Open House on Foreign Trade Policy
at New Delhi
 |
|
On the dais, from left, are Mr. Ajay Sahai, Director General, FIEO; Dr. S S Agarwal, Addl. DGFT; Dr. R K Dhawan, Chairman, FIEO (NR); Mr. Ganesh Kumar Gupta, President, FIEO; Mr. G K Pillai, Commerce Secretary; Mr. B S Meena, DGFT; Mr. J K Batra, Director General (Safeguards & Trade Facilitation), and Mr. P K Mohanty, Joint Secretary (Drawback). |
The Northern
Region Office of FIEO organized an open house on 8th May at New Delhi with
the
senior government officials on the recently announced Annual Supplement to
Foreign Trade Policy. Mr. G K Pillai, Commerce Secretary, Mr. B S Meena, the
DGFT, Mr. J K Batra, DG (Safeguards & Trade Facilitation), Mr. P K
Mohanty, JS (Drawback), Dr. Shyam S Agarwal, Addl. DGFT, Mr. S K Prasad,
Addl. DGFT, Mr. Anil Singh, Jt. DGFT, Mr. S K Saraf, Jt. DGFT, Mr. M K
Parimoo, Jt. DGFT and many other officials joined the open house and
interacted with a large number of exporters. Chairmen of various export
promotion councils also attended the meet and discussed issues concerning
their sectors.
Addressing the participants, FIEO President Mr. Ganesh Kumar Gupta drew the attention of the officials towards eroding export profits due to appreciating Rupee and urged them to immediately intervene in the matter so that the exporters remained competitive in the global market and achieved the ambitious target set by the Commerce Minster for the current fiscal. "Fluctuating exchange rate keeps the exporters anxious about their export proceeds till they are finally realized," he said.
FIEO Chief welcomed the initiatives taken in the Policy in respect of agro exports; focus product and market schemes; handloom and handicrafts industry; gem & jewellery and high technology exports. He expressed happiness over exemption of service tax on all services rendered abroad and charged on exports from India and also on services rendered in India but utilized by exports, but he requested for the immediate issuance of the necessary notifications in this regard and the announcement of the remission mechanism by the Department of Revenue .
Setting the floor open for discussion, the Northern Region Chairman of FIEO Dr. R. K. Dhawan commended the initiatives announced recently under the Policy to encourage agri exports. "The agricultural sector of the country not only has tremendous export potential but is also capable of improving the lifestyle of over 60% of the people living in the rural areas," said Dr. Dhawan. The two major Policy announcements - extension of the Vishesh Krishi and Gram Udyog Yojana (VKGUY) to include more items and incentives to the status holders for import of cold storage and other agricultural equipments – are considered to boost export of agricultural products from the country.
The Commerce Secretary informed that the Commerce & Industry Minister had written to the Prime Minister on the issue of Rupee appreciation and he expected that some action would be taken to address it. Interacting with the exporters, he took many decisions on the spot and sought to resolve various issues affecting exports. Here are the issues raised by exporters and the responses by the government officials.
FOREIGN TRADE POLICY
Duty Free Import Entitlement
Query: Para 1B.1 (ii) (c) of Handbook of Procedures allows duty free import entitlement of 1% of the FOB value for hand knotted carpets samples, but there is no corresponding customs notification in the absence of which exporters are unable to avail the facility.
Response: Serial number 167(c) of Customs Notification No.21/2002 dated 1.3.2002 (as amended) already covers import of samples of hand-knotted carpets at NIL rate of duty.
MAI Scheme
Query: Under MAI scheme (Para 3.2), exporters of pharmaceuticals are allowed reimbursement of 50% registration charges subject to a ceiling of Rs. 50 lakh. However, the application in this regard has to be routed through Export Promotion Councils and a Certificate has to be sought from Indian Missions concerned. This procedure considerably delays the reimbursement to exporters. Exporters may be allowed to file application for reimbursement of registration charges directly to MDA section of the Department of Commerce along with evidence showing payment of the registration charges. The payment may, however, be routed to the exporters through the Pharmaceuticals EPC so as to expedite the process.
Response: The Commerce Secretary agreed that the certification from the Indian Mission may not be insisted upon but said the application has to be routed through the Council concerned for reimbursement of registration charges.
MDA Scheme
Query: According to Para 3.2.1 of the Handbook of Procedure, the MDA assistance is available only for exporters with an annual export turnover of up to Rs. 10 crore but as per MDA guidelines, such assistance is available for all exporters having an annual export turnover of up to Rs. 15 crore. Thus the Para should be amended to conform to MDA guidelines.
Response: Suitable amendments will be carried out.
Query: As per MDA guidelines, number of visits in a financial year is restricted to 5 and subject to the condition that the exporter is having at least 12 months’ membership with the concerned EPC or FIEO. A FIEO member should be allowed to avail MDA assistance for events organized by an EPC or vice versa subject to the fulfillment of other conditions.
Response: This will be made possible provided the budget grant for reimbursement of MDA benefit is met by the organizer of such events. MDA division will issue suitable clarification to this effect, but other conditions of MDA scheme, such as the number of visits, have to be fulfilled.
Vishesh Krishi and Gram Udyog Yojana (VKGUY) ()
Query: Para 3.8.2.2 excludes exports of restricted and prohibited items from the purview of Vishesh Krishi and Gram Udyog Yojana. In certain cases, the government allows export of restricted items under advance licence where the licencee exports products by using the imported inputs. Such exports should be eligible for the benefit under VKGUY.
Response: Restricted items shall not be eligible for the benefit of VKGUY even under advance authorisation.
Query: Cashew kernels, including cashew in value added forms, may be included in the VKGUY. About 99% of the exports of cashew kernels from India are in bulk raw form. Putting it under VKGUY will boost export of value added cashew kernels.
Response: Value and volume in case of cashew are too high to include it under VKGUY.
Duty Credit Scrip to Status Holders against export of Agricultural Products
Query: Para 3.8.6 states that all status holders shall be entitled for duty credit scrip equivalent to 10% of the FOB value of agricultural exports. However, it is not mentioned whether the FOB value of the current or preceding year will be taken into calculation.
Response: FOB value of exports made during 2007-08 will be counted.
Admissibility of Duty Drawback under Advance Authorization
Query: Para 4.1.40 inter-alia stipulates that the drawback allowed shall be mentioned in the Authorization. Why this new stipulation?
Response: The stipulation will be reviewed.
Reduction in value addition for calculation of DEPB rates
Query: The DEPB rate is calculated on the basis of standard input-output norms, value addition and incidence of customs duty on inputs. When the DEPB rates were fixed initially in 1997, a minimum value addition of 50% was taken for calculation of such rate. However, with the passage of time and increase in the cost of domestic inputs, the import content of exports has gradually moved up. The cost of inputs, particularly metals, has gone up without corresponding increase in fob value which has adversely affected value addition. The minimum value addition criteria of 50% for calculation of DEPB rate needs to be lowered to 20% as in the case in DFIA.
Response: FIEO should submit a paper on the issue.
Transferability of DFIA
Query: As per Drawback Rules, time limit for filing drawback claims is within 3 months from the date on which an order permitting clearance and loading of goods for exportation is made by Customs. However, Para 4.4.6 does not mention any cutoff date for transferability of DFIA and claiming drawback of Additional Customs Duty/Excise Duty. This may create problem for the exporters while availing the prescribed facility. The time limit for claiming drawback may be prescribed from the date of transferability endorsement.
Response: The DGFT will discus this matter with Customs.
Query: DFIA Scheme which allowed exemption of CVD and SAD prior to 19.4.07 will now attract these duties in the event of transfer of DFIA license. This would make the scheme unviable and unattractive and so the status quo should be restored.
Response: The issue will be examined and suitable clarification will be issued.
Import of Naphtha/Furnace Oil against advance authorization
Query: Regional Authorities are not allowing full entitlement of fuel as allowed in the SION on the ground that in the "General Note for Fuel" a stipulation has been made that the import of fuel should under no circumstances exceed the limit of 7% of the fob value of exports. RAs are not maintaining a distinction between the fuel imported under the SION and the fuel imported under the General Note for Fuel. The FOB value limit of 7% as specified in the ‘General Note for Fuel’ is applicable only when fuel entitlement is claimed under its provisions. If the fuel is claimed under a specified SION, then the licence holder should be permitted to import the full quantity of the fuel as per SION without any value limit unless the SION itself specifies quantity/value restriction.
Response: DGFT will issue a clarification on the above matter.
Factoring of special additional duty and duty on fuel under DEPB
Query: The policy announcement made by the Commerce and Industry Minister acceded to the industry demand for factoring of 4% special additional duty on imports and customs duty on fuel for calculation of DEPB rates. However, Paragraph 4.3 suggests that the incidence of 4% special additional duty and customs duty on fuel should be allowed under DEPB as brand rate. Since the detailed procedure for the same has not been notified yet, the mechanism for such refund is not clear. The 4% special additional duty can be factored along with other customs duty for non-exciseable and non-cenvatable sectors so as to dispense with the needs for brand rate of DEPB, as has been proposed. This will considerably simplify the procedures and do away with the need for filing separate application for DEPB and brand rate of DEPB. The incidence of fuel may also be factored in the initial calculation of the DEPB rate so that this can be claimed along with DEPB entitlement. With this mechanism, all the duties can be claimed at one go in a single application.
Response: FIEO will submit a note giving details of the proposal for reducing time and paper work in claiming the benefit.
Import of restricted items under EPCG Scheme
Query: For import of restricted items under EPCG, exporters should be allowed to file only one application for approval from EFC at Headquarters and for grant of the licence. At present, Para 5.1(iii) does not specify this. As a result, exporters have to file two applications – one with EFC at headquarters and the other with Licencensing Authority for grant of the Licence - thus paying application fee twice. This increases transaction cost as well as transaction time.
Response: Separate application will be required to be made to EFC for restricted item as well as to the Licencing Authority for EPCG, but application fee will be payable only once.
 |
|
Mr. G K Pillai, Commerce Secretary, addressing the participants |
Average Export Obligation under EPCG Scheme
Query: As per the provision of Para 5.4(i), now Average Export Obligation will be calculated taking all exports of the Company (Irrespective of the export product for which EPCG licence is applied). This will increase average export obligation of Companies manufacturing multiple products even if they choose to take EPCG Licences for select products. Companies manufacturing multiple products should be given option to apply and receive EPCG Licences for export of specific products with average export obligation equivalent to the arithmetic mean of export performance of that product in the last three years. Only in case the company chooses to fulfill the obligation by exporting other products, the average should be the arithmetic mean of export performance of such selected products.
Response: The matter will be examined.
Conditions for fulfillment of export obligation
Query: One of the conditions for fulfillment of export obligation is that the export obligation shall be fulfilled by export of goods manufactured/services rendered by the applicant which shall be over and above the average level of exports achieved by the applicant in preceding three licensing years. In case of new products being manufactured or exported, the applicant may not be in a position to fulfill this condition. In post MFA regime many of the yarn exporters with sizable exports have entered into garments exports who may not be able to maintain the average. The provision may be modified to cover average exports of any such products for which EPCG licence is being claimed.
Response: Only manufactured goods will be counted for fixing the average level of exports.
Benefits under Served from India Scheme (Para 5.4(v)
Query: The only benefit available to services exports is the duty credit scrip at specified rates under Served From India Scheme. However, the same would not be available where Services have been rendered under EPCG Scheme as per Para 5.4(v). This stipulation has put the service exporters particularly the hotel industry in a great disadvantage. Status quo may be maintained with a view to providing relief to service exports.
Response: Hotel Industry should submit a detailed representation for examining the issue.
Group Company
|
Query: A Group Company could be any business organization/venture, it may be Proprietorship or Partnership or HUF or Public Limited Company or Private Limited Company or Co-operative Society or Association of persons, if it satisfies the stipulated conditions of Para 9.2a. However, sometimes the licensing authorities do not consider a Partnership Firm or a Proprietorship concern under the definition of Group Company as given in Para 9.2a. This puts the exporters in disadvantageous position. |
 |
|
Mr. Ganesh Kumar Gupta (left) welcoming Mr. G K Pillai. |
Response: The Commerce Secretary agreed to examine the issue.
HAND BOOK OF PROCEDURES
Self addressed stamp envelope
Query: Para 2.7 does not mention the amount of the required postal stamp to be affixed on the envelope to be furnished with an application. As a result, exporters may find it difficult to furnish a self addressed envelope of the required amount of postal stamp for sending the document by Speed Post. Regional Licensing Authorities may be advised to issue suitable Trade Notice prescribing the required Postal Stamp.
Response: Since the minimum speed post charges are Rs. 25 only for packages upto 500 grams, exporters can submit self-addressed envelop accordingly.
Payment through General Insurance
Query: Para 2.25.2 of the Handbook of Procedures Vol. I states that the amount of general insurance cover for transit loss would be treated as payment realized for exports under various export promotion schemes. However, in the absence of the necessary amendments in the RBI guidelines exporters are quite often finding it difficult to avail benefits available against realisation of export proceeds. Moreover, though the RBI provides that the write-off of export bills consequent upon settlement of ECGC claim does not involve surrender of incentives but the drawback provisions are still to be modified in line with the RBI/DGFT guidelines. Corresponding guidelines should be amended in line with the provisions.
Response: Matter would be taken up with the RBI by the DGFT to extend the facility for normal insurance cover at par with ECGC.
EPCs/CBs
Query: As per Para 2.64 of Handbook of Procedures, a list and category of EPCs including Commodity Boards is given in Appendix-2. However, under Appendix -2, the products against EPCs have not been mentioned. This Appendix may be amended by incorporating products and covered under various EPCs/Commodity Boards.
Response: The list of products of individual EPC/Commodity Board/FIEO will be brought out.
Validity of Status Certificates
Query: Para 3.2.2 of the Hand Book of Procedures, Volume-I mentions that all status certificates shall lapse on 31st March, 2009. This restricts the validity of recognition status which are granted during 2007 for a period of 2 years only and those which are granted during 2008 for a period of one year only even though after fulfilling the recognition criterion. Further, Para 2.68.1 provides the validity of RCMC granted by EPCs/FIEO for a period of 5 years from 1st April of the licensing year in which it was issued. The restriction of validity of status upto 31st March 2009 may be removed.
Response: Five year validity will be given subject to the condition that exporters will meet new criterion effective from 1.4.2009.
Landing Certificate under FMS
Query: To avail the benefits of Focus Market Scheme, exporter needs to submit landing certificate. No specimen of landing certificate is available on the website. This needs to be looked into on priority basis. At the same time, very clear guidelines should be given in regard to shipments taking place to interior African countries. For example, for shipment to Uganda, the cargo needs to be discharged at Mombassa, Kenya from where it moves by road. In such cases, who will be the ultimate authority to issue landing certificates?
Response: Tracking report from shipping line would suffice the purpose. Moreover, the benefit under the scheme will be given if the final destination is falling in the eligible list of countries irrespective of the fact that the goods have been trans-shipped from India to a third country and finally to the eligible country.
Restoration of Positive Value Addition for Gem & Jewellery EOU
Query: The minimum value addition for 100% Gem & Jewellery EOUs prescribed under Para 4A.2.1 of the Hand Book of Procedures Vol. I, has created problem for the exporters to compete in the international market. Positive Value Addition criteria may be restored.
Response: It was not agreed.
Clubbing of Advance Authorizations
Query: Facility of clubbing of Advance Authorisations should be permitted irrespective of the year of issue of custom notifications and validity. The only condition should be that the exporter achieves overall fulfillment in EO and value addition. The conditions laid down in Para 4.20.3 of Hand Book of Procedures should be dispensed with. The word ‘Valid’ appearing in 5th Line of this Para defeats the very purpose of clubbing.
Response: The facility is available provided Response one of the licences so clubbed is valid.
Regularisation of Bonafide Default
Query: Wherever shortfall in EO against an Advance Authorisation is there, the exporter should be permitted to surrender a valid transferable D.F.I.A for the equal quantity to cover the same.
Response: Surrender of DFIA as well as licence issued under Target Plus in lieu of payment of duty will be examined.
Closure of Advance Licences issued prior to 1.4.1992
Query: Issuance of DGFT Public Notice No.79 dated 2nd January has been appreciated by the exporters who were facing difficulties in closure of licenses issued from 01/04/1992. However, it now insists to produce a non-availment of MODVAT benefit certificate from the concerned jurisdictional Central Excise Authorities. It is very difficult to get a certificate from the Central Excise Authority for the cases, which are older by a decade. Because of this anomaly, a number of cases are still lying unresolved. Instead of a certificate, the licensee should be asked to submit an affidavit-cum-indemnity bond in regard to availment/non-availment of Modvat benefits and upon submission of this, the files should be closed.
Response: Modvat Certificate will not be insisted upon for non-excisable products. Suitable Public Notice will be issued by DGFT. For excisable products, Department of Revenue will issue guidelines to field formations.
|
Meeting on Foreign Trade Policy at Hyderabad Andhra Pradesh Chapter of the Federation organized an "Interactive Session on Foreign Trade Policy" on 15th May 2007 at Hyderabad. Mr. M. Saikumar, Additional Export Commissioner and Zonal JT.DGFT, Mr. M. Gopinath, Jt.DGFT, Hyderabad, Mr. D. Anil, Deputy Commissioner of Customs, Mr. Soumyadip Chowdhury, Senior Vice President & Head-SME (South II), Commercial Banking, HSBC, representatives from export promotion councils, chambers of commerce and trade associations, along with more than 90 exporters took part in the meeting. Mr. Saikumar in his address observed that unfortunately in the context of global trade our farm products did not get adequate market access due to heavy subsidies given by the developed world. During the meeting, presentations were also made on "Latest Procedures of Customs related to Imports and Exports through EDI" by Mr. D. Anil and "Export Factoring" by Mr. Soumyadip Chowdhury. Mr. Anil explained about the latest modules available in the EDI for exports and imports and the procedure of drawback processing through EDI. Mr. Chowdhury explained the advantages of export factoring in eliminating the cost and delay experienced in transacting business under letter of credit. He said the factors also helped exporters obtain valuable information on the standing of the foreign buyers. |
 |
|
Mr. M Saikumar, Additional Export Commissioner & Zonal Jt. DGFT, addressing the participants. On the dais, from left, are Mr. R Asokan, Jt. Director, FIEO (SR); Mr. Soumyadip Chowdhury, Senior Vice President & Head-SME (South II), Commercial Banking, HSBC; Mr. M Gopinath, Jt. DGFT, Hyderabad, and Mr. D Anil, Deputy Commissioner of Customs, Hyderabad. |
 |
|
A view of the participants. |
Fulfilment of Export Obligation under EPCG Scheme (Para 5.7.8 & Para 5.8.6)
Query: The introduction of Para 5.7.8 and Para 5.8.6 has made to understanding that with each EPCG Licence issued in a particular year , export obligation will include annual average plus duty saved amount on the last licence. No further EPCG Licence will be issued in Year 2 till the last year’s proportionate Export Obligation has been fulfilled. In case the Export Obligation on licences issued in the preceding year has been fulfilled proportionately and a fresh licence has been issued in YEAR 2, there what would be its annual average? Will it be the average of the preceding 3 years or will it have any connection with the outstanding Export Obligation of Year 1 which has been fulfilled proportionately. This may please be clarified.
Response: The DGFT will issue an explanatory note on the matter. FIEO will submit a note on the changes required for simplification of EPCG Scheme.
Disposal of obsolete machines from 100% EOU to DTA
Query: An Export Oriented Unit is allowed sale of obsolete/surplus capital goods into DTA to an EPCG Licence holder as per condition No. 5 of Notification No. 53/97Cus., dated 3.6.97. Para 6.15(b) of FTP also permits sale of obsolete imported capital goods in DTA on payment of applicable duty. However, some customs and central excise authorities need clarification regarding the sale of obsolete capital goods from 100% EOU to DTA unit holding EPCG Licence by payment of applicable rate of duty which is 5% in the case of EPCG Licence. It is mentioned that applicable duty is always based on the kind of import licence or exemption enjoyed by the importer. A clarification may be issued regarding sale of obsolete capital goods to DTA unit holding EPCG Licence against the payment of applicable concessional rate of duty.
Response: The matter will be examined by the DGFT.
Deemed Exports
Query: Sub contractor/sub supplier of the main contractor/ main supplier supplying indigenous goods to EPCG authorization (licence) holder should also be entitled for deemed export benefits. Because of non-inclusion of the reference of Para 8.2 (c) in Para 8.4 of the Hand Book of Procedures and the words sub contractor/sub supplier in Para 5.5.3 of the Handbook of Procedure, sub-contractor/ supplier are deprived of this facility.
Response: Inclusion of Para 8.2(c) in Para 8.4 of Handbook of Procedures will be looked into.
Application fee for Duplicate Copy of Transferable Licence
Query: All transferable licences/authorisations are now issued with a Port of Registration. For the issue of a duplicate authorization, a fee of 10% of the duty saved is too high a figure for a licence exceeding Rs. 1 lakh and above. Therefore, for issue of duplicate transferable authorisation/licence, the fee should be made with a ceiling of maximum of Rs. 1000 or 2% of the duty saved, whichever is less.
Response: The fee will be revised and reduced. Where the licence has been lost in transit, on production of copy of FIR lodged with the Police stating so, no fee will be charged.
Time bound disposal of applications
Query: Para 9.11 does not mention any time limit for disposal of Terminal Excise Duty refund. Delay in disposal of the refund claims blockage of the working capital which hampers export efforts. Hence, the time limit for the payment of TED refunds may also be specified which would expedite disposal of the applications and would reduce the transaction cost and time for the exporters.
Response: 60 days time limit for grant of TED Refund will be considered.
Application formats for Focus Market and Focus Product Schemes
Query: Though the schemes were notified as far back as on 18.12.2006, the format has not been uploaded on the DGFT Website so far. As a result exporters are unable to claim the benefit as the application is required to file on line. It is, therefore, suggested that the application formats may be uploaded in the DGFT website at the earliest.
Response: The software would be uploaded by 15th of May 2007.
Focus Product & Market benefits to exports from non-EDI Ports
Query: It is beyond an exporter’s reach to do anything about a Port being Customs EDI enabled or otherwise. Exporters from far-flung areas are exporting through ICDs, which are non-EDI. Moreover, the products, which are covered under Focus Product Scheme, are generally produced in rural or semi-urban areas. These can be exported only through the nearest ICD Ports, which are mostly non-EDI. There should be no discrimination between exports from EDI and Non-EDI Ports for grant of the benefits.
Response: Exports from Non-EDI ports will also be made eligible for benefits under the schemes.
Benefit under Focus Market Scheme for exports through transshipment
Query: There are certain countries appearing in Appendix-37C such as Tunisia, Morocco etc where the direct shipping lines are not available. These shipping lines pick up the containers from India and then transship the containers in their nearby hubs e.g. Singapore, Port Kalong, Sellah, Egypt etc. Thereafter these containers are loaded on the connecting vessels, which are scheduled for the countries mentioned in the Appenix-37C. Further, there is only one direct shipping line to Mauritius i.e. Delmas, which charges exorbitantly high. In such situation exporters have to go for indirect shipping lines, which transship the containers on the way to "notified countries".
Response: Already covered earlier.
Delay in uploading of Data on ICEGATE
Query: It has been observed that there is inordinate delay in uploading data related to EDI DEPB shipping Bills on to the ICEGATE by the concerned Custom Ports, without which, as on date, an exporter cannot apply for the same. And if the data have been fed, there have been instances that the shipping bill is appearing on the on-line DEPB module but when selected for submission the related detail of the export product under the same doesn’t appear leading to NIL DEPB entitlement against the said shipping bill. This needs to be redressed on priority because the delay can lead to uncalled for cuts in the exporters’ entitlement.
Response: Customs will develop a system to find out how mismatch has taken place and in such cases concerned exporters will be informed.
Drawback in case of non-realization of export proceeds under ECGC cover
Query: The Federation had represented the issue of the availability of drawback in case of non-realization of export proceeds under ECGC cover to the Reserve Bank of India. The RBI vide its letter No. EC.CO.EXD/ 1/20/05. 31.005/2003-04 dated 28/1/2004 informed that the guidelines have already been issued vide A.P. (DIR) Series Circular No. 22 dated 24/9/2003 and stated in its letter that "write off of export bills consequent upon settlement of ECGC claims does not involve surrender of incentives in view of paragraph 2.25.3 of the Handbook of Procedures." So, the Drawback provision should be modified in line with RBI and DGFT guidelines so as to provide for non-surrender of drawback amount in case of shipments where export proceeds have not been realized/remitted and claim has been settled by the ECGC.
Response: Status-quo will be maintained.
CUSTOMS
Risk Management System
Query: The risk based management system of customs precludes all export promotion schemes. On the contrary, most of the other than POL imports takes place under export promotion schemes. This, inter alia, excludes majority of the imports from risk based module subjecting them to routine verification which leads to delay and cost overrun. Customs may include all export promotion schemes within the purview of risk management systems so that the imports are expedited cutting down the delivery schedule for exporters.
Response: The Risk Management System is being developed and will be in operation by July 2007 to cover export promotion schemes.
Amendment in Customs Notification No.53/2003 dated 1.4.2003
Query: DFCE Scheme (Policy period 2002-07) is covered by Custom Notification No. 53/2003 dated 1st April 2003, which exempts various goods when imported into India from the whole of duty of customs on products other than agricultural and dairy products. The DGFT vide its two Public Notices No. 41(RE-2004)2004-2009 dated 4th January 2005 & 42/2004-09 dated 6th January 2005 allowed import of agricultural products, but the Custom Notification was not amended to permit clearance of the agricultural goods.
Response: JS (Drawback) agreed to examine the matter.
Single Bond under Export Promotion Schemes
Query: One company may be asked to give a single bond for all duty free clearances under various schemes. At present, a company is required to submit license-wise bond to the customs authorities which is time consuming and cumbersome. Since all major customs ports are having EDI connectivity, the Company may furnish bond at one Customs House for clearance of goods at any Customs Port under any scheme.
Response: Once more ports have the EDI connectivity, it will be implemented.
Cancellation of Bond/ LUT executed with Customs
Query: The Regional Authorities issues E.O.D.C only after payment of Customs Duty + interest, wherever applicable. Once EODC is presented to the Customs, the bond cancellation should take place across the table. The endorsement of bond cancellation should be given on the photocopy of EODC being presented by the licensee. Only in regard to bank guarantee, the licensees should be given a call date and on the given date the BG should be released to them. The present system of bond cancellation involves a minimum of 4 staffs, movement of files at least twice to each officer, a minimum of 10 days and also other avoidable incidental expenses.
Response: The Commerce Secretary suggested to the Addl. DGFT to take stock of all pending redemption/no-bond cases in all licensing authorities to sort out the problem.
Permission to hide sensitive information in shipping documents
Query: In the case of merchant exporters, while exporting the goods of excisable units their business secrets are leaked, as the shipping documents viz. shipping bill, bill of lading, invoice, BRC, etc. required to be given to the manufacturers for submission of proof of shipments to the central excise authorities contain the entire details of the foreign buyer, including the invoice value. By disclosing the name, address and details of the product exported, the confidential and sensitive business information becomes public and sometimes reaches to even competitors abroad. The exporters may be allowed to hide the sensitive information in the shipping documents at the time of providing the same for submission of proof of shipment. The DGFT has addressed this issues in its Policy Circular No.8 (RE-2006)/2004-2009) dated 6/6/2006 and Policy Circular No.18 (RE-2006)/2004-2009) dated 4.9.2006 in the case of issue of certificate of origin and claming benefits under various export promotion schemes.
Response: The Commerce Secretary suggested that sensitive information of exporters should not be divulged.
Difficulty in Clearance under DFCE/Target Plus Certificate
Query: Custom authorities are not allowing clearance against the duty credit scrip issued under DFCE/Target Plus Schemes. They are interpreting the word ‘nexus’ to include only those items of import as are allowed as per SION norms against particular export product. Vide Public Notice No. 15(RE:2005/2004-09 dated 4th June 2005 and Policy Circular No.27/2005-09 dated 5th October 2005, the scope and meaning of nexus with product group has been clarified. This is an anomalous situation. In terms of Para 2.3 of the Foreign Trade Policy, clarification issued by the DGFT is final so far as interpretation of import and export policy is concerned. This also leads to an ironical situation in many cases. For example, if an exporter has exported various engineering goods, say 5 different items, will he be asked to give separate FOB value of each item of export and accordingly will different items of import be allowed proportionately? Besides if one has exported goods from 3 to 4 different product groups, how does he decide upon his items of import? The Custom Authorities should allow clearance of goods as per broad nexus as defined by DGFT.
Response: The DGFT will modify the policy so as to allow nexus for products exported instead of product group.
SERVICE TAX
Registration for transportation of goods by Road
Query: The central excise field formations are asking the exporters to get service tax registration and pay service tax on freight in respect of transportation of goods by road. In most of the cases, the service tax is charged by the transport agency from the exporters and the transport agency pays the service tax to the service tax authorities. In such a situation, exporters should not be required to get registration for service tax and pay service tax for transportation of goods by road. A suitable clarification to this effect may be issued by service tax authorities so that exporters are not required to get service tax registration in cases where the goods are booked through transport agent who charges the service tax from exporters and pays the same to the tax authorities.
Response: JS (Drawback) clarified that if service tax is paid to transport agency by the exporter, no registration for exporters is required.
Exemption from service tax
Query: Cashew exporters are availing contract processing services for obtaining cashew kernel for fulfilling their export commitments. Exporters supply the raw cashewnuts to other concerns for processing and returning back the kernels on a contract basis. Processing is done on a job work basis and this helps many small units to work in different parts of the country, especially in rural areas, providing more employment to a large number of workers. This is a business auxiliary service related to exports and so the Government should exempt this from service tax.
According to the Policy, it appears that there will be a scheme for refund of service tax paid by the exporters to the service providers. There are many services like C&F, transport charges, commission/brokerage, port/shipping, foreign travel etc. which are directly related to exports. In case of some other services like telecom/electricity, courier, travel etc. these are often availed for export and non-export business.
Government may consider a mechanism, where exporters need not pay service tax for the directly export related services. These may be audited and certified by Chartered Accountant. In the case of other services, remittance and reimbursement may be considered on pro-rata basis (i.e. export turnover to total turnover). This will help avoid maintaining elaborate records, filing returns, claiming refund, etc. which will bring down transaction cost.
Response: Separate paper should be presented by FIEO with regard to reimbursement of service tax on pre/production/post production in India.
RE-INTRODUCTION OF LERMS
Query: Liberalized Exchange Risk Management Scheme (LERMS) may be re-introduced in consultation with the RBI so that a fiscal benefit of 5% could be provided to the exporters who have entered into a contract with a foreign buyer and have registered the same with the RBI with certain dollar calculations. Further, a strong vigilance may be made by the RBI into speculative activities of dollar or any other currency which is effecting the realization of exporters and as a result huge losses are incurred.
Response: The Commerce Minister has already written a letter to the Prime Minister highlighting exporters’ concern in this regard.
On a specific query by a member regarding the delay in issue of Certificate of Origin (preferential) under SAFTA by the EIC, the Commerce Secretary informed that the Ministry would explore the possibility of notifying other agencies for issuing certificates under Preferential Trade Agreement. On Cenvat of Education Cess, it was clarified by the JS (Drawback) that the Cenvat facility was admissible for education cess.
