Amendments to third party exports welcome

EXIM MATTERS

Three months after the announcement of the annual supplement to the foreign trade policy, the Central Board of Excise and Customs has issued a circular (No 30/2005, dated July 12, 2005) regarding some of the changes that have been given effect by the finance ministry.

The circular is silent on changes announced that have not yet been given effect.

The circular amends earlier instructions (58/2004, October 21, 2004) regarding furnishing bank guarantees under the duty exemption and export promotion capital goods (EPCG) schemes.

Manufacturer exporters, units in agri-processing zones and service providers, who have forex earnings of at least Rs 50 lakh in the preceding year, need furnish bank guarantee only to the extent of 15 per cent of the bond amount.

This significant and welcome relaxation is available for exports made after April 8, 2005.

The earlier outdated definition of "third party exports" (Circular No 120/95, dated November 23, 1995) has now been amended to fall in line with the definition of third party exports given under the foreign trade policy.

The other conditions of the earlier circular remain unchanged.

It would have been better if the CBEC had rescinded the earlier circular altogether and issued a fresh one keeping the ground realities in view.

The 1995 circular contains certain impractical stipulations. For example, shipping bills must be signed.

The EPCG licence holder/advance licence holder as well as export order holder and both the licence holder as well as the export order holder will be required to make a declaration on the shipping bill that in a case of any default/fraud, they will be jointly and severally liable for action under the Customs Act, 1962, or any other law for the time being in force at the time of making the exports.

The CBEC says transfer of duty-free material imported or procured under the advance licence from one unit of the company to another unit of the same company has been allowed with prior intimation (instead of permission) to the jurisdictional central excise authority and that the licensees have been allowed to get the duty free inputs processed from any manufacturer under actual user condition subject to following the central excise procedure relating to job work.

However, transfer is allowed only after redemption of bond/bank guarantee/legal undertaking furnished under the scheme.

The other changes conveyed through the circular relate to re-export of goods imported under the duty free replenishment certificate, special dispensations for the marine sector, extended scope of the annual advance licence scheme, exemption from anti-dumping and safeguard duties on imports for specified deemed exports, lower export obligation for specified category of EPCG licence holders and those who fulfil 75 per cent export obligation within half the export obligation period and so on.

The finance ministry has not yet accepted the foreign trade policy stipulation regarding abolition of various categories of advance licences.

The exemption notifications relating to the advance licence for physical exports and deemed exports are still separate and strangely intermediate supplies are covered under both the notifications.

The foreign trade policy provides for grant of extensions in export obligation period under EPCG licences by stipulating higher export obligation.

The finance ministry has not yet given effect to these provisions. Apparently, the finance ministry is averse to the idea of extending export obligation period up to 19 years from the licence issue date.

tncr@sify.com