What is the foreign trade policy and how does it govern your import?

The Foreign Trade Policy (FTP) is the primary instrument through which India's government sets the rules for every import and export transaction. Every importer is legally bound by the FTP in force at the time of import, including the conditions attached to specific goods, the licences required, and the procedures that must be followed. Importing in violation of FTP conditions attracts penalties under Section 9A of the Foreign Trade (Development and Regulation) Act, 1992, which can reach five times the value of the goods.

What is the foreign trade policy?

The Foreign Trade Policy is a policy document issued by the Directorate General of Foreign Trade (DGFT) under the authority of the Foreign Trade (Development and Regulation) Act, 1992. Section 5 of the FT (DR) Act empowers the Central Government to formulate and announce a Foreign Trade Policy, which governs the import and export of goods and services into and out of India. The FTP is legally binding on every entity engaged in international trade with India.

The current operative policy is the Foreign Trade Policy 2023 to 2028 (FTP 2023), which came into effect on 1 April 2023. It replaced the FTP 2015 to 2020, which had been extended multiple times before being superseded. FTP 2023 was formulated with an emphasis on ease of doing business, export promotion, and streamlining of import licensing procedures. The companion document, the Handbook of Procedures (HBP) 2023, provides the procedural detail for every authorisation, licence, and registration that the FTP requires.

The FTP operates together with the ITC (HS) Classification, the Indian Trade Classification (Harmonised System), which assigns a policy condition to every importable product. These two documents together form the complete legal framework that determines what can be imported, by whom, under what conditions, and at what point a licence is required.

The FTP also administers a range of export promotion schemes, such as the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme and the Advance Authorisation scheme, which allow duty-free importation of inputs for export production. These schemes carry specific conditions and fulfilment obligations that, if breached, trigger recovery proceedings.

Implications for businesses operating in India

Foreign manufacturers and exporters shipping to India operate within a framework where the FTP governs the legality of their buyer's ability to receive the goods. When a foreign exporter ships goods to an Indian importer who does not hold the required DGFT authorisation under the FTP, the goods will be detained at the Indian port. Foreign exporters with recurring India shipments must contractually confirm that their Indian buyers hold the correct import authorisations before goods are dispatched.

Indian importers are the primary parties on whom FTP obligations fall. The FTP requires that importers not only hold the correct authorisation for restricted goods, but also comply with end-use conditions, re-export conditions, and time limits built into specific authorisations. Under the Advance Authorisation scheme, for example, the importer must export the finished goods within a stipulated period. Failure to do so results in recovery of the customs duty that was exempted, along with interest. Many importers focus on the authorisation issuance and underestimate the post-import compliance obligations that the FTP imposes.

Customs house agents and freight forwarders must treat the FTP as a live document that changes. DGFT issues trade notices, policy circulars, and notifications that amend FTP conditions mid-policy cycle. The practical standard is to verify current FTP conditions at dgft.gov.in or accessindiaplatform.com before every transaction, not before every policy cycle.

How foreign trade policy compliance works

FTP compliance for an import transaction begins with confirming the ITC (HS) code and its associated policy condition. The DGFT portal at dgft.gov.in provides a Trade Intelligence section where the current Schedule I policy conditions can be queried by ITC (HS) code. You may also check accessindiaplatform.com for an HSN-level compliance report. This step must be performed before the purchase order is placed with the overseas supplier.

If the policy condition is Free, no DGFT import licence is required and the goods may be imported subject to any other applicable regulatory requirements such as BIS certification, FSSAI registration, or drug licensing clearances. The FTP does not override these parallel regulatory regimes, and all applicable conditions must be satisfied simultaneously.

If the policy condition is Restricted, the importer must file an application with the competent DGFT Regional Authority for an import licence before the goods are shipped. The application is filed electronically through the DGFT portal using the applicable Application for Norms Fixation (ANF) form. Applications must be supported by documents including a valid IEC, technical specifications of the goods, end-use declaration, and, in some cases, a No Objection Certificate from the relevant sectoral ministry. Processing timelines at Regional Authorities are typically 30 to 45 working days for straightforward applications.

Importers using FTP's export promotion schemes such as Advance Authorisation or Export Promotion Capital Goods (EPCG) must track their export obligation fulfillment. These obligations are recorded against the authorisation number and must be fulfilled within the validity period specified. Extensions are available on application but carry a fee and must be obtained before the original validity expires.

Legality and risks

The Foreign Trade (Development and Regulation) Act, 1992 is the statutory foundation of the FTP. Section 3 of the FT(DR) Act prohibits the import of any goods in contravention of the Act or the orders made under it, which includes the FTP. Section 9A provides for penalties of up to five times the value of the goods involved in any violation. These penalties are assessed per transaction.

Section 11 of the FT(DR) Act governs the adjudication process. The importer is served a show-cause notice, given an opportunity to be heard, and then an order is passed. The order may include a monetary penalty, confiscation of goods, forfeiture of any duty benefits claimed, suspension of the IEC, or cancellation of the IEC. An IEC that is suspended or cancelled renders the importer unable to conduct any import or export until the matter is resolved.

At the port, the Customs Act, 1962 and the FT(DR) Act operate simultaneously. A customs officer who identifies an FTP violation can detain the goods under Section 110 of the Customs Act, 1962 and refer the matter to the DGFT Regional Authority for adjudication.

Word of counsel

Importers are advised that FTP obligations attached to an authorisation do not end when the goods clear customs. Advance Authorisation holders, EPCG licence holders, and exporters claiming RoDTEP benefits all have post-clearance obligations such as export performance, installation certificates, and bond cancellations that must be completed within defined periods. The DGFT system will flag an outstanding obligation against the IEC, and that flag can block future authorisation applications entirely.

Have a question about a specific product or regulation? Speak to an expert at accessindiaplatform.com