Both import and exports are subject to regulatory requirements prescribed by the government.
Any importer or exporter is expected to know the regulations relating to foreign trade and abide by them. Of the numerous statues that have a bearing on export transaction, those having direct relevance for any export or import are the following:
1 Foreign trade (Development and Regulation) Act2 Foreign Exchange Management Act
3 Customs Act
Foreign Trade (Development and Regulation) Act vests the Central Government with the authority of regulating foreign trade of the country and formulating the foreign trade policy. Under the authority derived from the Act, the Central Government announce the Foreign Trade Policy which indicates (a) what goods can be imported into or exported from the country, (b) the conditional ties, if any, attached to such import or export, and (c) various schemes of export promotion and import facilitation. The current policy is for five years form September 2004 to march 2009.
Under the policy all the goods are free for imports/exports unless specifically restricted. Free for imports/exports means that no license is required for importing/exporting such goods. Few items placed under restricted category require licensing for imports/exports. A small number of items are totally banned from imports/exports.
The administration of the Foreign Trade Policy is the responsibility of the Directory General of Foreign Trade (DGFT) at New Delhi assisted by Joint and Deputy Director Generals at other important cities in the country.
Foreign Exchange Management Act
Foreign Exchange Management Act (FEMA) regulates the flow of money into the country and from the country in settlement of international transactions. Reserve Bank of India administers FEMA through commercial banks licensed by it as authorized dealers in foreign exchange. Exporters are required to realize the foreign exchange only through authorized dealers. Importers are required to route their transactions only through authorized dealers. They can obtain the required foreign exchange to pay for their imports from the authorized dealers.
Goods going out of the country on export or entering the country on import should get customs clearance by complying with the procedures prescribed under the Customs Act.