Latest DGFT diktat a nuisance, can be got around

EXIM MATTERS

Even as the commerce ministry is trying its best to help the exporters cope with the rising rupee, the new Director General of Foreign Trade (DGFT) has created a new problem for the exporters. Perhaps, he does not understand the nuisance value of the small amendments he makes.

Through a public notice number 21/2007 dated 17 July, the DGFT has amended the Bank Certificate of Export and Realisation. The amendment says that in Column No. 5 of BRC in Appendix 22A, the heading "Description of goods as given in the Customs Authenticated Shipping bill" stands replaced by "Description of goods as given in the CustomsAuthenticated Shipping bill and the Commercial Invoice/Packing List."

Essentially, this means that the exporters have to mention the same description in the shipping bill and the commercial invoice/packing list. This is not practical in all the situations.

For exporters who have to claim any export benefits the descriptions given in the shipping bill have to match the descriptions given by the government. For example, if an exporter wants to claim Duty Entitlement Passbook (DEPB) benefit, and the DEPB rate schedule gives a certain description, he must declare the same description in the DEPB shipping bill. He risks losing the claim, if the description given in the shipping bill does not match the description given in the DEPB rate schedule.

The customer, however, may place an order with a different description for the same item and expect the description in the invoice to match the description given in the order or letter of credit.

For example, layered and coated mean the same thing and the buyer may prefer either word to suit the requirements of his authorities or software.

In such cases, what the exporter does is to prepare one set of pre-shipment documents with descriptions that match the descriptions given in the DEPB rate schedule and at the post-shipment stage prepare the documents with descriptions that match the requirements of the customer.

This practice is not unusual and causes no particular harm as long as the concerned parties are happy about it. The new rules relating to letters of credit require the description in the commercial invoice to be same as that stated in the letter of credit but the other documents such as the bill of lading may state the description in general terms 'not in conflict' with what is stated in the invoice.

With the amendment now made in the Appendix 22-A Bank Certificate, the banks may insist that the description given in the commercial invoice and shipping bill must be identical. This will take away the much needed flexibility from the hands of the exporters.

Exporters can try to get out of the difficulty by ensuring that the packing list carries the same description as the shipping bill. Then, they can tell the bankers that they need not look at the description in the invoice at all but only that given in the shipping bill and the packing list. An alternative is to mention the required description in the shipping bill as per the DEPB rate schedule and give in brackets the description in the commercial invoice as required by the buyer. That will render the amendment quite useless, devoid of its sting and purpose. This is a get around but not very satisfactory.

tncr@sify.com