“DGFT Allows Merchanting Trade Within Single Foreign Country”

DGFT Notification Allows Merchanting Trade within Single Foreign Country

The Directorate General of Foreign Trade (DGFT) has issued a significant amendment to the Foreign Trade Policy, 2023, through Notification No. 62/2023 dated February 29, 2024. This amendment marks a notable shift by permitting merchanting trade within a single foreign country, subject to specific conditions.

Background and Legal Authority

The amendment is enacted under the powers granted by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992, in conjunction with paragraph 1.02 of the Foreign Trade Policy, 2023. This empowers the Central Government to introduce changes to the policy framework governing foreign trade.

Changes to Para 2.39 of the Foreign Trade Policy, 2023

The key amendment affects Para 2.39 of the Foreign Trade Policy, 2023. A comparison between the existing and revised paragraphs illustrates the scope of this alteration:

Existing Para:

The existing provision allowed for merchanting trade involving the shipment of goods from one foreign country to another foreign country without touching Indian ports. This was permissible if an Indian intermediary facilitated the trade, subject to compliance with Reserve Bank of India (RBI) guidelines. However, goods/items listed in the CITES and SCOMET lists were explicitly excluded from this provision.

Revised Para:

The revised paragraph expands the scope of merchanting trade by permitting the shipment of goods within one specific foreign country, in addition to the existing provision for trade between foreign countries. The involvement of an Indian intermediary remains a requirement, and compliance with RBI guidelines is mandatory. However, goods listed in the CITES Appendices or under SCOMET are excluded from this permission.

Effect of the Notification

This amendment introduces a significant change in the landscape of merchanting trade. Specifically, it permits the conduct of merchanting trade within a single foreign country, provided it adheres to RBI guidelines. Notably, goods listed in the CITES Appendices or under SCOMET are excluded from this permission.

Conclusion

In conclusion, the DGFT Notification No. 62/2023 dated February 29, 2024, represents a noteworthy development in foreign trade policy. By allowing merchanting trade within a single foreign country, subject to specified conditions, it opens up new avenues for trade while ensuring compliance with regulatory guidelines.