Chapter

Tariffs and Non Tariff Barriers

1. Free Trade and Protection

Free Trade

Absence of restrictions on export and import

Protection

Restricting import in order to protect domestic industries.

Protection is possible by two ways

i. Imposing tariff barriers and

ii. Imposing Non Tariff Barriers

Tariff

Tariffs refer to the tax imposed on a good when it crosses an

official boundary.

Tariffs are of two types :

i. Specific Tariffs

Fixed charge for each unit of good imported or it is a flat based on

the number of units regardless of the value of the goods( eg. $4 per
barrel of oil)

ii. Ad valorem tariffs

Charges computed as a value of the imports ( eg. 30% on import of

clothing)
Significance of tariffs :

1. Serve as a source of revenue to the governments

2. Protect the domestic industries from foreign competition

3. Curb the illegal imports in the country

 1. Protect the domestic industries
from foreign competition

Import duty on entire range of edible & non

edible oils by 50 % to 100% is likely to
safeguard farmers interests and protect
country from cheap edible oil imports, and
better prices for farmers.
1. Protect the domestic industries
from foreign competition
 TO check domestic supplies

The Government re-imposed Minimum

Export Price (MEP) of US$700 -800 per
tonne on onion t check domestic prices
and curb exports
2. Protect the domestic industries
from foreign competition

The Central
Government
imposes 50%
Import duty on
yellow peas to
raise demand
for chana
 3. Protect the domestic industries
from foreign competition

India under pressure to roll back import tariffs on

smartphones
 4. Protect the domestic industries
from foreign competition

India has doubled its import tax on wheat to 20 %,

as the world’s second biggest producer tries to rein
in imports to support local prices.
 5. Protect the domestic industries
from foreign competition

Customs duty on polyester fabric raised to 20%

Pre GST Post GST
Basic Custom Duty (BCD) - BCD = 10%
10%
Countervailing duty (CVD) Replaced with
12.5% Integrated
GST(IGST) 5%
Special Additional Duty ( Scrapped
4%)
Total = 26.5% Total = 15%

Now, BCD raised

to 20% to make
total duty of
around 25%
 6. To curb illegal imports &
avoiding revenue loss

Illegal pepper
imports rob the Pepper from Vietnam and
flavour off India’s arecanuts from Indonesia are
spices trade landing at different ports in
India as Sri Lankan produce,
claiming import duty concessions
extended to the neighbours and
depriving India of its huge
revenue.

Traders and growers, he said,

have urged the Union
government to fix $8,000/tonne
as import duty on pepper
arriving via Sri Lanka.
Components of Indian Custom Duty after GST

As Goods and Services Tax (GST) is now into force, Indian

Customs Duty is calculated in a new way. Some import duties like
Special Additional Duty of Customs (SAD) and Countervailing
Duty (CVD) have been subsumed under IGST (Integrated Goods
and Services Tax). So, new tax structure of India on Indian
Customs Duty.

1. About Indian Customs Duty

Customs Duty in India is a type of indirect tax, which is levied on

commodities imported into India as well as on commodities
exported from India.
In India, the basic law of charging and collecting customs duty is
Customs Act, 1962. It is now added to IGST, which comes under
IGST Act, 2017. It provides for levy and collection of duty on
imports and exports, import/export procedures, prohibitions on
importation & exportation of commodities, penalties, offences,
etc.
2. Types of Customs Duties in India

 Import Duty and

 Export Tax.
Import duty is levied on goods entering into India from other
countries.
Export Tax is concerned, it is applied on the exported
commodities by the customs authorities of India. It is levied
occasionally to clear up excess profitability in global price of items
in respect of which domestic prices may be low at given time.
Types of Import Duties in India

After GST, there are mainly three types of import duties

namely
1. Basic Custom Duty (BCD),
2. Integrated Goods and Services Tax (IGST)
and
3. Compensation Cess.
Compensation Cess: Compensation Cess is levied under section 8
of the Goods and Services Tax (Compensation to State) Act, 2017.
Compensation Cess is charged and collected on intra-state and
inter-state supply of goods and services in order to provide
compensation to the states for loss of revenue due to
implementation of GST in India.
Basic Customs Duty: Basic Customs Duty or BCD is the specific
rate of tax levied on the value of goods imported into India from
other countries. The duty is fixed at a specified rate of ad-valorem
basis. BCD has been imposed from 1962 and amended from time
to time. Today, Basic Customs Duty is regulated by the Customs
Tariff Act of 1975. The Central Government of India has the right
to exempt any goods from the tax.

Integrated Goods and Services Tax: IGST is a rate of tax under

Goods and Services Tax law, which is charged on goods imported
into India from other country. Basically, it is a destination based
tax, which is levied on commodities being imported from one
place to another. For example, if goods are being imported into
India from China, IGST rate is applicable on those goods.
4. Additional Import Duties

Safeguard Duty and Anti-Dumping Duty are also levied on certain goods
imported into India. They are levied on import of specific goods in order
to protect domestic industry from an unfair injury. Both the duties would
not apply on commodities imported by a 100% EOU (Export Oriented
Units), units in FTZ (Free Trade Zones) and SEZ (Special Economic
Zones). Let’s have a detailed overview of these customs duties in India.

Safeguard Duty: Safeguard Duty is imposed on goods to safeguard the

interest of domestic industries. It is calculated on the basis of loss
suffered by local businesses. In nutshell, safeguard action is restored to
only if it has been established that a sudden rise in imports has caused or
threatens to cause serious injury to the domestic industries.
Anti-Dumping Duty

On export of commodities, anti-dumping duty is applicable only

by way of a special brand rate of drawback. Most often, a large
number of manufacturers from abroad may export commodities
at very low prices as compared to the prices in the domestic
market. This may be to cripple domestic industry or to dispose
of their excess stock. This is called dumping of goods. Now in
order to avoid such dumping of goods, Government of India
levied anti-dumping duty up to the margin of dumping on such
articles, if the commodities are being sold at less than its normal
value.
5. Calculation of Import Duty after GST

For calculating import duty after GST, rates of Basic Customs Duty, Integrated
Goods and Services Tax, Compensation Cess and other specific duties are
required. To have better understanding, have a look on the example below:

If Bangles (HS Code 71171910) are being imported into India from other
country, then following Indian custom duties will be levied on assessable value
of bangles under GST regime.

· Basic Customs Duty: 15%

· Integrated Goods and Services Tax: 3%
· Compensation Cess: 0%
· Specific Duty: Not Applicable
· Preferential Duty: Not Applicable
· Total Duty: 18.45%

http://www.exportgenius.in/india-custom-duty

For calculate import duty (import calculator)

Non tariff Barriers :

Apart from tariff, import is restricted through NTBs.

Unlike tariff the purpose is not to add to the government
revenue. But like tariffs, NTBs are the measures , other
than tariffs the effect of which is to restrict imports, or to
significantly distort trade.

NTBs include all the rules , regulations and bureaucratic

delays that help in keeping foreign goods out of the
domestic markets.
1.Quotas
Different Types of NTBs:
2.Embargo

3.Voluntary Export Restraint

4.Local Content Requirement

5.Administrative Barriers

6. Sanitary and Phyto-sanitary measures (SPS)

7.Technical Barriers to Trade (TBT)

8. Buy local Legislation

9.Counter trade

10. Anti dumping and countervailing duties

1. Quota : A quota is a restriction on the quantity of imports .
The importing country prescribes specific quantum beyond
which the commodity can not be imported during a particular
year. It is enforced through licenses issued to either importers
and exporters
The government put imports of pigeon peas/mung beans
under the restricted category and fixed a quota for its inbound
shipments.

India announced in the month of August 2017, a 200,000-ton

import quota on pigeon peas and 300,000-ton quota on mung
bean and green grams.
However, the government has relaxed the provision pertaining
to registration of import contracts of Pigeon Pea for which
advance payment had been made prior to Aug. 5.
2. Embargo :

Refers to complete ban on trade with a particular country. An

embargo may be placed on one or more goods or completely
ban trade in all goods.

Most restrictive non tariff barrier

Applied to accomplish political goals or avoid hurting religious

feelings.
EU and USA put sanctions on Russia

1. Background

The USA, in March 2014 has issued three Executive Orders pertaining to
sanctions on Russian individuals. In July 2014, following the escalation of
violence in eastern Ukraine, and the killing of almost 300 innocent civilians on
board of MH17 flight, the EU also formally adopted the package of significant
additional restrictive measures agreed on 29 July 2014.

These restrictive measures broadly include:

 limit access to primary and secondary capital markets for Russian state-
owned financial institutions
 Impose an embargo on trade in arms
 Curtail Russian access to certain sensitive technologies that can be used for
oil production and exploration
In retaliation to these sanctions by US and EU, the Russian Government also put
sanctions on US and EU.

A ban has been introduced on the imports of products from the countries that
have imposed economic sanctions against Russian citizens and companies. A ban
has been imposed on imports of following products for the period of one year.

The banned products are:

 Meat of bovine animals, fresh, chilled or frozen

 Pork, fresh, chilled or frozen
 Meat and edible offal of poultry, fresh, chilled or frozen
 Meat salted, in brine, dried or smoked
 Fish and crustaceans, mollusks and other aquatic
invertebrates
 Vegetables; Fruits and nuts
 Sausages and similar products of meat, meat offal or
blodd
 Cheese and curd based vegetables fats
 Share in Russia’s Total Trade – A snapshot

Countries EU (28) USA India

Bilateral Trade (in US$bn) 418 28 10

% share in Russia’s total

49.5 % 3.3 % 1.2 %
trade

India’s Opportunity

Economic sanctions by USA and EU on exporting energy, defence, technology

and financial services to Russia and Russia’s sanctions on import of food
items viz. meat, dairy, imports from EU and USA can be a significant
opportunity for India to increase its exports to the Russia and make a
significant presence over there. This would not only result in preventing
declining bilateral trade between the two countries but also result in
strengthening the trade relations between the two countries, going forward.
With this reference, few strategies are suggested here below
 The European Union is about to ban arms exports to
Saudi Arabia amid growing suspicions by the European
authorities that these weapons might be used in
conflicts in Syria and Yemen.
3. Voluntary Export Restraint (VERs)

A country facing a persistent , huge trade deficit against another

country may pressurize it to adhere to a self-imposed limit on the
exports. This act of limiting exports is referred as Voluntary
Export Restraint. ( Foreign companies agree to do this because
the government threatens to impose tariffs if the foreign
companies do not agree to VERs)
USA VER w.r.t Chinese textiles and apparel exports
Chinese textile and apparel exports to the United States were subject
to VER to cope with the anticipated upsurge of Chinese exports after
its admission as member of the World Trade Organization or WTO in
the year 2001.

The VER was for the period of 2005 to 2008.

USA VER w.r.t Japanese passenger cars exports

In May 1981, with the American auto industry mired in recession,

Japanese car makers agreed to limit exports of passenger cars to the
United States. This "voluntary export restraint" (VER) program,
initially supported by the Reagan administration, allowed only 1.68
million Japanese cars into the U.S. each year. The cap was raised to
1.85 million cars in 1984, and to 2.30 million in 1985, before the
program was terminated in 1994.
5. Local Content Requirement :

It specifies the percentage of a product’s total value that

must be produced domestically in order for the product
to be sold in the domestic market.
US gives India time till year-end to scrap local
sourcing rules

Introduction

With an objective to establish India as a global leader in solar energy the Ministry
of New and Renewable Energy (hereinafter referred as "MNRE") has launched
The Jawaharlal Nehru National Solar Mission (hereinafter referred as "JNNSM") in
the year 2010 to achieve the set target of grid connected solar power capacity of
20,000 MW by 2022, in three (3) phases (first phase upto 2012-13, second phase
from 2013 to 2017 and the third phase from 2017 to 2022).

The policy of Domestic Content Requirement is with intent to promote the local
manufacturing of the components of solar generation equipment which includes
the cells and modules.2 Under the said Guidelines, the total capacity of 750 MW
under Batch-I Phase-II, is equally divided into two categories (i.e. "DCR" or
"Open") wherein out of the total capacity of 750 MW, a capacity of 375 MW was
kept for bidding with Domestic Content Requirement (DCR) and the rest capacity
was kept open to bid with no specification as to compulsory DCR (i.e. bidder is
open to procure either from domestically or from outside the domestic territory).
The Bidder at the time of bidding may opt for either "DCR" or "Open" or
both the categories. Under DCR, the solar cells and modules used in the
power plant must both be made in India. The Bidder has to submit
separate Bids to bid under both categories.

It is pertinent to note that India is the member of WTO and shall be

bound by its agreements i.e. the General Agreement on Tariffs and
Trade (GATT), Agreement on Trade Related Investment Measures
(TRIMS) and Agreement on Subsidies and Countervailing Measures
(ASCM).

USA filed against India at Dispute Settlement Body (DSB)

DSB had ruled in favour of a US complaint against the requirement that
power producers under the JNNSM should compulsory procure a part of
solar panels and modules for their projects from local producers as it
argued that the provision discriminated against foreign producers.

The United States has agreed to give India time till December 14 this year to
remove the requirement for mandatory domestic sourcing of solar panels
and modules under its national solar power generation programme.

“This means that all contracts for solar power production entered into with
power producers after December 14 under the Jawaharlal Nehru National
Solar Mission (JNNSM) should not include compulsory domestic sourcing
norms which the World Trade Organisation has ruled against
Indian exports of food products are facing
rejections

Indian exports of food products are facing rejections and bans in key
markets on grounds of lack of compliance with food safety and health
standards.

Products such as mangoes, table grapes, peanuts, curry leaves, chillies,

shrimps and prawns have faced rejections and even bans in markets
such as the US, Vietnam, EU, Saudi Arabia, Japan and Bhutan due to
issues such as presence of higher than approved levels of chemical
residues, and pest and bacterial infestation.

In the short run, such rejections and bans can led to financial losses
while in the long run, exporters and farmers can lose market share to
exporters from other countries, that are able to meet the food safety
and health standards of importing countries.
The government is working
towards new packaging
norms for export of food
items to address concerns
over food safety and health
standards even as some
Indian food products face
rejection in developed
markets.
While Indian export control and export promotion bodies are
trying to implement traceability, laboratory testing and other
measures such as hot water treatment for mangoes to reduce the
incidence of rejections, some of these are only temporary
solutions and may cause product spoilage. To meet food safety
and health standards, India needs to implement Good Agriculture
Practices and minimise the use of harmful chemicals in the fields.
It is important to focus on food quality and standards in the
domestic market, so that products are produced and processed
adhering to international food safety requirements.
6. Administrative Barriers :

Many countries use customs and inspection processes to

interfere with imports.

Chinese Toys are under stringent inspection norms

Directorate General of Foreign Trade (DGFT) mandated testing of

imported toys and clearance by the Bureau of Indian Standards
(BIS).

Toy imports from China have dropped to less than a half, since
the government introduced tough quality criteria and mandated
certification of compliance by accredited agencies from.
The comprehensive notification issued on September 1 prescribes criteria
for physical and mechanical properties, chemical content, flammability,
and testing for indoor and outdoor toys for both electrically and
mechanically operated ones.

The notification by the Director General of Foreign Trade said import of

toys would be permitted freely only if the manufacturer abided by the
Bureau of Indian Standards (BIS) benchmarks.
Countervailing duty

Countervailing duties (CVDs), also known as anti-subsidy duties, are

trade import duties imposed under World Trade Organization (WTO)
rules to neutralize the negative effects of subsidies.

India has imposed an additional import tax on certain stainless steel

flat products from China for five years in order to curb influx of
cheaper foreign imports.

The government imposed 18.95% countervailing duty on some hot-

rolled and cold-rolled stainless steel flat products, a first such levy on
a steel product.

This is aimed at helping local steel makers benefit when there is surge
in imports, it said.
The Ministry of Steel is working on means to contain the import of semi-
finished steel products in a bid to aid domestic steel companies.

The Bureau of India Standard norms are only for stainless steel sheets therefore
the industry is able to import semi-finished goods lower than that standard.

As per the rules in 10 to 15 days under which if the sheets have a BIS standard
importers will not be able to import anything below that quality.

By extending the BIS norms only products that will be compliant under the
standards will be allowed to be imported.

Imports of stainless steel flat products in India increased to over 42,000 tonnes
in June 2017, from over 19,000 tonnes in April, thereby distorting fair market
pricing.
US FDA imposes higher fees on imports of generic drugs from
India

Under the new Generic Drug User Fee Amendments of 2017 (GDUFA II) and
Medical Device User Fee Amendments of 2017 (MDUFA IV), the US Food and Drug
Administration (FDA) will collect significantly higher user fees for some
applications.

The fees for applications to market generic drugs, known as abbreviated new
drugs application (ANDA), as well as medical devices will double in 2018.

Since the GDUFA was introduced in 2012, inspections on Indian generic drug
producers have doubled, making life difficult for small players. To make matters
worse, the recent amendments will now double the marketing fees of generics.
Many of our small generic companies will not be able to afford it and will have to
pull out of the US market. It is not acceptable,” the official said. The US is the one
of the largest markets for Indian pharma firms, with exports reaching about $5
billion in FY17.
Anti dumping on Chinese tyres lift spirits of rubber
grower

With the Centre imposing anti-dumping measures on Chinese tyres, natural

rubber (NR) growers here are looking to scale up rubber production. It is pointed
out that the import of one lakh tyres is equivalent to the consumption of almost
3,000 tonnes of rubber in a month. If tyre companies turn to the domestic market
to source rubber, this would benefit growers, thereby making production more
remunerative.

any step to prevent dumping of tyres would help the entire value-chain of the
sector, including a million-odd rubber growers. An indiscriminate surge in the
import of Truck & Bus Radial (TBR) tyres from China has been a lose-lose
proposition for the stakeholders both in rubber and tyre sector.

From 23,000 tonnes in FY15, the indirect import of rubber through imported
TBR has doubled to more than 46,000 tonnes in FY17. More than one lakh tonnes
of rubber have landed in India in the last three years through TBR import.
Canada allows entry of Indian pomegranate,
banana & okra
EU raised restrictions on imports of
basmati rice

The European Commission has recently brought down in basmati rice the
maximum residue limit (MRL) level for Tricyclazole, a fungicide used by
farmers against a disease, to 0.01 mg per kg from the next year. This was
done for all countries.

The EU has virtually imposed ban on import of Indian basmati rice by

reducing 100-fold the import tolerance level of 'Tricyclazole'. It is not
possible to bring down the pesticide level all of a sudden to nearly zero.

Two aromatic basmati rice varieties -- PB1 and 1401 -- are maximum
exported to the EU. The shipments of these varieties with Tricyclazole
MRL at 0.03 mg per kg were accepted so far from India.

At least, two crop cycles are required to effect the desired change.
Moreover, there is no scientific evidence that it is harmful on human
health
Sept 2016 China may allow imports of
Indian non-basmati rice –

China may soon permit access to non-basmati rice its market which has been
denied by Beijing owing to health, safety and quality issues. Its concerns
included the likelihood of a pest called Kharpa Beetle (Cabinet Beetle) getting
transported along with Indian non-basmati rice consignments to China.

After several requests from the Indian side, Chinese officials have finally agreed
to visit India during September 19-28 to inspect 19 rice mills registered with
the National Plant Protection Organization (NPPO). These mills are situated in
states including Punjab, Haryana, Uttar Pradesh and Madhya Pradesh.
14th Sept 2016 – US cut duty barriers on shrimp
import -

The Seafood Exporters Association of India highlighted that the reduction in

anti-dumping duty by the US government on import of frozen shrimps from
India is likely to boost exports. The final average duty is fixed at 2.2 per cent.
The preliminary duty finalized earlier was 4.98 per cent.

The reduction will open up opportunities for small exporters. USA is India’s
largest market (134,144 tonnes) for frozen shrimp, followed by the EU
(81,849 tonnes), Southeast Asia (65,188 tonnes), Japan (34,204 tonnes), West
Asia (17,477 tonnes) and China (9,542 tonnes) and others (31,464 tonnes).
30.12.2016 India to resume Curry Leaf exports to
EU

After three years, India resumed export of curry leaves to the European Union.
The exports is now entail quality checks including lab tests and Agmark
certification, as mandated by the EU.

In 2013, the EU had banned importing curry leaves from India, citing concerns
related to high pesticide residue. It had later stipulated that exports must be
accompanied by results of sampling and analysis and by a health certificate
verified by authorised representatives.

A quality check system was needed for curry leaves exports. Exports will begin
soon but they would be preceded by good agricultural practices and lab tests
before getting shipped to the EU. The standards have been made for appearance,
cleanliness and damage caused by pests, among other criteria. India exports
almost 1.2 lakh kg of curry leaves to the EU.
Saudi bans Indian poultry products on bird flu scare -

Four weeks after the World Organisation for Animal Health reported an avian
influenza outbreak, Saudi Arabia has temporarily banned imports of poultry
produst from India. In a note dated January 2, the Agricultural and Processed
Food Products Export Development Authority (Apeda) informed Indian
poultry exporters, “The Ministry of Environment, Water and Agriculture
of Saudi Arabia has decided to impose a temporary ban on the import of live
birds, hatching eggs and chicks from India due to the outbreak of highly
pathogenic avian influenza.” Such bans, however, are periodically reviewed
and lifted in three months.
7. Technical Barriers :

Countries generally specify some quality standards to be met by

imported goods for various health, welfare and safety reasons .
This facility can be misused for blocking the import of certain
goods from specific countries by setting up of such standards,
which deliberately exclude these products.

These testing procedures being expensive , time consuming and

cumbersome to the exporters, act as a trade barrier.
8. Buy Local Legislation

Government follows this policy of procuring their

requirement only from local producers, sometimes the
government is liberal and permits the use of imported
goods if the price is below the predetermined level.

9. Counter Trade

Many countries adopt the practice of counter trade. They

import commodities only in exchage for their own
products. In such cases their imports are limited to the
value of their exports.