Read the case given below and answer the questions given at the end.

CASE STUDY – I
FEMA ALLOWS DEALERS TO MAKE REMITTANCES FOR GENUINE DEALS

FEMA, the improved version of FERA, which has come into effect from June, does not do away with exchange controls as such. Nonetheless, it puts an end to the archaic system of sending businessmen and managers to jail for civil offences.

The substitute of financial penalties is better even though the quantum of penalty does not reflect the low national cost of generating foreign exchange. Welcoming the new Act, Fieo Chief, Navratan Samdria, has said that the new Act recognises the export contract. There are no artificial limits in the law for agency commission or buyer claims. The actual incidence of these is left to market forces. Agency commission in the case of rupee trade is, however, not allowed.

The invoice value is no longer sacrosanct; it is a mere reflection of the consignment at the time of drawing upJhe bill. The actual value of goods is a function of time and place, the actual sale proceeds depend upon the market situation. However, the new thinking should be reflected in bank procedures and also the mindsets of the customs and DGFT officials. They are fixed to the invoice values and bank realisation certificates and do not wish to hear anything else.

In the new FEMA rules, business travellers can now avail of. minimum of $5,000 forex with minimum documentation and paperwork. The limit has been raised from the current level of $3,000.

There is new GR/PP form, which should be used in all export documentation. As of now, the RBI has asked exporters to continue with the old forms after modifying them for the FEMA undertakings. The new set of GR/PP forms will be provided to exporters shortly.

On the import side, authorised dealers have been given permission to make remittances for all genuine transactions. In case of doubts on the authenticity' of the transaction, dealers have the right to refuse to deal with the importers, provided they do so in writing.

Exceptions to the general permissions for import remittances are under Schedule II and Schedule II! of the FEMA rules, which cover cases requiring permission from union government as well as situations where monetary ceilings are prescribed.

The important point in exchange control on imports is that RBI approval is required for supplier credit beyond 180 days. For credit below 180 days, no permission is required and the dealer can straight away send out the amount. Similarly, all cases of buyer's credit, which means advance payment for the goods in some form or the other, also require a RBI clearance. The RBI has withdrawn itself from the task of prescribing documents for each transaction. The decision is left to the authorized dealer who must deal with each situation according to the ground level facts and circumstances. The intention is to control the transaction on the basis of undertakings and declarations rather than conducting another customs clearance at the banking stage

Agriculture trade: The IIFT and the department of agricultural research and cooperation held a daylong meeting of agriculture experts recently. The well-researched backgrounder from NCAER showed up negative subsidies on most agriculture commodities, rice led the field at over minus 40 per cent. The state government representatives felt that imports were responsible for depressed agriculture prices.

Economists said that rise in state minimum support prices and the consequent difficulties in disposing the expensive purchases is bad for agriculture. Concerns of good security were topmost in the minds of the commerce ministry negotiators. They are looking for ideal tariff rate, which meets the interests of the Indian producers and consumers without compromising food security.

The commerce ministry is on a transparency spree, the main discussion papers on both the agriculture and services negotiations at WTO reflecting the tentative position of the" Indian government on the Internet along with other related material.

Anybody can visit the site in the nic.inserver; one click on the commerce button is all that is required to download the material. Suggestions and views can be sent on the Internet at the Webmaster address. Given the limitations of the negotiations, cogent reactions will strengthen India's case at the WTO forum. The views will also build the consensus on reform in agriculture.

Furnace Oil. The DCFT notified Rs 780 per tonne as the industry rate of drawback on furnace oil supplied to 100 per cent EOUs and export processing zones. The measure reimburses the duties suffered by the deemed export on the fast track route. The brand rate alternative requires verification of the actual duty paid. The DCFT action is especially welcome because the duties suffered are rarely reimbursed by the export promotion system.

Sodium Cyanide. The revenue department has slapped a stiff anti-dumping duty on sodium cyanide imports. The final duty is Rs 68.025 per kg on all imports from US, EU, Czech Republic and Korea. The 16 per cent countervailing duty to compensate for the excise duty suffered by domestic goods must also be paid on the anti-dumping duty. In other words, another Rs 10.88 per kg must be paid as countervailing duty due to the anti-dumping duty of Rs 68.025 per kg. The short paid provisional duties will also be recovered as the customs shoot the demand letter out.

Questions
1. Does FEMA allows better flexibility of all export and import Transactions .
2. What Role does agriculture trade play in International Trade and Negotiations with WTO