Module 3

I. Foreign Trade (Development & Regulation) Act 1992

 The Foreign Trade (Development & Regulation) Act, 1992 (FTDR Act) is a

significant legislation in India that governs foreign trade and regulates

various aspects related to imports and exports.

 Here are some of its salient features:

i. Regulation of Foreign Trade:

 provides the legal framework for regulating foreign trade in

India.

 empowers the government to formulate policies, procedures,

and regulations governing imports and exports to promote

economic growth, balance of payments, and international

trade relations.

ii. Directorate General of Foreign Trade (DGFT):

 Establishes the DGFT as the primary authority responsible

for implementing and administering the provisions of the

Act.

 The DGFT issues notifications, guidelines, and procedures

for foreign trade transactions, including export-import

policies and licensing requirements.

 every importer as well as exporter shall obtain a code
number called the ‘Importer Exporter Code Number
(IEC)’ from DGFT.

iii. Licensing and Regulation of Imports and Exports:

  The act requires importers and exporters to obtain licenses

or permits for certain categories of goods specified by the

government.

 lays down procedures for the issuance, renewal, suspension,

and cancellation of such licenses, as well as conditions and

restrictions on imports and exports.

iv. Control of Dual-Use Goods:

 The Act regulates the import and export of dual-use goods,

which are items that have both civilian and military

applications.

 It aims to stop dangerous weapons and sensitive technologies

from getting into the wrong hands.

v. Trade Policy Formulation:

 provides for the formulation of the Foreign Trade Policy

(FTP) by the government.

 FTP outlines the objectives, strategies, and measures for

promoting foreign trade.

 The FTP is periodically reviewed and revised to align with

changing economic conditions and international trade

dynamics.

vi. Trade Facilitation Measures:

  The Act facilitates trade by streamlining procedures,

reducing bureaucratic hurdles, and promoting efficiency in

customs clearance, documentation, and logistics.

 It encourages the use of electronic commerce and digital

platforms for trade facilitation and documentation.

vii. Export Promotion Schemes:

 The Act authorizes the government to introduce export

promotion schemes and incentives to boost exports and

enhance competitiveness.

 These schemes may include duty drawback, export

incentives, export promotion capital goods (EPCG) scheme,

export-oriented units (EOUs), special economic zones

(SEZs), and trade facilitation measures.

viii. Prohibition and Restrictions:

 The Act empowers the government to impose prohibitions,

restrictions, or conditions on imports and exports for

national security, public health, environmental protection, or

foreign policy objectives.

 It also allows for the imposition of anti-dumping duties,

safeguard measures, and countervailing duties to address

unfair trade practices.

ix. Penalties and Enforcement:

  The FTDR Act prescribes penalties for violations of its

provisions, including fines, confiscation of goods, suspension

or cancellation of licenses, and imprisonment in certain cases.

 It authorizes the DGFT and customs authorities to conduct

inspections, investigations, and enforcement actions to

ensure compliance with foreign trade regulations.

II. UNCTAD Draft Model on Trans – national Corporations

 The United Nations Conference on Trade and Development (UNCTAD) has

indeed developed various models and frameworks to analyze and

understand the activities and impact of transnational corporations (TNCs)

on global economic dynamics.

 One of the prominent models is the "UNCTAD Transnational

Corporations" database.

 This database serves as a comprehensive resource for researchers,

policymakers, and analysts interested in studying the behavior,

strategies, and effects of TNCs on host and home countries.

 It includes data on various aspects such as foreign direct investment

(FDI), the geographic distribution of TNC activities, sectoral

breakdowns, and performance indicators.

 The UNCTAD model on TNCs often incorporates elements such as:

1. FDI Flows and Stocks: Tracking the flow of investments across

borders and the accumulation of foreign assets by TNCs in different

countries.
 2. Sectoral Analysis: Examining the distribution of TNC activities

across different sectors such as manufacturing, services, extractive

industries, etc.

3. Value Chain Analysis: Understanding how TNCs participate in global

value chains, from sourcing raw materials to production and

distribution.

4. Policy Analysis: Assessing the impact of policies and regulations on

TNC behavior and their implications for host and home countries.

5. Development Impact: Evaluating the contribution of TNCs to

economic growth, employment, technology transfer, and sustainable

development in host countries.

6. Sustainability and Corporate Social Responsibility (CSR): Analyzing

TNCs' environmental and social practices, including CSR initiatives and

their adherence to international standards.

III. Control and regulation of foreign companies in India

1. Delivery of Documents to Registrar:

 Within 30 days of establishing a place of business in India, foreign

companies must deliver the following documents to the Registrar of

Companies (ROC):
 i. Instruments constituting and defining the constitution of

the company (e.g., memorandum and articles of association).

ii. Full address of the principal office of the company.

iii. List of directors and secretary of the company.

iv. Name and address of the person resident in India authorized

to accept documents on behalf of the company.

2. Books of Account and Records:

 Foreign companies must prepare balance sheets, profit and loss

accounts, and necessary documents, submitting them to the ROC.

 These must be accompanied by a list of all offices or places of

business in India.

 Additionally, books of account reflecting Indian operations must be

kept at the principal place of business in India.

3. Display of Name:

 The name of the company and the country of incorporation must be

exhibited outside every office and place of business.

 It must also be stated in all official publications, such as business

letters, bill heads, and notices, in English characters and in the

local language.

4. Consequences of Non-compliance:

 Non-compliance may result in fines ranging from INR 1 lakh to 3

lakhs, with additional daily fines for continued violations.

 Officers in default may face imprisonment or fines.

  The company may not be able to institute legal proceedings related

to contracts, though contract validity remains intact.

5. Provisions for Raising Capital:

 Foreign companies can raise capital privately from Indian investors

or access Indian capital markets by issuing Indian Depository

Receipts (IDRs) after complying with regulatory requirements,

including those of the Securities and Exchange Board of India

(SEBI) and the Reserve Bank of India (RBI).

6. Winding Up:

 A foreign company may be wound up as an unregistered company if

it ceases to carry on business in India.

7. Compliance under Foreign Exchange Laws:

 Foreign companies establishing liaison offices, branch offices,

or project offices in India must comply with regulations under

the Foreign Exchange Management Act (FEMA), including

submitting reports to the Director General of Police (DGP) and

filing Annual Activity Certificates (AAC) with chartered

accountants.

IV. Foreign collaborations and joint ventures

 Foreign collaborations and joint ventures in investment law refer to

partnerships between foreign entities and local entities in a particular

 country for the purpose of conducting business activities, typically in

sectors such as manufacturing, services, technology, and

infrastructure.

 These collaborations are governed by investment laws and regulations

set forth by the host country, which outline the rights,

responsibilities, and procedures for foreign investors entering into

such partnerships.

 Here are some key aspects typically covered in investment laws

regarding foreign collaborations and joint ventures:

1. Legal Framework: Investment laws provide the legal framework for

establishing and operating joint ventures and collaborations between

foreign and local entities. They outline the permissible structures,

ownership limits, and regulatory requirements for such partnerships.

2. Ownership Restrictions: Many countries impose restrictions on

foreign ownership in certain sectors to protect national interests or

strategic industries. Investment laws specify the permissible level of

foreign ownership in different sectors and industries.

3. Registration and Approval Processes: Investment laws often require

foreign collaborations and joint ventures to be registered with

relevant government agencies and obtain necessary approvals before

commencing operations. This process may involve submitting detailed

business plans, financial projections, and other documentation.

4. Protection of Investments: Investment laws typically include

provisions for the protection of foreign investments, including

guarantees against expropriation, fair and equitable treatment, and

mechanisms for resolving disputes between foreign investors and the

host government.

5. Taxation and Incentives: Investment laws may provide tax incentives

or concessions to encourage foreign investment, such as tax holidays,

reduced tax rates, or exemptions on certain types of income

generated through joint ventures and collaborations.

6. Intellectual Property Rights: Investment laws address issues related

to intellectual property rights, including the protection of patents,

trademarks, copyrights, and trade secrets belonging to foreign

investors involved in joint ventures.

7. Labor and Employment Regulations: Investment laws may stipulate

requirements regarding employment of local workers, minimum wage

standards, health and safety regulations, and other labor-related

matters affecting joint ventures and collaborations.

8. Environmental Regulations: In many jurisdictions, investment laws

impose environmental regulations on businesses, including joint

ventures, to ensure compliance with environmental standards and

mitigation of environmental impacts.