items that require an authorisation or licence.
Prohibited: items that cannot be exported out of India.
The following restrictions apply to the export of goods out of India:
Export of wild life (including their parts), endangered plants and chemicals for weapons are prohibited.
Export items such as cattle, camels and chemical fertilisers are restricted and can only be exported out of India with authorisation.
The Director General of Foreign Trade (DGFT) has notified a list of dual use goods and technologies that are known as special chemicals, organisms, materials, equipment and technologies (SCOMET). The export of goods falling under the SCOMET list is either prohibited or allowed with the authorisation of a specified department.
Goods that fall within the category of "restricted" goods can be imported into India after obtaining a licence from the office of the DGFT under the provisions of the Foreign Trade Policy (FTP) as issued by the Central Government of India.
The Customs Act 1962 (Customs Act) provides various administrative and criminal penalties for non-compliance with export regulations.
The following acts will be subject to administrative penalties:
Improperly exported goods will be confiscated (section 113, Customs Act).
Any person who aids or abets the improper export of goods and those goods are liable to confiscation under section 113 of the Customs Act (see above) (section 114, Customs Act). Such person will be liable for penalties including a fine of up to:
three time the value of the goods (for prohibited goods);
10% of the customs duty sought to be evaded (for duty goods other than prohibited goods); or
the value of the goods (for other goods).
Cases of short levy of duty, non-level of duty and mistaken refund, as a result of collusion, wilful misstatement or suppression of facts, will be liable to a payment equal to the duty or interest due (section 28, Customs Act).
All other cases of contravention or non-compliance (not dealt with under other provisions) (section 117, Customs Act). This provides for the imposition of a fine of up to INR100,00.
The following acts will be subject to criminal prosecution:
False declaration and providing false documents (section 132, Customs Act).
Obstructing a customs officer (section 133, Customs Act).
Refusing to be X-rayed (section 134, Customs Act).
Evading duty or relevant prohibitions (section 135, Customs Act).
Preparing to export in contravention of provisions (section 135A, Customs Act).
Foreign Trade (Development and Regulation) Act 1992 (FTDR Act)
Under the FTDR Act, the following can be initiated for non-compliance with any export regulations:
Suspension and cancellation of import-export code (IEC) on contravention of any provision of the Act or for exporting that is damaging to the trade relations of India with any country (section 8, FTDR Act).
Suspension or cancellation of licence (section 9, FTDR Act).
Penalties for the contravention of provisions of the Act, rules, orders or the Foreign Trade Policy (section 11, FTDR Act).
International trade restrictions
The trade sanctions currently in force are specified in paragraphs 2.16 to 2.19 of the Foreign Trade Policy 2015-20.
India has designated 38 organisations as banned terrorist organisations under section 35 of the Unlawful Activities (Prevention) Act 1967. The complete list is available at www.mha.nic.in/BO.
Under Rule 7 of the Foreign Trade (Regulation) Rules 1993 (Rules), the Directorate General of Foreign Trade can refuse to grant or renew a licence to import or export goods. The Rules provides 14 types of violations that the Directorate General can determine to exercise his powers under Rule 7. In addition, the Rules provide for suspension or cancellation of the licence. The entities that have had their licence suspended or cancelled are listed on the Denied Entity List (DEL or Black List).
The violation of prohibitions or restrictions imposed on the import or export of specified goods incurs penal action under the Customs Act 1962 and the Foreign Trade (Development & Regulation) Act 1992. The goods are liable for confiscation, and a possible penalty up to five times the value of the goods, and in certain cases prosecution leading to imprisonment of up to seven years.
Importers and exporters are required to be familiar with the provisions of:
The Customs Act 1962.
The Foreign Trade Policy.
Other relevant acts and rules.
In addition, they must ensure that they are aware of any prohibitions/restrictions/requirements that apply to the goods, before any imports are effected or exports planned. Liability cannot be mitigated through contractual arrangements. However, indemnification on a back-to-back arrangement can mitigate the financial losses.
Foreign trade barriers
Foreign trade barriers that are contrary to trade agreements can be addressed by submitting a detailed representation to the Trade Policy Division (TPD) in the Ministry of Commerce, Government of India. The TPD can hold consultations with the stakeholders (for example, local exporters and jurisdictional geographic divisions of the Ministry of Commerce) to clarify the issues, seek legal advice and address the issues through bilateral mechanisms or WTO dispute settlement mechanisms.
The regulatory authorities
Central Board of Excise and Customs (CBEC)
- Formulation of policy concerning the levy and collection of customs and central excise duties and service tax.
- Administrative authority for its subordinate organisations, including Custom Houses, Central Excise and Service Tax Commissionerates and the Central Revenues Control Laboratory.
Directorate General of Foreign Trade
Principal responsibilities. Regulation and promotion of foreign trade by administering the implementation of the Foreign Trade Policy.
Directorate General of Antidumping and Allied Duties
Principal responsibilities. Investigations and subsequent imposition of anti-dumping duties.
Directorate General of Safeguards
Investigating the existence of "serious injury" or "threat of serious injury" to the domestic industry as a result of increased imports of a product into India.
Investigating cases relating to transitional safeguard duty.
Directorate of Industrial Policy and Promotion
- Formulation and implementation of industrial policy and strategies for industrial development.
- Formulation of foreign direct investment (FDI) policy and promotion, approval and facilitation of FDI.
Foreign Investment Promotion Board
Principal activities. Processing of FDI proposals and making recommendations for government approval.
Reserve Bank of India (RBI)
- Formulates, implements and monitors the monetary policy.
- Facilitates external trade and payment and promotes orderly development and maintenance of the foreign exchange market in India.
- Issues, exchanges or destroys currency and coins not fit for circulation.
Department of Revenue, Ministry of Finance
Principal activities. Exercises control and supervision of two statutory boards, the Central Board of Direct Taxes (CBDT) and CBEC.
State Sales Tax Authorities
W http://dvat.gov.in/website/home.html (Government of NCT of Delhi)
W www.pextax.com/PEXWAR/appmanager/pexportal/PunjabExcise (Punjab)
W http://rajtax.gov.in/vatweb/vat/vatMain.jsp?viewPageNo=9 (Rajasthan)
Every state maintains its own website, some of which are listed above.
Principal activities. Imposition of taxes on sales or purchases of goods in the course of inter-state and intra-state trade or commerce.
Food Safety and Standards Authority of India
- Regulates the manufacture, storage, distribution, sale and import of food products.
- Lays down science-based standards for food products.
S Seetharaman, Principal Partner
Lakshmikumaran & Sridharan Attorneys
T +91 (011) 26192243/ 41299800
Professional qualifications. International Lawyer, India
Non-professional qualifications. BA, Corporate Secretaryship, University of Madras; BA, Law, University of Delhi; Certificated Associate of the Indian Institute of Bankers, Mumbai.
Areas of practice. Competition Law; international trade, disputes and trade remedies; corporate law; customs.
- Represented the Government of India in two WTO disputes, one against Turkey and the other against the US.
- Represented clients from around the globe in over 200 trade remedy cases initiated by India, the EU, the US, South Africa, China, Korea, Indonesia, Thailand, Canada, Egypt, Turkey and Brazil.
- Represented the Government of India in several countervailing duty investigations by the EU and US and safeguards duty investigations by Turkey and Peru.
- Represented the Government of China in several transitional product specific safeguard investigations conducted by the Government of India.
- Advising the Government of India on ongoing WTO rules negotiation.
- Advised many corporate clients on issues relating to company law, foreign trade policies, FEMA, and representing clients before the Appellate Tribunal for Foreign Exchange.
Sudish Sharma, Executive Partner
Lakshmikumaran & Sridharan Attorneys
T +91 (0124) 4771341
Professional qualifications. International Lawyer, India
Non-professional qualifications. LLB, University of Delhi; BCom, University of Rajasthan
Areas of practice. Mergers and acquisitions; joint ventures; private equity; power projects; real estate; education; general corporate advisory.
- Advised and assisted various leading Indian and multinational corporations with transactions relating to joint ventures, acquisitions and power projects.
- Advised numerous foreign investors on issues pertaining to joint ventures and acquisition deals.