India - Trade BarriersIndia - Trade Barriers
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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: For more information visit the website.
One of the most common non-tariff barriers is the prohibition or restrictions on imports maintained through import licensing requirements. Though India has eliminated its import licensing requirements for most consumer goods, certain products face licensing related trade barriers. For example, the Indian government requires a special import license for motorcycles and vehicles that is very restrictive. Import licenses for motorcycles are provided to only foreign nationals permanently residing in India, working in India for foreign firms that hold greater than 30% equity or to foreign nations working at embassies and foreign missions. Some domestic importers are allowed to import vehicles without a license provided the imports are counterbalanced by exports attributable to the same importer.
India maintains a “negative list” of imported products subject to various forms of nontariff regulation. The negative list is currently divided into three categories: 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. Refurbished computer spare parts can only be imported if an Indian chartered engineer certifies that the equipment retains at least 80 percent of its life, while refurbished computer parts from domestic sources are not subject to this requirement. India requires import licenses for all remanufactured goods. U.S. stakeholders report that meeting this requirement, like other Indian import licensing requirements, has been onerous. Problems that stakeholders report include: excessive details required in the license application; quantity limitations set on specific part numbers; and long delays between application and grant of the license.
India subjects boric acid imports to stringent restrictions, including arbitrary import quantity approval requirements and conditions applicable only to imports used as insecticide. Traders (i.e., wholesalers) of boric acid for non-insecticidal use cannot import boric acid for resale because they are not end-users of the product and consequently cannot obtain “no objection certificates” (NOCs) from the relevant Indian government ministries and departments or import permit from the Ministry of Agriculture. NOCs are required before applying for import permits from the Ministry of Agriculture’s Central Insecticides Board & Registration Committee. Meanwhile, local refiners continue to be able to produce and sell boric acid for non-insecticidal use subject only to a requirement to maintain records showing they are not selling to end users who will use the product as an insecticide. The United States urged India to eliminate its import licensing requirements on boric acid in meetings of the WTO Import Licensing Committee and at the 2016 TPF. United States has actively sought bilateral and multilateral opportunities to open India’s market, and the government of India has pursued ongoing economic reform efforts. Nevertheless, U.S. exporters continue to encounter tariff and nontariff barriers that impede imports of U.S. products into India.
Standards, testing, labeling & certification:
The Indian government has identified 109 commodities that must be certified by its National Standards body, the Bureau of Indian Standards (BIS). Another agency, the Food Safety and Standards Authority of India established under the Food Safety and Standards Act, 2006 as a statutory body for laying down standards for articles of food and regulating manufacturing, processing, distribution, sale and import of food. The idea behind these certifications is to ensure the quality of goods seeking access into the market, but many countries use them as protectionist measures. For more on how this relates to labeling requirements, please see the section on Labeling and Marking Requirements in this chapter
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 in order 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.
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. For example, the government authorized the exportation of 66.5 million tons of wheat from government-held stocks during August 2012 to May 2014 at varying minimum export prices significantly below the government’s acquisition cost of $306 per ton, plus storage, handling, inland transportation cost, and other charges for exports. In February 2014, the Indian Cabinet Committee on Economic Affairs made 4 million metric tons of raw sugar eligible to receive export subsidies under a new, two-year subsidy program. The United States, along with other interested Member countries, has raised this issue in the WTO Committee on Agriculture.
The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers. In international purchases and International Competitive Bids (ICB’s) domestic companies gets a price preference in government contract and purchases.
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 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 value of contracts above 3 billion rupees (approximately $56 million) in Indian produced parts, equipment, or services.
India has started the legislative process for enacting a new Procurement Bill. Comments were requested in April 2015. Speaking to foreign investors in September 2015, Finance Minister Arun Jaitley stated that the Procurement Bill is high on the government’s agenda and would be put forward for parliamentary approval soon. The Indian Ministry of Defense also announced in August 2015 changes to its offset production regulations for defense industry companies contracting with the Indian government, providing greater flexibility in designating Indian offset production partners. These offset changes will apply to all current and future contracts. India’s National Manufacturing Policy calls for increased use of local content requirements in government procurement in certain sectors (e.g., ICT 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. India is not a signatory to the WTO Government Procurement Agreement, but is an observer.
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.
Equity restrictions and other trade-related investment measures are in place to give an unfair advantage to domestic companies. The Government of India continues to limit or prohibit FDI in sensitive sectors such as retail trade and agriculture. Additionally, there is an unpublished policy that favors counter trade. Several Indian companies, both government-owned and private, conduct a small amount of counter trade.
In 2010, India initiated the Jawaharlal Nehru National Solar Mission (JNNSM), which aims to bring 100,000 megawatts (MW) 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. Specifically, under the JNNSM, participating solar power developers must use solar cells and modules made in India in order to enter into long-term power supply contracts and receive other benefits from the Indian government. On February 6, 2013, the United States requested consultations with India concerning India’s domestic content requirements under “Phase I” of the JNNSM. On February 10, 2014, the United States requested supplementary consultations concerning India’s domestic content requirements under “Phase II” of the JNNSM. Under Phase II, the LCRs were expanded to cover solar thin film technologies, which comprise the majority of the components made in the United States. Thin film technologies had been excluded from the LCRs under Phase I. In May 2013, the WTO established a panel to examine the LCRs under Phase I and II of the JNNSM. On December 21, 2015, the Panel issued a report finding the LCRs inconsistent with India’s national treatment obligations under Article III:4 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article 2.1 of the Agreement on Trade-related Investment Measures (TRIMS Agreement). On 16 September 2016, the Appellate Body report sustained the United States' claims that India's LCR measures are inconsistent with WTO non- discrimination obligations under the Articles mentioned above. Efforts to resolve the dispute with the Government of India have thus far, yielded no results.
India has steadily increased export duties on iron ore and its derivatives. In February 2011, India increased the export duty on both iron ore fines and lumps from 5 percent and 15 percent, respectively, to 20 percent on both, and increased that export duty to 30 percent in January 2012. A 5 percent ad valorem export duty on iron ore pellets has been in place since January 2014. Furthermore, a 10 percent export duty is levied on iron ore containing Fe (iron) less than 58 percent since May 2015. In February 2012, India changed the export duty on chromium ore from Rs. 3,000 per ton to 30 percent ad valorem, an increase at current chromium ore price levels. 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.
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 February 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 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. 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 TPF and multi-laterally in the WTO and other fora.
India Trade Barriers