Question No. 3 - IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 3
a)What are the different ways of managing political risk? Discuss.

The different ways in which Political Risk can be managed are as follows:

1) Avoiding Investment:

The simplest way to manage political risks is to avoid investing in a country ranked high on such risks. Where investment has already been made, plants may be wound up or transferred to some other country which is considered to be relatively safe.

This may be a poor choice as the opportunity to do business in a country will be lost.

2) Adaptation:

Another way of managing political risk is adaptation. Adaptation means incorporating risk into business strategies. MNCs incorporate risk by means of the following three strategies: local equity and debt, development assistance, and insurance.

i) Local Equity and Debt:

This involves financing subsidiaries with the help of local firms, trade unions, financial institutions, and government. As partners in local businesses, these groups ensure that political developments do not disturb operations. Localization entails modifying operations, product mix, or any such activity to suit local tastes and culture. When McDonald’s commenced franchisee operations in India, it ensured that sandwiches did not contain any beef.

ii) Developmental Assistance:

Offering development assistance allows an international business to assist the host country in improving its quality of life. Since the firm and the nation become partners, both stand to gain. In Myanmar, for instance, the US oil company Unocal and France’s Total have invested billions of dollars to develop natural gas fields and also spent $6 million on local education, medical care, and other improvements.

iii) Insurance:

This is the last means of adaptation. Companies buy insurance against the potential effects of political risk. Some policies protect companies when host governments restrict the convertibility of their currency into parent country currency. Others insure against losses created by violent events, including war and terrorism.

3) Threat:

Political risk can also be managed by trying to prove to the host country that it cannot do without the activities of the firm. This may be done by trying to control raw materials, technology, and distribution channels in the host country. The firm may threaten the host country that the supply of materials, products, or technology would be stopped if its functioning is disrupted.

4) Lobbying:

Influencing local politics through lobbying is another way of managing political risks. Lobbying is the policy of hiring people to represent a firm’s business interests as also its views on local political matters. Lobbyists meet with local public officials and try to influence their position on issues relevant to the firm. Their ultimate goal is getting favourable legislation passed and unfavourable ones rejected.

5) Terrorism Consultants:

To manage terrorism risk, MNCs hire consultants in counterterrorism to train employees to cope with the threat of terrorism.

6) Invaluable Status:

Achieving a status of indispensability is an effective strategy for firms that have exclusive access to high technology or specific products. Such companies keep research and development out of the reach of their politically vulnerable subsidiaries and, at the same time, enhance their bargaining power with host governments by emphasizing their contributions to the economy.

When Texas Instruments wanted to open an operation in Japan more than a decade ago, the company was able to resist pressures to take on a local partner because of its unique advanced technology. This situation occurred at a time when many other foreign companies were forced to accept local partners. The appearance of being irreplaceable obviously helps reduce political risk.

7) Vertical Integration:

Companies that maintain specialized plants, each dependent on the others in various countries, are expected to incur fewer political risks than firms with fully integrated and independent plants in each country. A firm practicing this form of distributed sourcing can offer economies of scale to a local operation. This strategy can become crucial for success in many industries.

If a host government were to take over such a plant, its output level would be spread over too many units, products, or components, thus, rendering the local company uncompetitive because of a cost disadvantage. Further risk can be reduced by having atleast two units engage in the same operation, thus, preventing the company itself from becoming hostage to over- specialization. Unless multiple sourcing exists, a company could be shut down almost completely if only one of its plants were affected negatively.

8) Local Borrowing:

One of the reasons why Cabot Corporation prefers local partners is that, it can then borrow locally instead of adding an additional level of risk with the investment funds being in a currency which is different from the currency of all the sales and costs of the venture. Financing local operations from indigenous banks and maintaining a high level of local accounts payable maximize the negative effect on the local economy if adverse political actions were taken.

Typically, host governments do not expropriate themselves, and they are reluctant to cause problems for their local financial institutions. Local borrowing is not always possible, however, because of restrictions placed on foreign companies, which otherwise crowd local companies out of the credit markets.

9) Minimizing Fixed Investments:

Political risk, of course, is always related to the amount of capital at risk. Given equal political risk, an alternative with comparably lower exposed capital amounts is preferable. A company can decide to lease facilities instead of buying them, or it can rely more on outside suppliers, provided they exist. In any case, companies should keep exposed assets to a minimum to limit the damage posed by political risk.

10) Political Risk Insurance:

As a final recourse, global companies can purchase insurance to cover their political risk. With the political developments in Iran and Nicaragua and the assassinations of President Park of Korea and President Sadat of Egypt all taking place between 1979 and 1981, many companies began to change their attitudes on risk insurance. Political risk insurance can offset large potential losses. For example, as a result of the UN Security Council’s worldwide embargo on Iraq until it withdrew from Kuwait, companies collected $100-$200 million from private insurers and billions from government-owned insurers.

b) What are foreign bonds and eurobonds. What are the advantages of eurobonds owner foreign bonds.

Foreign bonds: Foreign bonds are issued by foreign issuers in a foreign national market and are denominated in the currency of that market. Foreign bond issuance is regulated by the rules of the host national market. An example of a foreign bond is a bond denominated in US dollars issued by a German company in the United States. Foreign bonds bear distinct “street” names by which they are recognized as being traded in a particular country. Examples of foreign bonds are: Yankee bonds traded in the United States, Bulldog bonds traded in the United Kingdom, Samurai bonds traded in Japan, and Matador bonds traded in Spain.

A foreign bond may define as an international bond sold by a foreign borrower but denominated in the currency of the country in which it is placed. It underwrites and sells by a national underwriting syndicate in the lending country. Thus, a US company might float a bond issue in the London capital market, underwritten by a British syndicate and denominated in sterling.

The bond issue would sell to investors in the UK capital market, where it would quote and traded. Foreign bonds issued outside the USA call Yankee bonds, while foreign bonds issued in Japan are called Samurai bonds. Canadian entities are the major floaters of foreign bonds in the USA.

Euro bonds may define as an international bond underwritten by an international syndicate and sold in countries other than the country of the currency in which the issue denominates. In the Eurobond market, the investor holds a claim directly on the borrower rather than on a financial institution.

Eurobonds are generally issued by corporations and governments needing secure, long-term funds and are sold through a geographically diverse group of banks to investors around the world. Eurobonds are similar to domestic bonds in that they may issue with fixed or floating interest rates.

Advantages of Eurobonds:

The Eurobonds market possesses several advantages for borrowers and investors.

The advantages of Eurobonds to borrowers are:

• The size and depth of the market are such that it can absorb large and frequent issues.
• The Eurobond market has freedom and flexibility not found in domestic markets.
• The cost of the issue of Eurobonds, around 2.5 percent of the face value of the issue.
• Maturities in the Eurobond market are suited to long-term funding requirements.
• A key feature of the Eurobond market is the development of a sound institutional framework for underwriting, distribution, and the placing of securities.

The advantages of Eurobonds to investors are:

• Euro bonds are issued in such a form that interest can pay free of income or withholding taxes of the borrowing countries. Also, the bonds issued in bearer form and are held outside the country of the investor, enabling the investor to evade domestic income tax.
• Issuers of Eurobonds have a good reputation for creditworthiness.
• A special advantage to borrowers as well as lenders provides by convertible Eurobonds. Holders of convertible debentures give an option to exchange their bonds at a fixed price.
• The Eurobond market is active both as a primary and as a secondary market.

Bonds denominated in a particular currency that usually issues simultaneously in the capital markets of several nations. They differ from foreign bonds in that most nations do not have pre-offering registration or disclosure requirements for Eurobond issues. An Example of a Eurobond a bond issue by a Russian corporation in the European market that pays interest and principal in U.S. dollars.

Question No. 2 - IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 2
a) Explain the mechanism of money market hedge for managing transaction exposure.

The money market hedge allows the domestic company to lock in the value of its partner’s currency (in the domestic company’s currency) in advance of an anticipated transaction. This creates certainty about the cost of future transactions and ensures the domestic company will pay the price that it wants to pay.

Without a money market hedge, a domestic company would be subject to exchange rate fluctuations that could dramatically alter the transaction’s price. While changes in exchange-rate rates could cause the transaction to become less expensive, fluctuations could also make it more expensive and possibly cost-prohibitive.

A money market hedge offers flexibility in regard to the amount covered. For example, a company may only want to hedge half of the value of an upcoming transaction. The money market hedge is also useful for hedging in exotic currencies, such as the South Korean won, where there are few alternate methods for hedging exchange rate risk.

A money market hedge is a technique for hedging foreign exchange risk using the money market, the financial market in which highly liquid and short-term instruments like Treasury bills, bankers’ acceptances, and commercial paper are traded.

Since there are a number of avenues such as currency forwards, futures, and options to hedge foreign exchange risk, the money market hedge may not be the most cost-effective or convenient way for large corporations and institutions to hedge such risk. However, for retail investors or small businesses looking to hedge currency risk, the money market hedge is one way to protect against currency fluctuations without using the futures market or entering into a forward contract.

Forward Exchange Rates

Let’s begin by reviewing some basic concepts with regard to forward exchange rates, as this is essential to understand the intricacies of the money market hedge.

A forward exchange rate is merely the spot exchange (benchmark) rate adjusted for interest rate differentials. The principle of “Covered Interest Rate Parity” holds that forward exchange rates should incorporate the difference in interest rates between the underlying countries of the currency pair, otherwise an arbitrage opportunity would exist. 

For example, assume U.S. banks offer a one-year interest rate on U.S. dollar (USD) deposits of 1.5%, and Canadian banks offer an interest rate of 2.5% on Canadian-dollar (CAD) deposits. Although U.S. investors may be tempted to convert their money into Canadian dollars and place these funds in CAD deposits because of their higher deposit rates, they obviously face currency risk. If they wish to hedge this currency risk in the forward market by buying U.S. dollars one year forward, covered interest rate parity stipulates that the cost of such hedging would be equal to the 1% difference in rates between the U.S. and Canada.

We can take this example a step further to calculate the one-year forward rate for this currency pair. If the current exchange rate (spot rate) is US$1 = C$1.10, then based on covered interest rate parity, US$1 placed on deposit at 1.5% should be equivalent to C$1.10 at 2.5% after one year. Thus, it would be shown as:

US$1 (1 + 0.015) = C$1.10 (1 + 0.025), or US$1.015 = C$1.1275

And the one-year forward rate is therefore:

US$1= C$1.1275 ÷ 1.015 = C$1.110837

Note that the currency with the lower interest rate always trades at a forward premium to the currency with the higher interest rate. In this case, the U.S. dollar (the lower interest rate currency) trades at a forward premium to the Canadian dollar (the higher interest rate currency), which means that each U.S. dollar fetches more Canadian dollars (1.110837 to be precise) a year from now, compared with the spot rate of 1.10.

Money Market Hedge

The money market hedge works in a similar manner as a forward exchange, but with a few tweaks, as the examples in the next section demonstrate.

Foreign exchange risk can arise either due to transaction exposure (i.e., due to receivables expected or payments due in foreign currency) or translation exposure, which occurs because assets or liabilities are denominated in a foreign currency. Translation exposure is a much bigger issue for large corporations than it is for small business and retail investors. The money market hedge is not the optimal way to hedge translation exposure – since it is more complicated to set up than using an outright forward or option – but it can be effectively used for hedging transaction exposure.

If a foreign currency receivable is expected after a defined period of time and currency risk is desired to be hedged via the money market, this would necessitate the following steps:

Borrow the foreign currency in an amount equivalent to the present value of the receivable. Why the present value? Because the foreign currency loan plus the interest on it should be exactly equal to the amount of the receivable.

Convert the foreign currency into domestic currency at the spot exchange rate.

Place the domestic currency on deposit at the prevailing interest rate.

When the foreign currency receivable comes in, repay the foreign currency loan (from step 1) plus interest.

Similarly, if a foreign currency payment has to be made after a defined period of time, the following steps have to be taken to hedge currency risk via the money market:

Borrow the domestic currency in an amount equivalent to the present value of the payment.

Convert the domestic currency into the foreign currency at the spot rate.

Place this foreign currency amount on deposit.

When the foreign currency deposit matures, make the payment.

Note that although the entity who is devising a money market hedge may already possess the funds shown in step 1 above and may not need to borrow them, there is an opportunity cost involved in using these funds. The money market hedge takes this cost into consideration, thereby enabling an apples-to-apples comparison to be made with forward rates, which as noted earlier are based on interest rate differentials.

b) What is economic exposure and transaction exposure? How is economic exposure different from transaction exposure? 

Economic exposure is a type of foreign exchange exposure caused by the effect of unexpected currency fluctuations on a company’s future cash flows, foreign investments, and earnings. Economic exposure, also known as operating exposure, can have a substantial impact on a company’s market value since it has far-reaching effects and is long-term in nature. Companies can hedge against unexpected currency fluctuations by investing in foreign exchange (FX) trading.

The degree of economic exposure is directly proportional to currency volatility. Economic exposure increases as foreign exchange volatility increases and decreases as it falls. Economic exposure is obviously greater for multinational companies that have numerous subsidiaries overseas and a huge number of transactions involving foreign currencies. However, increasing globalization has made economic exposure a source of greater risk for all companies and consumers. Economic exposure can arise for any company regardless of its size and even if it only operates in domestic markets.

Unlike transaction exposure and translation exposure (the two other types of currency exposure), economic exposure is difficult to measure precisely and hence challenging to hedge. Economic exposure is also relatively difficult to hedge because it deals with unexpected changes in foreign exchange rates, unlike expected changes in currency rates, which form the basis for corporate budgetary forecasts.

For example, small European manufacturers that sell only in their local markets and do not export their products would be adversely affected by a stronger euro, since it would make imports from other jurisdictions such as Asia and North America cheaper and increase competition in European markets.

Economic exposure can be mitigated either through operational strategies or currency risk mitigation strategies. Operational strategies involve diversification of production facilities, end-product markets, and financing sources, since currency effects may offset each other to some extent if a number of different currencies are involved. Currency risk-mitigation strategies involve matching currency flows, risk-sharing agreements, and currency swaps.

Economic exposure can be mitigated either through operational strategies or currency risk mitigation strategies. Operational strategies involve diversification of production facilities, end-product markets, and financing sources.

Currency effects may offset each other to some extent if a number of different currencies are involved. Currency risk-mitigation strategies involve matching currency flows, risk-sharing agreements, and currency swaps. Matching currency flow means matching cash outflows and inflows with the same currency, such as doing as much business as possible in one currency, including borrowings. Currency swaps allow two companies to effectively borrow each other’s currencies for a period of time. 

Assume that a large U.S. company that gets about 50% of its revenue from overseas markets has factored in a gradual decline of the U.S. dollar against major global currencies—say 2% per annum—into its operating forecasts for the next few years. If the dollar appreciates instead of weakening gradually in the years ahead, this would represent economic exposure for the company. The dollar’s strength means that the 50% of revenues and cash flows the company receives from overseas will be lower when converted back into dollars, which will have a negative effect on its profitability and valuation.

Transaction exposure is the level of uncertainty businesses involved in international trade face. Specifically, it is the risk that currency exchange rates will fluctuate after a firm has already undertaken a financial obligation. A high level of vulnerability to shifting exchange rates can lead to major capital losses for these international businesses.

Transaction exposure is also known as translation exposure or translation risk.

The danger of transaction exposure is typically one-sided. Only the business that completes a transaction in a foreign currency may feel the vulnerability. The entity that is receiving or paying a bill using its home currency is not subjected to the same risk.

Usually, the buyer agrees to buy the product using foreign money. If this is the case, the hazard comes if that foreign currency should appreciate, as this would result in the buyer needing to spend more than they had budgeted for the goods.

Question No. 1 - IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 1
a) What were the distinctive features of Breton Woods System.

The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire. Thus, the name “Bretton Woods Agreement.

Under the Bretton Woods System, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value. The Bretton Woods System effectively came to an end in the early 1970s when President Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S. currency.

Approximately 730 delegates representing 44 countries met in Bretton Woods in July 1944 with the principal goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth. The Bretton Woods Agreement and System were central to these goals. The Bretton Woods Agreement also created two important organizations—the International Monetary Fund (IMF) and the World Bank. While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have remained strong pillars for the exchange of international currencies.

Though the Bretton Woods conference itself took place over just three weeks, the preparations for it had been going on for several years. The primary designers of the Bretton Woods System were the famous British economist John Maynard Keynes and American Chief International Economist of the U.S. Treasury Department Harry Dexter White. Keynes’ hope was to establish a powerful global central bank to be called the Clearing Union and issue a new international reserve currency called the bancor. White’s plan envisioned a more modest lending fund and a greater role for the U.S. dollar, rather than the creation of a new currency. In the end, the adopted plan took ideas from both, leaning more toward White’s plan.

Following were the features of Bretton Woods Agreement: 

i Bretton Woods agreement was signed among the world powers in 1944. 

ii This agreement established IMF and World Bank to preserve economic stability in the world. 

iii Decision making in Bretton Woods Institutions was controlled by the Western Industrial powers. 

iv National currencies followed the fixed exchange rates. 

v It led to an era of unprecedented growth of trade and incomes.

b) Briefly discuss the various money market instruments with their purpose.  

The term ‘Money Market’, according to the Reserve Bank of India, is used to define a market where short-term financial assets are traded. These assets are a near substitute for money and they aid in the money exchange carried out in the primary and secondary market. So, essentially, the money market is an apparatus which facilitates the lending and borrowing of short-term funds, which are usually for a duration of under a year. Short maturity period and high liquidity are two characteristic features of the instruments which are traded in the money market. Institutions like commercial banks, non-banking finance corporations (NBFCs) and acceptance houses are the components which make up the money market.

The money market is a part of the larger financial market and consists of numerous smaller sub-markets like bill market, acceptance market, call money market, etc. Money market deals are not carried out in money / cash, but other instruments like trade bills, government papers, promissory notes, etc. Also, money market transactions cannot be done via brokers but have to be carried out via mediums like formal documentation, oral or written communication.

Types Of Money Market Instruments

1. Treasury Bills (T-Bills)

Issued by the Central Government, Treasury Bills are known to be one of the safest money market instruments available. However, treasury bills carry zero risk. I.e. are zero risk instruments. Therefore, the returns one gets on them are not attractive. Treasury bills come with different maturity periods like 3-month, 6-month and 1 year and are circulated by primary and secondary markets. Treasury bills are issued by the Central government at a lesser price than their face value. The interest earned by the buyer will be the difference of the maturity value of the instrument and the buying price of the bill, which is decided with the help of bidding done via auctions. Currently, there are 3 types of treasury bills issued by the Government of India via auctions, which are 91-day, 182-day and 364-day treasury bills.

2. Certificate of Deposits (CDs)

A Certificate of Deposit or CD, functions as a deposit receipt for money which is deposited with a financial organization or bank. However, a Certificate of Deposit is different from a Fixed Deposit Receipt in two aspects. The first aspect of difference is that a CD is only issued for a larger sum of money. Secondly, a Certificate of Deposit is freely negotiable. First announced in 1989 by RBI, Certificate of Deposits have become a preferred investment choice for organizations in terms of short-term surplus investment as they carry low risk while providing interest rates which are higher than those provided by Treasury bills and term deposits. Certificate of Deposits are also relatively liquid, which is an added advantage, especially for issuing banks. Like treasury bills, CDs are also issued at a discounted price and their tenor ranges between a span of 7 days up to 1 year. However, banks issue Certificates of Deposits for durations ranging from 3 months, 6 months and 12 months. They can be issued to individuals (except minors), trusts, companies, corporations, associations, funds, non-resident Indians, etc.

3. Commercial Papers (CPs)

Commercial Papers are can be compared to an unsecured short-term promissory note which is issued by highly rated companies with the purpose of raising capital to meet requirements directly from the market. CPs usually feature a fixed maturity period which can range anywhere from 1 day up to 270 days. Highly popular in countries like Japan, UK, USA, Australia and many others, Commercial Papers promise higher returns as compared to treasury bills and are automatically not as secure in comparison. Commercial papers are actively traded in secondary market.

4. Repurchase Agreements (Repo)

Repurchase Agreements, also known as Reverse Repo or simply as Repo, loans of a short duration which are agreed upon by buyers and sellers for the purpose of selling and repurchasing. These transactions can only be carried out between RBI approved parties Repo / Reverse Repo transactions can be done only between the parties approved by RBI. Transactions are only permitted between securities approved by the RBI like treasury bills, central or state government securities, corporate bonds and PSU bonds.

5. Banker's Acceptance (BA)

Banker's Acceptance or BA is basically a document promising future payment which is guaranteed by a commercial bank. Similar to a treasury bill, Banker’s Acceptance is often used in money market funds and specifies the details of the repayment like the amount to be repaid, date of repayment and the details of the individual to which the repayment is due. Banker’s Acceptance features maturity periods ranging between 30 days up to 180 days.

IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 1

a) What were the distinctive features of Breton Woods System.

b) Briefly discuss the various money market instruments with their purpose.     

                                                    CLICK HERE

Question No. 2

a) Explain the mechanism of money market hedge for managing transaction exposure.

b) What is economic exposure and transaction exposure? How is economic exposure different from transaction exposure?                CLICK HERE

Question No. 3

a)What are the different ways of managing political risk? Discuss.

b) What are foreign bonds and eurobonds. What are the advantages of eurobonds owner foreign bonds.

                                                    CLICK HERE

Question No. 4

a) Discuss the factors that influence the design of world wide corporate capital structure.

b) Describe adjusted present value method?

                                                        CLICK HERE

Question No. 5

a) Discuss the merits of foreign direct investment, portfolio investment and short term investment.

b) Write short notes on for forfaiting.    CLICK HERE

Question No. 5 - IBO - 04 - Export Import Procedure and Documentation - Master of Commerce (M.Com)

Solutions to Assignments 

IBO - 04 - Export Import Procedure and Documentation

Master of Commerce (M.Com) - 1st Year

Question No. 5 Write notes on the following: 
(a) General Provisions for imports.

The Ministry of Commerce and Industry and Directorate General of Foreign Trade and Investment (DGFT) implemented the foreign trade policy of the year 2015-2020, which contains the general provisions for import and export in Chapter 2. They are as follows:

1. Exports and imports are free unless regulated– Exports and Imports shall be free, except in cases where they are regulated by the provisions of this Policy or any other law for the time being in force. The item-wise export and import policy shall be, as specified in ITC(HS) published and notified by the Director-General of Foreign Trade, as amended from time to time.
2. Laws are to be complied– Every exporter or importer shall comply with the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Rules and Orders made thereunder, the provisions of this Policy, and the terms and conditions of any license/certificate/permission granted to him, as well as provisions of any other law for the time being in force. All imported goods shall also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods. No import or export of rough diamonds shall be permitted unless the shipment parcel is accompanied by Kimberley Process (KP) Certificate required under the procedure specified by the Gem & Jewellery Export Promotion Council (GJEPC).
3. Procedure– The DGFT specifies the procedure that has to be followed by the exporter and importer or by any other authority to follow any of the procedures which are laid down in any Acts, handbooks, etc. Once the procedure is being established it has to be published on public notice, and these procedures can be subjected to change as well.
4. Exemption- If due to any genuine reason, relaxation is needed in any procedure, the request can be made to the DGFT, who can pass orders on the same. The DGFT can relax certain procedures for public interest as well, such request may be considered only after consulting Advance Licensing Committee (ALC) if the request is in respect of a provision of Chapter-4 (excluding any provision relating to Gem & Jewellery sector) of the Policy/ Procedure. 
5. Restriction principles- The DGFT on notification can enforce any decision that is necessary for (a) protection of public morals (b) Protection of human, animal, or plant life or health (c)Protection of patents, trademarks, and copyrights and the prevention of deceptive practices (d) Prevention of use of prison labour (e) Protection of national treasures of artistic, historic or archaeological value (f) Conservation of exhaustible natural resources (g) Protection of trade of fissionable material or material from which they are derived (h) Prevention of traffic in arms, ammunition, and implements of war.
6. Goods which are restricted- Any goods which are restricted can only be imported and exported if there is a license for the same and a public notice has to be issued as well on this behalf.
7. Terms and conditions- There are certain terms and conditions which have to present while obtaining a license or a certificate, they include:(a) The quantity, description, and value of goods (b) Actual user condition (c) Export obligation (d) The value addition to be achieved (e) The minimum export price.
8. Penalty- If a license/certificate/permission holder violates any condition of the license/certificate/ permission or fails to fulfill the export obligation, he shall be liable for action in accordance with the Act, the Rules and Orders made thereunder, the Policy and any other law for the time being in force.
9. Permission to get license etc.- No person may claim a license/certificate/ permission as a right and the Director-General of Foreign Trade or the licensing authority shall have the power to refuse to grant or renew a license/certificate/permission in accordance with the provisions of the Act and the Rules made thereunder.
10. Import on export basis- New or second-hand capital goods, equipments, components, parts and accessories, containers meant for packing of goods for exports, jigs, fixtures, dies and mould, may be imported for export without a licence/certificate/permission on the execution of Legal Undertaking/Bank Guarantee with the Customs Authorities provided that the item is freely exportable without any conditionality/requirement of license/ permission as may be required under ITC (HS) Schedule II.

(b) Foreign Currency Account. 

A ‘Foreign Currency Account’ means an account held or maintained in a currency that is not the currency of India or Bhutan, or Nepal. Any person who is residing in India can open, hold and maintain a foreign account. ‘Person Resident in India’ is defined under Section 2(v) of the Foreign Exchange Management Act, 1999 (FEMA). 

‘Person resident in India’ means—

1. Every person residing in India for more than one hundred and eighty-two days during the preceding financial year but does not include –

• a person who has gone or stays outside India for taking up employment or carrying a business or vocation outside India or any other purpose where he/she indicates their intention to stay outside India for an uncertain period,
• a person who has come to or stays in India, otherwise than for taking up employment or carrying on business or vocation in India or any other purpose where he/she indicates their intention to stay for an uncertain period in India.

• Every person or body corporate incorporated or registered in India,
• An office, agency or branch in India that is owned or controlled by a person resident outside India, 

• An office, agency or branch outside India that is owned or controlled by a person resident in India.

(c) Financing under Deferred Payment Arrangement. 

Under Section 34 of the Care Act a universal Deferred Payment scheme has been established. A deferred payment scheme allows the person entering into it to delay making some or all of their payments to the Local Authority for the Care and Support services they receive. It allows them time to come to terms with their situation and consider their options without having to rush into selling their home. Some people enter into a deferred payment agreement until they die but others use it as a 'bridging loan' while they decide what best to do and explore options available for meeting the cost of care (for example, they may be able to arrange the release of another asset to meet the cost). How long a person has a deferred payment agreement for is entirely up to them.

When a Deferred Payment agreement is entered into the Local Authority usually secures its interests by arranging for a land registry charge to be placed upon the person's property for an amount known as the Equity Limit. They then defer all payments until this amount is reached or the agreement is terminated, whichever comes first. At this point the person's home is sold and the Local Authority receives payment for the care costs it has deferred under the agreement.

Payments that can be deferred

The person can defer the full amount of their care costs or an element of their care costs (if they choose to make a contribution from another source).

Payments must be deferred up to the personal budget amount (or what that amount would be likely to be where people have not been assessed by the Local Authority). If the person wishes to defer less than the personal budget amount this can be agreed but they need to be able to pay the difference between what is being deferred and the personal budget amount.

If a person has chosen to live in a care home that costs more than the personal budget amount the Local Authority does not have to defer the 'top-up' amount payable, although it has the power to do so if it wishes to. If the Local Authority does not decide to defer the top-up amount then top-up remains payable.

Payments relating to interest and charges made by the Local Authority can also be deferred if the person requests it and the Local Authority is in agreement.

Payments can only be deferred for costs charged by the Care and Support provider for services provided. Where the person lives in a care home provision this is likely to include associated accommodation costs but where the person lives in supported living and pays rent to a landlord (who may or may not be the care provider) these rental payments cannot be deferred.

(d) ISO 9000. 

ISO 9000 is a set of standards for quality management, developed as an internationally-acceptable baseline for performance by businesses and other organizations. It was created by the International Organization for Standardization (ISO) with input from standards professionals from many nations.

Quality management is the act of overseeing all of the processes that go into achieving and maintaining the desired level of excellence in the creation and delivery of a product or service. This includes the determination of a quality policy, creating and implementing quality planning and assurance, and quality control and improvement. It is also referred to as total quality management (TQM).

ISO 9000 standards were developed to help manufacturers effectively document the quality system elements that need to be implemented to maintain an efficient quality system. They are increasingly being applied to any organization or industry.

ISO 9001 is now being used as a basis for quality management—in the service sector, education, and government—to help organizations satisfy their customers, meet regulatory requirements, and achieve continual improvement.

The ISO 9000 series, or family of standards, was originally published in 1987 by the International Organization for Standardization (ISO). They first gained popularity in Europe, and then spread to the U.S. in the 1990s. As the world’s view of quality assurance has evolved, the standards have been revised.

Current versions of ISO 9000 and ISO 9001 were published in September 2015.