End-use of duty-free imports to be monitored

EXIM MATTERS

The Director General of Foreign Trade (DGFT) has prescribed a new method for monitoring the proper end use of duty free materials imported under advance licenses. The method is applicable for advance licenses issued on or after May 13, 2005.

Under the new method, the advance license holders have to maintain consumption registers in a revised format, showing the actual quantity of duty free inputs used in the manufacture of export products.

If the full quantities of duty free inputs imported have not been used in export production, duty on the material not so utilized has to be paid and the details must be recorded in the consumption register.

Earlier, the DGFT had instructed that consumption registers must be furnished at the time of seeking redemption of each advance license.

Now, the Public Notice no. 60 dated 10th October 2005 says that the consumption records in the revised format prescribed in Appendix "� 23 of the Handbook of Procedures, Vol.-1 should be sent to the relevant licensing authority at the beginning of each licensing year for all those licences, which have been redeemed in the previous licensing year.

The revised Appendix-23 prescribes a format in which the consumption details must be certified by an independent chartered accountant or cost accountant.

Also, wherever any unutilised duty free material has been used for further production and exports or any duty has been paid on the unutilised material, the advance license holder must record the details in the register and also submit documentary evidence to the effect to the licensing authority.

The provisions relating to maintenance of consumptions register has been around since the introduction of actual user condition against import licenses. Most importers, however, never maintained the records in the prescribed format because it is not very practical to do so.

For example, a manufacturer of chemicals may be using the same storage tank to receive certain raw materials, whether duty paid or duty free. Till recently, the licensing authorities also never bothered about the registers, so long as the advance license holder fulfilled his export obligation.

The DGFT, however, has been receiving complaints that under advance license much more quantities of raw materials enjoy duty exemption than what is actually required for export production and that way, an implicit subsidy is built into the scheme.

In response to the complaints, the DGFT reviewed the Standard Input Output Norms (SION) for a number of products recently and in fact, withdrew or revised the SION for quite a few products. The decision to monitor the proper end use of duty free raw materials is also a response to such complaints.

Advance license holders, however, say that they have modernised their manufacturing processes and increased their efficiency and that is howthey end up consuming less quantity of raw materials than what the SION permits and so, the benefits of such efficiencies should not be taken away.

The immediate relief for the advance license holders is that they need not submit extracts from the consumption registers at the time of seeking export obligation discharge certificates from the licensing authorities.

To that extent they can redeem their bonds more quickly. Also, they need not maintain records of each issue or receipt but only give a consolidated statement every year and that too only for licenses redeemed in the previous year.

E-mail: tncr@hathway.com