Includes the barriers (tariff and non-tariff) that U.S. companies face when exporting to this country
Last Published: 10/10/2018

Trade Barriers

For more information and help with trade barriers please contact:

International Trade Administration
Enforcement and Compliance
(202) 482-0063ECCommunications@trade.gov

http://trade.gov/enforcement/

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 https://ustr.gov/sites/default/files/files/reports/2017/NTE/2017%20NTE.pdf

Import Licensing

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 can 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 treats 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 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. Consequently, it should now eliminate all its export subsidies in all sectors of its economy without exception. Despite its graduation from Annex VII, India has not publicly articulated a timeline for elimination of any export subsidy programs.

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.

Procurement

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.

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. 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. This notification is the culmination of similar Indian policy proposals over the past year that have outlined discriminatory government procurement policies designed to stimulate domestic manufacturing of electronics and telecommunications equipment.

Service barriers

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.

Other barriers

Equity restrictions and other trade-related investment measures are perceived give an unfair advantage to domestic companies. The GOI 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 (barter or non-cash transactions). 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 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. In November 2016, India provided formal notice that it would bring the challenged measures into WTO compliance within a "reasonable period." Subsequently, India and the United States agreed that the reasonable period 14 months.

On January 23, 2018, India requested the establishment of a WTO compliance panel to determine whether India has brought the challenged measures into WTO compliance. The WTO has yet to take any action on India’s request.

In response to pressure from local stakeholders, 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.

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.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



India Trade Barriers