MBA In International Business 2018-21

Course
Management of Global Sourcing

Course Instructor
Prof. MP Singh

Individual Project

1. Sahil Puri (39)

Roll No 39
 Assignment Problems & Answers
Q2. A) How does present Foreign Trade Policy help in Global Sourcing?

Ans) Foreign trade policy 15-20 benefits in global sourcing can be:

1) EPCG (Export Promotion of Capital Goods)- EPCG is an export promotion scheme under
which an exporter can import certain amount of capital goods at zero duty for upgrading
technology related with exports.

The Aim of EPCG is to help importers or domestic procurements of capital goods like
machinery etc for producing quality goods and services for exports. Therefore it helps
procuring goods with relaxation in custom duties (import goods) or excise duties(in India)

Which goods are eligible?

Capital goods as in any plant, machinery, equipment or accessories required in manufacture

or production or for rendering services

Obligations:
a) Once the goods has been imported the authorization holder of the EPCG license would
have to make exports and show proof of the the same to DGFT for redemption of
authorization
b) Exports in next 6 years should be at least 6 times the duty saved in authorization. This
export should be over and above the average export should be done in last 3 years
c) Atleast 50 % of exports must be done in first 4 years and remaining in next 2 years
d) Relaxations are given for J&K, North Eastern Region, Green products etc
e) Capital goods bought within India will have 25 % less obligation
f) Installation certificate should be within 6 months
g) Valid till 18 months of issue of authorization

How to Apply:

a) Online Registration at DGFT website under form ANF-5A with digital signature
b) An independent CE certificate must be furnished as per the format given to show nexus of
capital goods
c) CA certificate to show average exports done in last 3 years

2) AA (Advance Authorization)- advance authorization is issued to allow duty free import of

inputs, which is physically incorporated in export product.

3) MEIS/SEIS - tax benefits are provided under merchandise export from India scheme (MEIS)
for goods and services export from India scheme (SEIS).

4) Trade Facilitation Measures - Customs single window initiative to facilitate various

aspects of trade with 24x7 customs clearance in a paperless environment.

5) The government has reduced the number of mandatory documents required for
exports and imports to 3 each, comparable with international benchmarks
b) An exporter has decided to import Capital goods under EPCG in the FY 19-20. The total
value of the CGs is US$ 400000. The normal duty is 50% & a total export in 3 years prior to the
year of application is US$ 600000.
The export turnover since 19-20, in first four years & next two years is US$ 1.2 MILLION &
US$ 0.6 MILLION respectively.
Make the statement & calculate the penalties if any?

Ans)

Assuming Avg Exports of last 3 years = 600000

Per yr Average Export = 600000/3= 200000

Total value of CG = 400000 dollars

Saved Duty (50%) = 200000 dollars

Export Obligation for 6 years = (200000 x 6) + (6 x 200000) = 1200000 + 1200000 = 2400000

dollar

50% of total export obligation to be met in first 4 years = 1200000 dollar

Actual Export for first 4 year done = 1200000 dollar

No penalty

Obligation for next 2 years = 1200000 dollar

Actual export next 2 years = 600000

Penalty = Duty + Interest = 200000 + 90% of 200000 = 380000