India - Trade BarriersIndia - Trade Barriers
International Trade Administration
Enforcement and Compliance
Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can either be tariff barriers (the levy of ordinary negotiated customs duties in accordance with Article II of the GATT) or non-tariff barriers, which are any trade barriers other than tariff barriers. For more information visit:
India maintains a nontariff regulation on three categories of products: banned or prohibited items (e.g., tallow, fat, and oils of animal origin); restricted items that require an import license (e.g., livestock products and certain chemicals); and “canalized” items (e.g., some pharmaceuticals) importable only by government trading monopolies and subject to cabinet approval regarding import timing and quantity. India, however, often fails to observe transparency requirements, such as publication of timing and quantity restrictions in its Official Gazette or notification to WTO committees.
For purposes of entry requirements, India has distinguished between goods that are new, and those that are secondhand, remanufactured, refurbished, or reconditioned. India allows imports of secondhand capital goods by the end users without an import license, provided the goods have a residual life of five years. India’s official Foreign Trade Policy categorizes remanufactured goods in a similar manner to secondhand products, without recognizing that remanufactured goods have typically been restored to original working condition and meet the technical and safety specifications applied to products made from new materials. The National Trade Estimate Report published recently by USTR indicates that the U.S. stakeholders continue to inform that obtaining an import license for remanufactured goods has been onerous and the U.S. exporters continue to encounter significant tariff and nontariff barriers that impede imports of U.S. products into India.
The Directorate General of Foreign Trade (DGFT) of the Ministry of Commerce is involved in the foreign trade regulation and promotion. DGFT maintains a list of restricted and prohibited items for imports and is updated regularly in their Website: http://dgft.gov.in/
Standards, testing, labeling & certification
The Bureau of Indian Standards (BIS) established by the Indian Government under the BIS Act 2016 and is the National Standards Body of India. The Bureau functions under the Ministry of Consumer Affairs, Food & Public Distribution and is involved in the harmonious development of the activities of standardization, marking and quality certification of goods.
Another agency, the Food Safety and Standards Authority of India (FSSAI), established through the food safety and standards act under the Ministry of Health and Family Welfare; along with the Office of Legal Metrology under the Ministry of Consumer Affairs, Food and Public Distribution; and the Department of Commerce under the Ministry of Commerce and Industries (MOCI), regulate food safety, standards, labelling and packaging requirements of food and agricultural products.
Anti-dumping and countervailing measures
Anti-dumping and countervailing measures are permitted by the WTO Agreements in specified situations to protect the domestic industry from serious injury arising from dumped or subsidized imports. India imposes these from time-to-time to protect domestic manufacturers from dumping. India’s implementation of its antidumping policy has, in some cases, raised concerns regarding transparency and due process. In recent years, India seems to have aggressively increased its application of the antidumping law.
Export subsidies and domestic support
Several export subsidies and other domestic support is provided to several industries to make them competitive internationally. Export earnings are exempt from taxes and exporters are not subject to local manufacturing tax. While export subsidies tend to displace exports from other countries into third country markets, the domestic support acts as a direct barrier against access to the domestic market.
The Indian government’s Foreign Trade Policy (FTP) 2015-2020 announced on April 1, 2015 is primarily focused on increasing India’s exports of goods and services to raise India’s share in world exports from 2 to 3.5 percent. The FTP consolidated most of India’s existing export subsidies and other incentives into two main export incentive schemes, namely the Manufactured Goods Exports Incentive Scheme (MEIS) and the Service Exports Incentive Scheme (SEIS).
India maintains several export subsidy programs, including exemptions from taxes for certain export-oriented enterprises and for exporters in Special Economic Zones. Numerous sectors (e.g., textiles and apparel, paper, rubber, toys, leather goods, and wood products) receive various forms of subsidies, including exemptions from customs duties and internal taxes, which are tied to export performance. India not only continues to offer subsidies to its textiles and apparel sector to promote exports, but it has also extended or expanded such programs and even implemented new export subsidy programs. As a result, the Indian textiles sector remains a beneficiary of many export promotion measures (e.g., Export-Oriented Units, Special Economic Zones, Export Promotion Capital Goods, Interest Credit Schemes, Focus Product, and Focused Market Schemes). The GOI in July 2016 further increased the subsidy for the garment sector to boost employment generation in addition to providing for refund of state levies.
In 2017, India graduated from Annex VII of the WTO’s Subsidies and Countervailing Measures Agreement. In March 2018, the United States requested consultations on India’s export subsidy schemes in the WTO and a formal panel was established on July 24, 2018.
India maintains a large and complex series of programs that form the basis of India’s public food stockholding program. India maintains stocks of food grains not only for distribution to poor and needy consumers but also to stabilize prices through open market sales. India uses export subsidies to reduce stocks and has permitted exports of certain agricultural commodities from government public-stockholding reserves at below the government’s costs.
As per the USTR updates, India’s mid-term review of its FTP (released in Dec. 2017) outlined a renewed focus on promoting Indian exports while highlighting the need to move away from export subsidies consistent with WTO commitments relating to gross national income levels. As a result, India’s revised FTP will also focus on reducing the cost of trade internal to the country and has set forth an agenda to address trade facilitation issues impacting Indian exporters.
USTR source states that India lacks an overarching government procurement policy and, as a result, its government procurement practices and procedures vary among the states, between the states and the central government, and among different ministries within the central government. Multiple procurement rules, guidelines, and procedures issued by multiple bodies have resulted in problems with transparency, accountability, competition, and efficiency in public procurement. A recent World Bank report stated that there are over 150 different contract formats used by the state-owned Public-Sector Units, each with different qualification criteria, selection processes, and financial requirements. The government also provides preferences to Indian micro, small, and medium enterprises and to state owned enterprises. Moreover, India’s defense offsets program requires companies to invest 30 percent or more of the acquisition cost of contracts above the threshold value in Indian produced parts, equipment, or services, a requirement that continues to prove challenging for manufacturers of high-technology equipment.
In 2015, the government mandated that 20 percent of its public procurements be awarded to Indian based micro, small, and medium enterprises, and in 2017, the Indian cabinet approved a public procurement policy encouraging preferences for Indian manufactured goods with a view to promote the “Make in India” initiative. The move is aimed at facilitating local manufacturing and boosting domestic demand for locally manufactured products. As part of this May 2017 policy, the Ministry of Defense approved a model for Strategic Partnerships in certain acquisition programs, although the strong focus on mandatory technology transfer has given many U.S. companies reason to exercise caution regarding participation. A local content requirement has also been extended to the procurement of medical devices, and several government tenders in the last year have included a 30 percent local content mandate. India’s National Manufacturing Policy calls for increased use of local content requirements in government procurement in certain sectors (e.g., information communications technology and clean energy). Consistent with this approach, India issued the Preferential Market Access notification, which requires government entities to meet their needs for electronic products in part by purchasing domestically manufactured goods. Subsequently, in June 2017, the Department of Industry Policy and Promotion (DIPP) issued two notifications under the Public Procurement “Preferential Electronics Order” and “Cyber Notification,” which require local content for all state and central government procurements mandating preferences for domestically manufactured electronic goods (including medical devices) and cyber-security software products. The notification indicates that this requirement will apply to procurement by government, government companies, and other procuring entities. This notification is the culmination of similar Indian policy proposals over the past year that have outlined discriminatory government procurement policies as a means to stimulate domestic manufacturing of electronics and telecommunications equipment at the expense of foreign companies that have invested heavily in India.
Services in which there are restrictions include: insurance, banking, securities, motion pictures, accounting, construction, architecture and engineering, retailing, legal services, express delivery services and telecommunication. The Indian government has a strong ownership presence in major services industries such as banking and insurance. Foreign investment in businesses in certain major services sectors, including financial services and retail, is subject to limitations on foreign equity. Foreign participation in professional services is significantly restricted, and in the case of legal services, prohibited entirely.
Local Content requirements, Export Duties and Transparency continue to be other barriers for trade.
In 2010, India initiated the Jawaharlal Nehru National Solar Mission (JNNSM), which currently aims to bring 100,000 megawatts of solar-based power generation online by 2022 as well as promote solar module manufacturing in India. Under the JNNSM, India imposes certain local content requirements (LCRs) for solar cells and modules and requires participating solar power developers to use solar cells and modules made in India to enter into long-term power supply contracts and receive other benefits from the Indian government. The United States challenged these requirements through the World Trade Organization (WTO) dispute settlement system. In February 2016, a WTO panel found India’s LCRs inconsistent with multiple WTO requirements. These findings were affirmed by the Appellate Body on September 16, 2016, and the DSB adopted the Appellate Body and Panel reports at a special meeting of the DSB on October 14, 2016. On December 19, 2017, the United States requested authorization from the DSB to suspend
concessions or other obligations on the grounds that India had failed to comply with the DSB recommendations within the “reasonable period of time” that the parties agreed to. The United States’ request was referred to arbitration. On January 23, 2018, India requested the establishment of a compliance panel, asserting that it had complied with the DSB recommendations. The arbitration and compliance panel proceedings are ongoing.
India has steadily increased export duties on iron ore and its derivatives. This includes export duty of 30 percent, ad valorem export duty on iron ore pellets of five percent, an export duty on iron ore containing less than 58 percent iron of 10 percent, and an export duty on chromium ore of 30 percent ad valorem. In recent years certain Indian states and stakeholders have increasingly pressed the central government to ban exports of iron ore. To improve availability of iron ore for the local steel producers, the GOI in March 2016 enhanced and unified the rate of export duty for all types of iron ore (other than pellets) at 20 percent; earlier a 15 percent export tax was applicable on lumps and 5 percent on fines. India’s export duties impact international markets for raw materials used in steel production. In addition to the steel-related export duties, India’s March 2017 budget also imposed a 15 percent duty on exports of aluminum ores, including laterite. India has also maintained, since February 2012, a 30 percent ad valorem duty on exports of chromium ore.
Lack of transparency with respect to new and proposed laws and regulations affecting traders remains a problem due to a lack of uniform notice and comment procedures and inconsistent notification of these measures to the WTO. This in turn inhibits the ability of traders and foreign governments to provide input on new proposals or to adjust to new requirements. In 2014, India’s Ministry of Law and Justice issued a policy on pre-legislative consultation, which was to be applied by all Ministries and Departments of the Central Government before any legislative proposal was to be submitted to the Cabinet for its consideration and approval. The policy also required the central government entities to publish draft legislation or a summary of information concerning the proposed legislation for a minimum period of 30 days. Issuance through electronic media was also encouraged in the policy, as were public consultations. However, despite U.S. requests, the Indian government has provided no information on the implementation of the policy, other than to clarify it is only intended to apply to draft legislation, not regulations or tariff-setting not. U.S. stakeholders continue to report new requirements that are issued with no or inadequate public notice and consultation or without WTO notification. This lack of transparency imparts a lack of predictability in the Indian marketplace, negatively affecting the ability of U.S. companies to enter or operate in the Indian market. The United States continues to raise our concerns regarding uniform notice and comment procedures with the government of India both bi-laterally in the Trade Policy Forum (TPF) and multi-laterally in the WTO and other fora.