Understanding DGFT and Its Important Roles and Functions
The DGFT or Directorate General of Foreign Trade is a dedicated body that operates under the Ministry of Commerce & Industry by the Indian Government. DGFT is headed by the Director General of Foreign Trade. Until 1991, the office was referred to as the CCI&E Chief Controller of Imports & Exports. After liberalization in 1991, the Directorate General of Foreign Trade came into existence to replace the CCI&E.
Eventually, the primary role of the Directorate General of Foreign Trade changed from serving as the Prohibition & Controller of Exports & Imports to Promoter, Facilitator, and Regulator of Imports & Exports. By ensuring the respective objects of the nation improve exports, DGFT is responsible for implementing necessary laws, issuing export licenses, introducing trade incentives, and developing trade relations with other countries.
The DGFT is a vital agency in India’s trade ecosystem, and its functions and roles have a significant impact on the country’s economic growth. The agency’s role in promoting exports and facilitating foreign trade is crucial, given India’s focus on becoming a global economic powerhouse.
One of the primary functions of the DGFT is to create and implement foreign trade policies that are in line with India’s trade goals. The agency works closely with the Ministry of Commerce and Industry to identify areas of growth and to develop policies that promote exports and remove trade barriers. These policies are crucial to enhancing India’s competitiveness in the global marketplace.
Another important role of the DGFT is to issue licenses to exporters and importers in India. These licenses are required to carry out foreign trade activities and are issued based on various criteria, such as the type of product being exported/imported, the country of origin/destination, and the value of the product. The agency also issues export and import permits for specific products and commodities to ensure compliance with international trade regulations.
Understanding Important Roles & Functions of DGFT
- Implementing Foreign Trade Policy and EXIM Policy: Foreign Trade Policy or EXIM Policy is a dedicated set of instructions and guidelines with respect to the import and export of items. The guidelines or instructions are created by the DGFT or Directorate General of Foreign Trade. The Indian Government is known to announce the EXIM Policy that remains applicable for 5 years under Section 5, Foreign Trade Act, 1992.
The primary objective of EXIM Policy or Foreign Trade Policy is to encourage exporters in the nation while improving exports and maintaining the right balance of payment conditions.
- Implementing Procedures Related to Foreign Trade: Directorate General of Foreign Trade is responsible for formulating and announcing the procedures related to Foreign Trade that are followed by the importers and exporters for implementing the respective provisions of the Foreign Trade Policy and the Foreign Trade Act.
The primary objective here is to simply lay down procedures that are EDI-compatible and are easy to understand. The procedures should be user-friendly as well for ensuring seamless execution of foreign trade within the nation.
- Issuing IEC Code to Importers & Exporters: IEC or Import Export Code is a must-have requirement for ensuring all import or export businesses throughout India. IEC is available as a 10-digit code for registration that is issued by the DGFT. The code also helps in tracking as well as managing the shipment of the importer or exporter.
The IEC code has now been integrated with the PAN. Only a single IEC can be issued against one Permanent Account Number. An importer or exporter can think of applying for the IEC or the e-IEC online on the official website of the DGFT.
- Documenting and Maintaining Classifications of ITC HS Codes: These codes are designed according to the International HS or Harmonized System of Codes. These were introduced in the nation for facilitating the activity of foreign trade. The customs in India make use of an ITC HS Code featuring 8 digits with respect to trading activities.
The ITC HS Codes are categorized into two distinct schedules. Schedule 1 is meant for import activities. On the other hand, Schedule 2 is meant for export activities. Any modifications -like eliminating defunct codes, changing the description of the items, the addition of new codes, and so more are executed by the DGFT.
- A platform for Viewing and Updating the eBRC: eBRC refers to an electronic form of Bank Realization Certificate that is typically issued by banking institutions to exporters such that they are capable of claiming the benefits under multiple export promotion schemes -including the Foreign Trade Policy.
For the promotion of paperless trade, the eBRC module for exports by the DGFT enables banking institutions to electronically transmit foreign exchange realization to the account of the exporters directly.
- Informing About Goods that Can or Cannot be Exported Freely: As per Schedule 2 formulated by the Directorate General of Foreign Trade, all items except those listed in the export licensing schedule in addition to the appendices are exportable freely. Exports remain free with the exception of being regulated through any STE, restriction, or prohibition.
- Granting Export Licenses for Restricted Goods: All goods that have been referred to as restricted within the export policy are allowed for exports as per the license that is granted by the Directorate General of Foreign Trade. The license for these goods can be applied online on DGFT’s website.
- Promotion of Trade: Directorate General of Foreign Trade plays an important role in introducing a number of export promotion schemes -including the Duty-Free Import Authorization Scheme, Advance Authorization Scheme, MEIS, SEIS, Deemed Exports, EOU or Export Oriented Units Scheme, and so more. These schemes are implemented under the Foreign Trade Policy. The procedures to apply these schemes have been outlined under the procedure of Foreign Trade by the DGFT.
- Policy Formulation: The DGFT formulates policies related to foreign trade, such as export-import policies, trade agreements, and bilateral agreements. It also advises the government on matters related to foreign trade and helps in the formulation of foreign trade policies at the national level.
- Export Promotion: The DGFT promotes exports from India by providing various incentives and benefits to exporters, such as duty drawbacks, the EPCG scheme, etc. It also provides support for the development of export-oriented industries, such as SEZs. The DGFT also organizes trade delegations to explore new markets and promote exports from India.
- Trade Facilitation: The DGFT helps in facilitating trade by simplifying procedures and reducing bureaucracy. It provides various online services, such as the issuance of IEC and DSC. It also conducts various trade fairs and exhibitions to promote trade and commerce. The DGFT also offers guidance and assistance to importers and exporters on various trade-related matters.
- Policy Review: The DGFT regularly reviews its policies and programs related to foreign trade to identify the challenges faced by Indian exporters and importers. It suggests measures to overcome them and also consults with various stakeholders, such as industry associations and trade bodies, to understand their concerns and issues. The DGFT also provides feedback to the government on the effectiveness of its trade policies and programs.
The DGFT is a single body. However, it is responsible for facilitating multiple importers and exporters simultaneously. DGFT plays a crucial role in the Indian government in regulating all internal affairs of foreign trade.