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You read ‘Foreign Collaboration’ in category ‘Essay examples’ The subsequent should be taken into account while drafting the technology agreement which the licensed product/technical information is defined elaborately, period that such a technology/knowhow is usually transferred, precisely what is transferred and what is not really transferred and what are special and non exclusive rights transferred, manner of calculation of payment and schedule of payment, cost of foreign Technicians, which party will keep the taxes if etc . Please note that no permission is necessary intended for hiring of foreign experts and no app need be made to Government for this specific purpose irrespective of whether the hiring of foreign specialist is beneath an approved collaboration contract or not]. As stated earlier the collaboration may be through automated route or perhaps government route.

Below is definitely the brief debate regarding the same: – 2 . 1 Programmed Route intended for Foreign Technology Agreements: The Reserve Financial institution of India, through the regional offices, accords automated approval for all industries to get foreign technology collaboration agreements subject to: The lump sum payments not exceeding US $2 million, Where there s technology Transfer: – Royalty payment being restricted to 5 per cent for home sales and 8 percent for export products, subject to an overall total payment of 8 percent in revenue without any constraint on the duration of the repayments, and High is no technology Transfer: , The Government of India also permits repayment of royalties of up to 2 per cent about exports and 1 per cent for home sales beneath automatic path on use of trademarks and brand names from the foreign collaborator without technology transfer.??

Also, Clarification was brought in by simply department by means of press be aware dated 23-12-2005 that because FDI upto 100% is permitted under the automatic course in most sectors/activities automatic path is also allowed for foreign technology collaboration where the payments will be within five per cent for home-based sales and 8% for exports. installment payments on your 2 Govt Approval for Foreign Technology Agreements As per press notice 1(2005 series) Prior endorsement of the Govt would be necessary only in situations where the foreign entrepreneur has an existing joint venture or technology transfer/trademark agreement in the žsame? ield. The onus to provide essential justification and also proof to the satisfaction from the Government which the new pitch would or perhaps would not in any respect jeopardize the interests with the existing joint venture or technology/trademark partner or perhaps other stakeholders would sit equally on the foreign investor/technology supplier plus the Indian partner. TAXPERT Pros | www. taxpertpro. com [email, protected] com 09769134554 Article about Foreign Cooperation

In cases where the foreign investor has a joint venture or perhaps technology transfer/trademark agreement inside the žsame? discipline prior approval of the Authorities will not be necessary in the next cases: i actually. Investments to get made by Venture Capital Funds authorized with the Reliability and Exchange Board of India (SEBI), ii. in which in the existing joint-venture investment by possibly of the celebrations is less than 3 per cent, iii. Where the existing venture/collaboration can be defunct or sick.

Remittance of Royalty/Technical Fee Standard permission has been given permission to authorised retailers by Hold bank of India vide (DIR Series) Circular Number 76 went out with 24th Feb 2004 to let remittances for royalty and payment of Lump sum cost provided the payment, provided the vips does not surpasses 5% from the domestic sales and 8% on export products and Huge fees would not exceeds UNITED STATES DOLLAR 2 Mil. Prior authorization from Ministry of Sector and Trade, Government of India just in case exceeds the above mentioned said payments.

In terms of Rule 4 from the Foreign Exchange Management (Current Account Transactions) Guidelines 2000, preceding approval from the Ministry of Commerce and Industry, Federal government of India, is required intended for drawing foreign exchange for remittances under technical collaboration contracts where repayment of royalty exceeds 5% on regional sales and 8% upon exports and lump-sum payment exceeds USD 2 mil [item 8 of Schedule II to the Forex trading Management (Current Account Transactions) Rules, 2000]. However as per RBI/2009-10/465 A. P. (DIR Series) Round No . 2 dated 13 May 2010 the Government of India has reviewed the extant coverage with regard to liberalization of foreign technology contract and it had been decided to omit item number 8 of Schedule II to the Foreign currency Management (Current Account Transaction) Rules, 2150, and the entrance relating thereto. Accordingly, ADVERTISING Category-I banking companies may enable drawal of foreign exchange simply by persons pertaining to payment of royalty and lump-sum payment under technical collaboration agreements without the authorization of Ministry of Trade and Market, Government of India [w.. f 16 Dec 2009]. Source: http://rbidocs. rbi. org. in/rdocs/content/PDFs/AFE130510RC. pdf In conclusion, success of any cooperation is dependent for the synergies which have been driven via it simply by both parties. As a result to achieve the desired objective of collaboration it is crucial that the things like correct due diligence, duty structuring, creating of joint venture agreement and so on are very well taken care of. For further specifics get in touch at [email, protected] com TAXPERT Professionals | www. taxpertpro. om [email, protected] com 09769134554 Content on Foreign Collaboration Annexure I Supply: http://dipp. nic. in/ DIALOGUE PAPER SUBJECT: APPROVAL OF FOREIGN/ TECHNICAL COLLABORATIONS IN CASE OF EXISTING VENTURES/ TIE-UPS IN INDIA 1 ) The Section of Industrial Insurance plan and Campaign has chosen to release Discussion Papers upon various aspects related to FDI. In the series of these Discussion Papers, this can be the third newspaper on žApproval of foreign/ technical aide in case of existing ventures/tie-ups in India?.

Landscapes and suggestions are invited on the observations made in the enclosed debate paper, since also for the entire range of problems related to the subject, by Oct 15, 2010. 2 . The views stated in this conversation paper should not be construed since the opinions of the Govt. The Department hopes to generate informed discussion on the subject, so as to enable the federal government to take an appropriate policy decision at an suitable time. TAXPERT Professionals | www. taxpertpro. com [email, protected] com 09769134554 Document on International Collaboration

DIALOGUE PAPER APPROVAL OF FOREIGN/ TECHNICAL AIDE IN CASE OF EXISTING VENTURES/ TIE-UPS IN INDIA 1 . 0 PRESENT SCENARIO: 1 . one particular Paragraph four. 2 . two of Circular 1 of 2010 (Consolidated FDI Policy), specifies that investment would be subject to the žExisting Venture/ tie-up condition?. As per this disorder, where a foreign investor acquired, prior to January 12, 2006, entered into a preexisting joint venture/ technology transfer/ trademark contract in the same field, any new pitch for investment/ technology transfer/trademark agreement, requires Government acceptance.

The pitch has to be routed through both the Foreign Purchase Promotion Board (FIPB) inside the Department of Economic Affairs, if refreshing foreign investment is included or the Task Approval Panel (PAB) in the DIPP, in the event no overseas investment is usually involved. The 4 digit National Professional Classification (NIC), 1987 Code, would be the basis for deciding if the field was the same. 1 . a couple of The responsibility to demonstrate which the proposed new tie-up probably would not jeopardize the xisting partnership or technology transfer/ hallmark partner, is equally on the foreign investor/ technology distributor and the American indian partner. 1 ) 3 The policy is aimed at protecting the interests of joint venture companions of deals entered into, ahead of January 12, 2005. International collaboration deals, both financial and technical, entered into after January doze, 2005, had been exempted using this stipulation. It is because such partnership agreements are required to include a žconflict of interest? lause, so as to safeguard the interests of joint venture companions, in the event of one of the partners wanting to set up one more joint venture or a wholly possessed subsidiary inside the same field of monetary activity. 1 ) 4 Five categories of purchases have, yet , been free from the dependence on Government acceptance, even though the international investor could possibly be having a joint venture/ technology transfer/ brand agreement inside the same field.

These are a) Investments being made by Capital raising Funds listed with the Securities and Exchange Board of India (SEBI ), b)Investments by Multinational Financial Institutions just like the Asian Development Bank (ADB), International Fund Corporation(IFC), Commonwealth Finance Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG), c) Where, in the existing partnership, investment by either from the parties is no more than 3 per cent d)Where the present joint venture as well as collaboration is usually defunct or sick and e) Purchases of the Information Technology or mining sectors. installment payments on your 0 installment payments on your 1

DEVELOPMENT OF THE PRESENT REGIME: PRESS NOTE 18 (1998 SERIES) In Press Note 18 (1998 series), Government set out the following guidelines for approval of overseas / specialized collaborations, underneath the automatic route, in cases where past ventures/ tie-ups existed within India. a) Automatic path for bringing in FDI and/or technology collaboration agreements (including trade-mark agreements), would not be around to those who have or experienced any previous joint-venture or technology transfer/trade-mark agreement, in the žsame? or perhaps žallied? field, in India. TAXPERT Pros | www. taxpertpro. com [email, protected] om 09769134554 Article on Foreign Cooperation b) Authorities approval way was, important in such cases. Comprehensive circumstances beneath which it absolutely was found important to set-up a brand new joint venture/enter into new technology transfer (including trade-mark) were required to end up being furnished during seeking acceptance. c) The onus was clearly about such investors/technology suppliers, to supply the essential justification /proof, to the pleasure of the Authorities, that the new proposal would not, in any method, jeopardize the interests with the existing joint-venture or technology/trade-mark partner or perhaps other stakeholders.

It was on the sole discretion of the FIPB/ PAB, to either say yes to the application with or without conditions as well as to reject that in toto, duly documenting the reasons intended for doing so. installment payments on your 2 PRESS NOTE 15 (1999 SERIES) Press Take note 10 (1999 series) defined the meaning from the terms “same field and “allied field as beneath: o u “same field ” four-digit NIC 1987code “allied field ” three-digit NIC 1987code

The Press Note additional clarified that, only proposals for foreign collaboration, slipping under same four-digit or three-digit categories, in terms of their past or existing joint ventures in India, could attract the provisions of Press Notice 18 (1998 series). 2 . 3 PRESS NOTE two (2000 SERIES) With a view to help liberalize the FDI regime, the Government given Press Note 2 (2000 series), in which all activities were placed under the automated route for FDI, except for a specified unfavorable list. Sector-specific guidelines were attached to this kind of Press Be aware.

In respect of the mining sector, it was stated that the procedures of Press Note 18 (1998 series) would not be applicable intended for setting up 100% owned subsidiaries, subject to a declaration through the applicant that he had simply no existing joint-venture for the same region and/ or perhaps the particular nutrient. 2 . four PRESS BE AWARE 8 (2000 SERIES) Press Note 8 (2000 series), recognized the special character and needs in the IT sector. With a view to increase simplify authorization procedures and facilitate greater investment inflows into the THIS sector in the area, FDI proposals elating for the IT sector were exempted from the procedures of Press Note 18 (1998 series). 2 . five PRESS TAKE NOTE 1 (2001 SERIES) This Press Note provided for faveur from the procedures of Press Note 18 for purchases made in home companies by simply International Finance institutions, such as the Hard anodized cookware Development Financial institution (ADB), International Finance Company (IFC), Earth Development Organization (CDC), Krauts (umgangssprachlich) Entwicklungs Gescelschaft (DEG) and so forth

Accordingly, these kinds of International Banking institutions were allowed to invest in domestic companies, through the automatic way, subject to SEBI/ RBI rules and sector-specific caps on FDI. TAXPERT Professionals | www. taxpertpro. com [email, protected] com 09769134554 Article on Overseas Collaboration 2 . 6 PRESS NOTE you (2005 SERIES) 1 . Following a introduction of Press Notice 18 (1998 series), particular representations were created by overseas investors. They pointed out that: a) The Press Note got the effect of overriding the contractual conditions agreed to together with the Indian companions. ) Home investors were using the provisions of the Press Note as a way of extracting unreasonable prices / commercial advantage. The Press Be aware was, as a result, becoming a obstacle for further FDI coming into the country. c) The word “allied field was very widely defined, as it included even all those products which usually would not include caused jeopardy to the production of existing products. d) Foreign buyers were being singled out to present their particular defence, with no Indian partner being asked to justify the existence of peril.. Press Be aware 1 (2005 series), given on 12 January, 2005, addressed problems by amending the earlier suggestions. New plans for overseas investment/technical effort were allowed under the computerized route, subject to sectoral guidelines and the subsequent revised guidelines: a) Previous approval in the Government can be required only in cases where the foreign investor a new joint venture or perhaps technology transfer/trademark agreement in the , same’ field, existing as for the date of the Press Be aware i.. 12 January, 2005. b) The onus to provide requisite reason and evidence, to the satisfaction of the Govt, that the new proposal could or probably would not, in any way, jeopardize the interests of the existing joint-venture or technology/ trademark partner or perhaps other stakeholders, would lie equally around the foreign investor/ technology dealer and the Indian partner. ) Even in instances where the foreign buyer had a joint-venture or technology transfer/ trademark agreement inside the , same’ field, prior approval with the Government probably would not be required in the following cases: Investments being made by Venture Capital Funds registered with the Security and Exchange Board of India (SEBI) or ii) where in the existing joint-venture investment by either with the parties was less than 3% or iii) where the existing venture/ collaboration was defunct or unwell i) d) In so far as joint ventures to become entered into following your date in the Press Be aware were concerned, the partnership agreements can embody a , issue of interest’ clause, to guard the passions of joint-venture partners, in case of one of the partners desiring to create another joint-venture or a wholly-owned-subsidiary, in the , same’ discipline of economic activity. 2 . 7 PRESS NOTE 3 (2005 SERIES) TAXPERT Professionals | www. taxpertpro. com [email, protected] com 09769134554 Article on Foreign Effort Subsequently, Press Note 3 (2005 series), issued on 15 03, 2005, responded that: a) For the purposes of Press Note 1 (2005 Series), the meaning of žsame? field could continue to be 4-digit NIC 1987 Code. ) Proposals inside the Information Technology sector, and the exploration sector, ongoing to remain not impacted by the application of Press Note 1 (2005 Series). c) For the purpose of avoiding virtually any ambiguity, it was further reiterated that, jointventures/technology transfer/trademark contracts, existing on the date of issue of the said Press Note (i. e. doze. 1 . 2005), would be treated as existing jointventures/technology transfer/trademark agreements, pertaining to the uses of that Press Note. a few. 0 APPLICATION OF THE PROVISIONS IN PRACTICE: a few. 1 FIPB considered 566 proposals during the calendar year 2009, out that 16% associated with matters associated with Press Paperwork 1 and 3 of 2005, wherein the candidates had a joint-venture / technology transfer arrangement, with a great Indian spouse, as upon 12 January, 2005. three or more. Some of the guidelines emerging from your cases discussed in the FIPB 1 are set out below: a) In the event the existing joint-venture has become defunct, there might not be any jeopardy to the Indian partner, in the event the foreign collaborator wishes to setup a new opportunity. b) žJeopardy? should not be invoked as a assess to contrain legitimate business activity preventing competition. A defieicency of žjeopardy? should be examined because of the extant business agreements/arrangements between the get-togethers. c) žJeopardy? may not be proven in cases where technology licence contracts have expired, as per conditions mutually decided by the joint-venture partners. d) In site specific projects/ activities, the concept of žjeopardy? can not be extended over and above the area at first envisaged in the agreement. In such cases, žjeopardy? eeds to be viewed in a location-specific context. three or more. 3 The FIPB Assessment, 2009 features observed that: “While critics may feel that Press Notice 1 features outlived its utility, the high frequency debate on the issue of jeopardy and Indian JV partners alleging foul perform by the international collaborator cannot make us oblivious to their continuing relevance.  4. 0 METHODS IN OTHER APPEARING MARKETS (CHINA AND BRAZIL): 1 FIPB Review, 2009 TAXPERT Pros | www. taxpertpro. com [email, protected] com 09769134554 Article on Foreign Cooperation Emerging financial systems, such as Brazil and Chinese suppliers, do not have such corresponding requirements, under their particular foreign expense regimes. 5. CONCERNS LINKED TO LIBERALISING THE ‘EXISTING VENTURE/ TIE-UP CONDITION’: 5. 1 In 1998, the primary policy concern was to guard the passions of home-based jointventure partners/ technology collaborators, who may have been less conveniently placed, when compared with their foreign counterparts, insofar as their capacity to influence the terms of future organization engagement had been concerned. It was felt that an element of Government oversight was important, so that future collaborations were subjected to quality of žjeopardy? and existing domestic joint-venture partners/ technology collaborators weren’t placed in a posture wherein all their survival was threatened. 5. This insurance plan framework was relaxed in 2005, while keeping a balance between the need to ensure healthy and balanced foreign expense inflows and the need to ensure that survival in the domestic sector was not insecure. The main aspects of the žexisting venture/ tie-up condition? had been retained, underlining Government? s i9000 concerns regarding ensuring the continuing sustenance and growth of the domestic joint-venture partners/ technology collaborators, in collaboration with the foreign lovers. 6. zero THE CASE FOR REVIEW OF THE EXTANT ROUTINE: 6. one particular The žexisting venture/ tie-up condition? has now been in presence, as a formal measure within the FDI plan, for nearly a dozen years. It had been last examined in june 2006.

There is a ought to examine if such a conditionality remains relevant in the present day context. six. 2 The žexisting venture/ tie-up condition? currently does apply only to individuals joint-ventures which were in existence while on or perhaps prior to 12 January, 2005. With more than five years having elapsed, it could be argued that the issue of žjeopardy? is usually, no longer relevant, as the Indian associates could have reclaimed their opportunities substantially during this time period of time. 6th. 3 The Indian market today is in a much better position than it was in the 1990s, when the condition was first introduced. It, therefore , needs to be seen whether there is a ought to continue with all the elements of these kinds of a routine even today. 6. Further, sector has to progressively become more competitive. This is especially relevant within an era of globalization, in which a number of Totally free Trade Contracts (FTAs) and Comprehensive Monetary Cooperation/ Alliance Agreements (CEPAs/CEPAs) are in position. In such a situation, if an industry is frustrated from being set up in India, it could be placed in a adjoining country, with whom a trade agreement exists or perhaps is being negotiated. Competition today, is not only between domestic players inter ze but as well between intercontinental and household players. Throwing of goods coming from some of countries has asked serious dangers to the success of domestic industries.

Between 1992 and 2010 (May), the Directorate General for anti Dropping (DGAD) offers initiated anti-dumping investigations into 253 situations involving 38 countries/territories (considering 27 EC countries being a single territory). The major product categories where anti-dumping obligation has been accessed are chemicals , petrochemicals, pharmaceuticals, fibres /yarns, stainlesss steel and other metal products and buyer goods. TAXPERT Professionals | www. taxpertpro. com [email, protected] com 09769134554 Document on International Collaboration Limiting international technology agreements through measures explained above might constrain the growth of good and competitive domestic industrial sectors. 6. Additionally it is a moot point if Government insurance plan should get involved in the commercial sphere and override contractual conditions agreed to between the parties, given the need to enhance healthy competition, and ensure sustained long-term monetary growth. It is usually argued that Government really should not be concerned about industrial issues between two organization partners. 6. 6 The measure discriminates between the overseas investors who shown confidence in India, by investing in the prior to 2006 and those who also invested afterwards. 6. 7 The condition may be restricting numerous investors, who also may not be capable to reach agreement with their Of india partners prove future purchase plans, thereby restricting the inflow of foreign capital and technology into the region. 6. eight A related issue is definitely the concept of žsame field?.

Press Note one particular of 2005 significantly limited the range of the procedures of Press Note 18 (1998 series), as the latter applied simply to the “same field rather than the very much wider “allied field. However , in the present day context, even the concept of “same field may not be an accurate indicator to get determining if the new enterprise would jeopardize the interest from the existing joint-venture partner. It is because, the NIC four number Codes, even after revision, may even now not totally reflect the complexities associated with the concept of the žsame? market and may typically tend to cover a wide range of professional activities beneath the same mind. As an example, the activity of žmanufacturing of seat belts? may not jeopardize the activity of žmanufacturing of car steerage?.

However , both fall under the žsame discipline? under the NIC Code of 1987. Additional, the NIC Codes of 1987 may well not accurately signify many of the business situations in the current complex and diversified commercial environment, bringing about difficulties in interpretation. six. 0 COVERAGE OPTIONS TO GET CONSIDERATION: 7. 1 Pertaining to the reasons described in Paras 6. one particular to 6. eight, should the žexisting venture/ tie-up conditions? last amended in Press Remarks 1 and 3 of 2005 and now included as paragraph 4. 2 . two of Spherical 1 of 2010 be totally eliminated? 7. two Alternatively, whether it is felt that such an ailment should continue for some more time, should arranged relaxations always be introduced?

These kinds of could include exemptions in the application of the problem in cases where: a) The existing venture/tie up is far more than state 10 years older b) If the activity of the new venture is demonstrably not the same as the activity from the existing venture/tie up, even though it has the same NIC discipline. Are there any additional contingencies exactly where such faveur should be considered? This article is contributed by LOS ANGELES. Sudha G. Bhushan, She is a Chartered Accountant and a company admin. She is expert to many intercontinental companies on international duty matters and FEMA Exhortatory services. The girl can be reached at [email, protected] com. TAXPERT Professionals | www. taxpertpro. com [email, protected] com 09769134554