The effects of fixing SION

EXIM MATTERS

In a positive move to bring greater efficiency in the process of fixation of Standard Input Output Norms (SION), the Director General of Foreign Trade (DGFT) has issued important instructions (Policy Circular no. 20.2007 dated 5th December 2007) and set time limits for various steps involved in the process. He has also ordered a review of all the SION keeping in view the ongoing technological advancements and industrial process developments.

The Circular makes it clear that where an Advance Authorisation (i.e. advance licence) is issued on 'net to net' basis, the Regional (licencing) Authority need not forward the case to NC. It clarifies that wherever a SION exists and an application under Para 4.7 of handbook is made for higher quantity of imported inputs (than the same fixed under SION), such requests can be entertained for SION revision only.

That is, such applications cannot be considered under Para 4.7 for ad hoc norms, and the advance authorisation in such cases must be issued only as per the then prevailing SION.

On the other hand, where a SION exists and an application is made for additional inputs other than those specified in SION, the regional authority may issue advance authorisation under Para 4.7.

The Policy Circular says that most exporters/industrial manufacturers prepare a project report, which include details establishing profitability based on output sale proceeds and input cost forecasts, and outlining basic manufacturing process, giving quantitative details of inputs.

Such project reports can also be submitted by exporters along with the ad hoc norm applications. This will expedite decision making for fixation of ad hoc norms. In specific cases, the regional authorities may also seek such reports to facilitate early fixation of ad hoc norms.

The fixation of norms is a relatively non-transparent process, where the technical officer in the concerned administrative ministry enjoys near absolute discretion on how much quantity of what items can be allowed duty free import for manufacture of any export product. Views differ on how well the discretion is used.

The flaw in the scheme is that the exporter has no way to challenge the opinion of the technical officer at any other forum. He has to represent to the same NC that rejected his application and hope that the NC will change its decision.

Even so, the trade will welcome the efforts of the DGFT to streamline the norms fixation processes and hope that the fate of their applications will be known quickly.

tncr@sify.com