DGFT agent norms good news for drug firms

EXIM MATTERS

The director general of foreign trade (DGFT) has issued important instructions regarding issue of duty free credit entitlements to export houses under the target plus scheme and duty free credit entitlement(DFCE) scheme.

The good news for export houses is that under the DFCE scheme, commissions and discounts need not be deducted for the purpose of making the claims.

This is a significant bonanza for export houses, especially in the pharmaceutical sector, who had offered high discounts/commissions to overseas distributors/agents.

Under the duty entitlement passbook (DEPB) scheme also the exporters can include commission in the FOB value for the purpose of claiming the duty credits.

However, there is a cap of 12.5 per cent in the sense that if commission paid is more than 12.5 per cent, the exporters can work out free on board (FOB) value taking into consideration maximum of 12.5 per cent commission for the purpose of claiming the DEPB entitlements.

Under the DFCE and target plus scheme, no such cap is prescribed for claiming the benefits. This means that even higher commissions/discounts can be considered for working out the FOB value for the purpose of claiming the benefits.

The DGFT has now asked the export houses to submit their applications to the zonal offices of the DGFT instead of the regional licensing offices.

At each zonal office, a committee headed by the Zonal Joint DGFT will finalise all cases relating to the two schemes. The committee shall have the discretion to call for additional documents, on a sample basis, like shipping bills, etc. to enable them to arrive at the genuineness/authenticity of the claim.

Such claims may be settled within a period of 45 days from date of filing of application.

Under both the schemes, there are ambiguities especially in regard to admissibility of claims where GR forms and bank certificates contain more than one name.

The DGFT says that wherever it is a mandatory requirement that more than one name is required to be recorded in these export documents, the exporter may approach the committee along with documentary evidence to prove such mandatory and legal requirements; based on which the committee would consider and allow the claim or otherwise.

No disclaimers are permitted in the schemes and the claim can be filed only by those who receive the export proceeds in own name, says the DGFT.

In the meantime, the exporters are feeling the harassment caused by the DGFT's directive that extracts from the consumption registers must be produced before the licencing authorities for the purpose of redeeming the advance licence cases.

The regional licencing authorities now have started insisting on the extracts of consumption registers even in respect of licences issued before notification of the present foreign trade policy.

In fact, Para 4.27 of the Foreign Trade Procedures says that "the advance licence including advance licence for annual requirement issued up to 31.8.2004 shall be governed by the provisions contained in Chapter-7 of the Handbook (Vol.1) (RE-2001) and Chapter 4 of the Handbook (2002-2007 as notified on 31.3.2002) respectively as amended from time to time,excepting the provision relating to clubbing which will be governed by the provisions of Para 4.20 of this Handbook".

The DGFT should give full effect to this para and instruct the regional licensing offices not to insist on consumption records in respect of licences issued before August 31, 2004.

tncr@sify.com