Agenda

@Understanding

- Invoice, Packing List, Inspection Certificate, Certificate of Origin, Shipping Bill, ARE-1, Mate Receipt, GR/SDF, Bill of exchange, Bank Realisation Certificate, Bill of Lading and Airway Bill, Bill of Entry etc.

@Incoterms @Terms of payment @Documentation: Overview Commercial

and Regulatory documents

@Letter
Agenda

of credits - Concept, Types of L/C, Parties to L/C, L/C mechanism.

@Export Procedures

@Import Procedure @Export Promotion Schemes under Foreign

Trade Policy

Purview of Export-Import
FLOW CHART I (continue from the previous slide)

Overview of Documentation
Significance Documentation

of

@ Documents

are important for the following reasons:

(a) as an evidence of shipment and title of goods; (b) for obtaining payment; (c) to provide a specific and complete description of the goods; (d) for assessment of correct Duty for clearance purpose; (e) for obtaining Export Licences; (f) for obtaining export finance; (g) for completing Pre-shipment Inspection; (h) for claiming export benefits like Duty Drawback, etc.

Commercial / Regulatory Documents

@Commercial set of documents are mainly

used for Commerce. In other words these are documents normally exchanged between buyer and seller.

@Regulatory

documents are required in dealing with various regulatory authorities such as customs, RBI, Excise, Licencing authorities Inspection and other Export

Promotion bodies for availing incentives etc.

Commercial / Regulatory Documents

@Documents

are categorized into two categories, namely Commercial Documents and Regulatory Documents.

Commercial Documents

Regulatory

@Referring

to the Commercial set of documents, it may please be observed that these set of documents are prepared from other set of documents (some of these only). These are known as auxiliary documents.

@These documents may not be required

by the foreign buyer, but these are must for preparation of main export documents, known as Principle Commercial Documents.

Pre-shipment Documents

@Documents

at pre-shipment stage are those documents, which are required to be made, till the consignment is presented to the customs department for clearance.

@The following documents can, therefore,

be treated as pre-shipment documents:-

@Proforma Invoice @Confirmed order or contract

@Letter of Credit @Pre-shipment Inspection Certificate @Packing list @Shipping Bill @Export Declaration Forms (GR/SDF) @ARE
Post-shipment Documents

@Documents at

Post-shipment stage are naturally those which are prepared after the shipment.

@These documents include the following:@Mate Receipt @Bill of Lading @Airway Bill @Roadway/Railway Bill @Post Parcel/ Courier Receipt @Invoices (including consular invoice) @Certificate of Origin @Insurance Certificate or Policy @Bill of Exchange @BRC

Documents for availing various Export Benefits

@Documents are also divided, depending

upon, whether the benefit has to be claimed prior to exports or after the exports.

@For claiming benefits one has to make

different applications government authorities. with various

Documents for availing various Export Benefits

@ At

the pre-shipment stage the following documents are note-worthy.

@Application
the bank.

for pre-shipment finance from

@Application of Advance Authorization or Duty

Free Import Authorisation with DGFT.

@Application

for execution of Bond with Central Excise authorities.

@Application for obtaining CT-1 in case of a

Merchant Exporter

Documents for availing various Export Benefits

@ At

the post shipment stage, the following documents are note-worthy.

@Application of Duty Entitlement Pass Book. @Application for Focus Market or Focus Product
Scheme.

@Application
Drawback

for fixation of Brand rate of

Import Documentation
Important DocumentsImports

@Invoice @Packing list @Bill of Lading or Delivery Order/Airway Bill @GATT declaration form duly filled in @Importers/CHAs declaration @Licence/Authorisations in original wherever
necessary

@Letter of Credit/Bank Draft/wherever necessary @Insurance document @Import license @Industrial License, if required @Test report in case of chemicals

@Catalogue, Technical write up, Literature in

case of machineries, spares or chemicals as may be applicable

@Separately

split up components, machineries

value

of

spares,

@Certificate of Origin, if preferential rate of duty

is claimed under PTAs/FTAs etc.

@No Commission declaration

Understanding Documents
Understanding Documents

@All documents whether it is for export or import

transaction generally contain following information

@ @

Name and address of the exporter and importer Document No. and date.

@ @ @ @ @ @ @ @ @ @ @

Order No. and date Port of discharge Port of destination Country of origin Description of Goods Marks and nos., model nos. [if any] Weight ITC HS Code No. Value Currency Terms of payment

Terms of shipment etc.

Understanding Documents

@However, depending upon the nature of

the document, specific information is to be mentioned.

@For e.g. apart from the above details,

Shipping Bill will include what export benefit is being claimed against that particular shipment, etc. Similarly, Packing List will give information about how goods are packed.

@Let

us now study each document in

depth.

Invoice

@It is itemized statement prepared and

issued by a seller at the time dispatching the goods to the buyer. of

@ It helps the Customs Authorities to: @ensure that goods shipped are permitted by
the export policy.

@compute the customs duty, if any, payable on

the export or the import.

@check the quantity of goods. They generally

open a few packages at random and check the veracity of details in the invoice.

@check if there is any over-invoicing or underinvoicing (that may be resorted to by the importer to reduce the import duty payable).

Invoice

@Invoices are often called bills. @Various

types of invoices used in International Trade are

@Proforma Invoice @Commercial Invoice @Consular Invoice @Leagalized Invoice @Customs Invoice
Packing List

@It is a consolidated statement in a prescribed

format detailing how goods are packed, marked and numbered including weight and dimensions of each package.

@It

is useful for customs at the time of examination and warehouse keeper of buyer to maintain inventory record and to effect delivery.

@It have many details common from invoice but

it does not indicate unit rate value of goods.

@The exporter or his/her agent, the customs

Packing List
broker or the freight forwarder, reserves the shipping space based on the gross weight or the measurement shown in the packing list.

@Customs uses it as a check-list to verify: @the outgoing cargo (in exporting) and @the incoming cargo (in importing).

@Basic functions of Packing List are: @To confirm the contents of a shipment as it
left the exporters premises.

@To indicate weights, measures and the piece

count (i.e. the number of cartons or cases) in that shipment.

@It is prepared in 7-10 copies or as per

the requirement.

Inspection Certificate

@Certificate

of Inspection is issued by the Inspection Agency concerned certifying that the consignment has been inspected before shipment as per the requirements of the Exports (Quality Control and Inspection) Act, 1963.

@It satisfies the conditions relating to quality

control and inspection as applicable to it and is

certified export worthy.

@This certificate is required: @by customs before allowing

goods or

shipment of

@by a banker to negotiate the documents. @This

certificate bears cross references of invoice or contract number.

Inspection Certificate

@ Inspection can be done by @Inspection Agency appointed

by the Government of India, i.e. Export Inspection Agency, Textile Committee, Central Silk Board etc.

@Inspection Agency may also be nominated by

importing countries Government i.e. SGS and

OMIC by some African Countries.

@Sometimes

buyer himself appoints an independent private inspector to inspect the goods.

@If an inspection is a part of transaction, then

exporter is required to arrange for necessary inspection.

@It

can be a certificate of quality, weight, analysis, or the like.

Certificate of Origin [COO]

@It is a certificate indicating the fact that the

goods which have been exported have originated or manufactured in a particular country. So it is a sort of declaration testifying the origin of export.

@It is normally required by an importer to clear

goods from the customs.

@For political and social reasons, it is insisted by

Customs Authority of importing country before goods are allowed to enter in the country.

@It helps the importer to take an advantage in

duty concession, if any. For e.g. goods imported under Free Trade Agreement.

Certificate of Origin [COO]

@On the basis of COO, Customs can ensure

that certain prohibited goods of particular countries are not imported.

@It also ensures that goods have not been

reshipped by a seller who has brought them into his own country from some other place of origin.

@It is sent to the importer by the exporter.

@It is issued or signed by an independent

Certificate of Origin

official organization, such as a Chamber of Commerce, on prescribed form.

@These are often required: @to meet Customs requirements

importing state

in

the

@to comply with Banking requirements @for other official and commercial reasons. @ There are two categories of Certificate
of Origin :
1. 2.

Preferential Origin

Preferential Certificate of Origin and Non-preferential Certificate of Origin

Certificate

of

@It entitles preferential treatment in duty

in the importing country.

@These certificates are governed by rules

of origin which are always part of Preferential Trading Agreements entered into between two or more countries.

@As far as India is concerned the following

agreements are noteworthy: (GSP)

@Generalised System of Preferences @SAARC @Asia(APTA) Preferential Agreement (SAPTA) Pacific Trade Trading Agreement

@India-Sri
Preferential Origin

Lanka Agreement (ISLFTA)

Free

Trade

Certificate

of

@Some

of the agencies authorised to issue PCOO are:

which

are

@Export Inspection Agencies All products. @Directorate General of Foreign Trade &
its regional offices - All products.

@Spices Board, Ministry of Commerce &

Industry - Spices and Cashewnuts

@Central

Silk Board through 8 regional offices all over India - Silk Products.

@Coir Board Coir and Coir Products.

@Textile
madeups

Committee

Textiles

and

Non-preferential Certificate of Origin

@It evidences the origin of goods and do

not bestow any right to preferential tariffs.

@The

Government has also nominated certain authorised agencies to issue Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to Simplification of Customs formalities.

Shipping bill

@Shipping Bill is an important document required

to seek permission of customs to export goods by Sea/Air. It is prepared by the exporter and

submitted to the Customs.

@The

exporter SHIPPING BILL export by air or respect of export

of any goods has to file a as an entry for the purpose of sea and a BILL OF EXPORT in by land.

@Cargo will be allowed to be carted to Dock/Port

sheds only after stamping and passing of the shipping bill by customs authorities.

@The exporter has to sign a declaration in the

Shipping Bill regarding the truth of its contents.

Shipping bill

@ Shipping Bill normally contains: @the name and address of

importer/consignee and exporter,

the

@invoice number and date,

@name of vessel carrying the goods, @name of master or agents, @port at which goods are to be discharged, @country of final destination, @description of goods, quantity details of
each case,

@value of the goods as defined in the Sea

Customs Act,

@number of packages with total weight, @marks and numbers, etc.

Shipping bill

@ Types of Shipping Bills:

@FREE

SHIPPING BILL: Used for export of goods which neither attract any Export duty/cess nor entitled to any Duty Drawback

@DUTIABLE SHIPPING BILL: Used when export

goods are subject to Export Duty/Cess. Duty is charged either on quantity basis (Fixed amount per kg. or per Metric tonne) or on certain percentage of assessable value.

@DRAWBACK SHIPPING BILL: Used when Duty

Drawback is to be claimed.

@SHIPPING

BILL FOR SHIPMENT EX-BOND: Used when the goods are to be exported which have been imported earlier and kept in bond prior to re-export.

Shipping bill

@ Types of Shipping Bills:

@DEPB SHIPPING BILL: When DEPB benefit is

to be claimed.

@DEEC SHIPPING BILL: This shipping bill is

used for export of goods under Advance Authorisation (Duty exemption scheme).

@DEEC CUM DRAWBACK SHIPPING BILL: This

shipping bill is used for export of goods where both the schemes Duty Exemption as well as Drawback are to be taken into account.

Shipping bill

@Shipping bill is required to be submitted in

quadruplicate. If Drawback/DEPB claim is to be made, one additional copy should be submitted.

@ Copies of Shipping Bill are as under: @

Customs Copy: For record of Customs

@ @ @ @

Exporters Copy: For record of Exporters/ Exporter may forward it to shipping company. Export Promotion Copy: For office of DGFT. This copy is the most important document for claiming duty Neutralisation/Exemption benefits plus export incentives wherever applicable. Exchange Control Copy: For negotiating the export documents in bank. It is Proof of export for exchange purposes. DEPB Copy: For use in the import cell of customs for registration of licence.

Mate Receipt

@Mates receipt is a receipt issued by the Master

or Mate of the vessel stating that certain goods have been received on board his vessel.

@It is prima-facie evidence that the goods are

loaded in the vessel.

@It contains:
the name of shipping line and vessel, port of loading, port of discharge and place of delivery, marks and numbers, number and kind of packages, gross weight, description of goods, container status/seal number, shipping bill number and date and condition of cargo at the time of its receipt on board the vessel.

@It is serially numbered.

Mate Receipt

@Port

authorities recover port dues exporter on production of this receipt.

from

@On payment of Dock dues, the exporter or his

agent collects the receipt from the Port-Trust authorities and hands over to shipping company for preparing Bill of Lading.

@Bill of Lading is prepared on the basis of Mates

Receipt.

@It is of a transferable nature. @In

case of ascertaining the exact date of shipment, the mates receipt date is also very important.

@Normally, the date of Export is regarded as the

date of Mate Receipt or the date of Bill of Lading, whichever is later.

Export (GR/SDF)

Declaration

Forms

@As

per the exchange regulations, exporters, wishing to ship goods abroad, are required to submit Export Declaration Forms to the Customs authorities (whenever the value of the shipment exceeds US $ 25,000) before any export of goods

from India is made.

@It is to be filed by exporter stating that export

proceeds would be realized within 180 days for non-status holder exporters and 360 days for status holder exporters.

Export (GR/SDF) Export (GR/SDF)

Declaration Declaration

Forms Forms

@ These forms normally contain: @ @ @

Name and address of exporter, IEC code number and description of goods. Name and address of authorised dealer through whom the proceeds of the exports have been, or will be, realised. Details of commission due to foreign agent or buyer should be correctly declared. Otherwise, difficulties may arise at the time of remittances of

such commission/ payment. An exporter should note this point very carefully.

@ @ @

It should be clearly indicated whether the export is on Outright Sale Basis or On Consignment Basis An exporter is required to give analysis of full export value, a break-up of FOB value, freight, insurance, discount, commission, etc. An exporter has to mention the period within which he will realise full export value of transaction. If the shipment is on DA terms, then an exporter has to bring forex within that period. However, normally maximum period allowed is 180 days.

Statutory Declaration Form [SDF]

@ Procedure for Distribution / disposal of

copies of SDF

@The SDF form should be submitted in

duplicate (to be annexed to the relative shipping bill) to the Commissioner of

Customs concerned.

@After verifying and authenticating the

declaration in form SDF, the Commissioner of Customs will hand over to the exporter, one copy of the shipping bill marked Exchange Control Copy in which form SDF has been appended for being submitted to the bank within 21 days from the date of export.

Statutory Declaration Form [SDF]

@Banks

should accept the Exchange Control (EC) copy of the shipping bill and form SDF appended thereto, submitted by the exporter for collection/negotiation of shipping documents.

@The manner of disposal of EC copy of

Bill of Exchange

shipping Bill (and form SDF appended thereto) is the same as that for GR forms.

@Bill

of Exchange [BE] is a document drawn and is an order by the exporter to the buyer to pay the money in specified exchange.

@It is also known as a draft. @A

bill of exchange is accompanied by commercial documents which are presented by a bank and released to the buyer either against payment (at sight) or against a signature for payment on a specified future date.

@It is an unconditional written order.

Bill of Exchange

@When a BE is drawn on foreign firm it is

termed as a foreign draft or bill of exchange.

@It is prepared either in an international

currency or Indian rupees depending on the terms of the contract.

@Accordingly,

the bill is known by the name of currency in which it is drawn. e.g. a bill drawn in US dollars is known as a Dollar Bill and when drawn in Rupees, it is termed as Rupees Bill.

Bill of Exchange

@ The most common versions of a bill of

exchange are: A) Sight Draft

@When the drawer (exporter) expects

the drawee (importer) to make payment immediately upon the draft being presented to him.

@Unless and until the Draft is received,

the Negotiating/ Collecting Bank does not hand over the Shipping documents and the buyer cannot take delivery of goods.

Bill of Exchange
B) Usance Draft

@When draft is drawn for payment at a

date later than the date of presentation.

@It may be a fixed future (specific) date

or determinable date according to the period of credit viz. 30 days, 60 days or 90 days etc.

@It

is presented to the drawee (importer) who will retire the documents by accepting the draft by putting his signature and date.

Bill of Exchange

@When

the payment is received in advance no Bill of Exchange is required to be drawn.

@ Parties to a bill of exchange

i.

Drawer who makes the order for making payment. ii. Drawee whom the order to pay is made. iii. Payee whom the payment is to be made.

Bill of Exchange

@ Features of a Bill of Exchange: @A bill must be in writing, duly signed

by its drawer, accepted by its drawee and properly stamped.

@It must contain an order to pay. Words @The order must be unconditional. @The sum payable mentioned must be
certain or certain. capable of being

like please pay US $ 5,000 on demand and oblige are not used.

made

@The parties to a bill must be certain.

Bank Realisation Certificate

@Once the export proceeds are realised,

the exporter has to prepare Bank Certificate of Export and Realisation for the purpose of claiming export benefits, incentives, etc.

@It is prepared as per Form No.1, given in

Appendix 22A of Handbook of procedures 2004-09 (Vol. I).

@To prepare this certificate, the date of

realisation is most essential, as the exporters have to apply for the export benefits, incentives, etc. within six months following the month/quarter of the realization month.

Bank Realisation Certificate

@It is signed by the authorized signatory

of the firm/company with full name in block letters with designation, full official and residential addresses.

@Bankers

attest this certificate as true and correct after verifying the particulars, including the date of mate receipt. This date is the most important, as this is the actual date of export.

Bank Realisation Certificate

@It is signed by an authorized signatory of

the bank with his name and designation.

@Bankers

affix certificate number and date and also mention the Authorized Foreign Exchange Dealer's Code number allotted to Bank by Reserve bank of India.

@For this purpose, this certificate must be

accompanied documents:with the following

@A copy of invoice, @A copy of customs attested export promotion

copy of the shipping bill,

@A copy of Bill of Lading/ PP receipt/ Airway

bill,

@A copy of the insurance certificate/Insurance

policy/cover.

Bill of Lading (B/L)

@Bill of Lading is the transport document

associated with Sea freight.

@It is issued by the Shipping Company or

its agent or master of a ship acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is

usually identified.

@It is a document of title to the goods

and, as such, is freely transferable by endorsement and delivery.

Bill of Lading (B/L)

@Bill of Lading serves three purposes as: @Receipt given by Shipping Company as goods
described on document has been received by it/carrier.

@Evidence of the contract of carriage by sea

between the shipping company and the shipper (exporter or importer).

@Document of title to the goods and can be

used to obtain payment or a written promise before the merchandise is released to the importer.

@For the bill of lading to be negotiable it

must be:
1. 2. 3. made out to the order to the shipper. signed by the steamship company. endorsed in blank by the shipper.

Bill of Lading (B/L)

@It is the only evidence to file a claim

against the shipping company in the event of non-delivery, defective delivery or short-delivery of the cargo at the destination.

@For

preparation of B/L the exporter should submit the complete set of B/L together with mate receipt to the shipping company which will calculate the freight amount on the basis of measurement or weight. payment of freight, the shipping

@On

company returns the B/L duly signed and supported by requisite adhesive stamps.

Bill of Lading (B/L)

@Generally made out in the sets of two or

three originals duly signed by the master of the ship or the agent of the steamship company. the originals are equally valid for taking the delivery of the goods. Once one original is utilised the other originals become null and void.

@All

@Marked as Non-negotiable copy cannot

be utilised for taking the delivery of goods.

Bill of Lading (B/L)

@ Bill

of Lading information:

contains

the

following

@ @ @ @ @ @ @ @ @ @ @

Shipping companys name and address. Consignees name and address. Notify party Name of the vessel, Port of loading/Shipment and port of discharge. and Numbers, Cubic

Shipping marks measurements, weights

Description of the goods Number of packages. Shipped on board with date-rubber stamp. Gross weight and net weight. Freight details

@ @ @ @ @ @

Signature of the shipping companys agent. Container number if any. Shippers name and address. B/L Number and Date Originals Terms (on reverse)

Bill of Lading (B/L)

@ Bill of Lading can be further described

as under:-

@Shipped on Board :- When goods are actually

shipped on board.

@Received for shipment :- When goods have

been handed over to agent for shipment.

@Through B/L:- When two or more carriers/

Bill of Lading (B/L)
different modes of transport form i.e. road, rail, air, and sea employed to reach goods to their final destination.

@Transhipment B/L:- When there is no direct

service between the two ports and shipowner is prepared to tranship the goods at an intermediate port.

@Stale B/L:- i.e. a late B/L that has been held

too long before it is passed on to a bank for negotiation or to the consignee.

@Clean B/L:- Where the carrier has noted that

the goods have been received or loaded in

apparent good condition damage, loss, etc.).

(no

apparent

Bill of Lading (B/L)

@Claused

B/L:- Which contains additional clauses/notations limiting the responsibility of the shipping company which specify deficient condition(s) of the goods and/or packaging.

@Combined Transport B/L:- When different

modes of transport are used; usually issued when goods stuffed at shippers premises and delivered at consignees premises.

Bill of Lading (B/L)

@Charter Party B/L:- Where a shipper has

contracted with a shipping line to charter a vessel for the movement of cargo. It is issued by the carrier or its agent in the charter shipping. Unless otherwise authorized in the letter of credit (L/C), the charter party B/L is not acceptable in the L/C negotiation.

@Freight Paid B/L:- When freight is paid at

the time of shipment or in advance, the B/L is marked, freight paid.

@Freight Collect B/L:- When the freight is not

paid and is to be collected from the consignee on the arrival of the goods, the B/L is marked, freight collect.

Bill of Lading (B/L)

@Negotiable B/L:- It is a title document to

the goods, issued to the order of a party, usually the shipper, whose endorsement is required to effect its negotiation. Thus, a shipper's order (negotiable) B/L can be bought, sold, or traded while goods are in transit and is commonly used for letter of credit transactions.

Airway Bill (AWB)

@Airway Bill is a transport document associated

with Airfreight.

@It serves as a receipt for goods and an evidence

of the contract of carriage, but it is not a document of title to the goods. Hence, the AWB is non-negotiable.

@It contains the following details: @number of packages @dimensions or volume @gross weight @shipping marks @The goods in the air consignment are consigned
directly to the consignee.

Airway Bill (AWB)

@On the reverse side of the airway bill are the

airlines terms and conditions of carriage whereby an airline is obligated to transport a consignment to its final destination once it has confirmed receipt of the shippers consignment.

@ Airway bill can be comprised in two parts: @MAWB (Master Airway bill) shipments sent
on a direct basis, not consolidated.

@HAWB (House Airway bill) shipments sent

on a consolidation basis whereby grouping together various clients consignments under one MAWB being issued by the freight forwarder.

Bill of Entry

@ The

document on the strength of which clearance of imported goods can be affected is known as Bill Entry, the form of which has been standardized by the Central Board of Excise and Customs.

@ Every importer has to submit it under

section 46 of the Customs Act, 1962.

@ Under

EDI system, Bill of Entry is actually printed on computer in triplicate only after out of charge order is given. Duplicate copy is given to importer.

Bill of Entry

@ Salient

features of a Bill of Entry which is to be presented for clearance of goods for home consumption are mentioned below:

@Origin & Vessels Particulars @Particulars of the Goods @Value @Duties Leviable @Code @Declaration of Importers/Clearing Agents @Types of Bill of Entry There are three
types. Out of these, two types are for clearance from customs while third is for clearance from warehouse.

Bill of Entry

@BILL OF ENTRY FOR HOME CONSUMPTION When the imported goods are to be cleared on payment of full duty. Home consumption means

use within India.

@BILL OF ENTRY FOR WAREHOUSING - If the

imported goods are not required immediately, importer may like to store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when required on payment of duty. This will enable him to defer payment of customs duty till goods are actually required by him. It is also called Into Bond Bill of Entry as bond is executed for transfer of goods in warehouse without payment of duty.

@BILL OF ENTRY FOR EX-BOND CLEARANCE It is used for clearance from the warehouse on payment of duty.

Bill of Entry

@Documents required by customs authorities are

required to be submitted to enable them to (a) check the goods (b) decide value and classification of goods and (c) to ensure that the import is legally permitted.

@Documents presented to customs along with the

Bill of Entry generally include:

@ @ @ @ @ @ @ @

Invoice, Packing List, Bill of Lading or Delivery Order,

Import Licence(s) / Customs Clearance Permit, Letter of Credit / Bank Draft wherever necessary Insurance Policy, Certificate of Origin etc. GATT declaration form duly filled in

Importers / CHAs declaration duly signed

Tips for Documentation

Proper

@Implications of all Regulatory documents must

be studied carefully. For example; declaration on ARE1 forms.

@Filing of Shipping Bill electronically requires

correct entries including HS code for the product. Many times, small mistakes are extremely difficult to correct later on.

@Shipping bills must be filed according to the

scheme the exporter wants to avail . For example; DEPB /DFIA/Drawback etc.

@Extra care should be taken when combination

of schemes is intended to be used. For example;

DEEC Drawback.

@Co-relation between customs, excise and DGFT

is extremely important. Many times documents do not match with each other, which results in delay or denying of some benefit under one or the other scheme.

Tips for Documentation

Proper

@Each regulatory document is important from

the point of view of claiming various benefits associated with exports. Each document therefore should be carefully looked into as to correctness of the contents, description, quantity, weight, currency, declaration etc.

@Maintenance of

statutory records: Since most of the schemes are in the nature of the exemption / remission of the duty, documentary compliances are insisted upon by all the

government departments. For example; Appendix 23 Consumption register.

INCOTERMS 2000
INCOTERMS 2000

@ INTRODUCTION
In their sales contract buyer and seller agree on the conditions of sale : payment on the one hand and delivery on the other. These terms determine at what precise location the ownership of the goods is transferred from seller to buyer and when/how payment will be done. In international trade a universal set of rules on delivery has been developed over the years. It is called INCOTEMRS.

INCOTERMS 2000

@ The Incoterms divide costs and risks

INCOTERMS 2000 INCOTERMS 2000

The Incoterms of trade have been designed to clarify obligations of both parties, the buyer and the seller. Principally, these are:

@ EXW = EX WORKS ( named place)

Cost of Goods plus cost of Export packing and marking In this term the seller delivers the goods by keeping it ready in deliverable state at the seller's place or another named place. This named place can be factory/godown or manufacturing unit. In this term seller does not clear the goods for exports nor goods are loaded on vehicle.

@ FCA = FREE CARRIER ( named place)

Cost of Goods plus cost of Getting goods to railway station or truck for transportation to port

This term refers to seller's responsibility to deliver the goods, cleared for export, to the carrier appointed by the buyer at the named place. In this term the place of delivery is very important. If the delivery is at sellers place's then he is responsible for loading. If the delivery occurred at any other place, the seller is not responsible for unloading. This term can be used for all modes of transport as well as multimodal.

INCOTERMS 2000

@ FAS = FREE ALONGSIDE SHIP (named

port of shipment) Cost of Goods plus cost of Transport to port and getting goods alongside ship In this term when the goods are placed alongside the vessel at the named port of shipment it will be considered that the seller has completed the delivery. The buyer has to bear all risks of loss or damage to the goods and all costs from this point of time. However the seller must clear the goods for the purpose of export. This term can be used only for inland waterway transport or shipment by sea. It is not used

when it is air shipment.

INCOTERMS 2000

@ FOB = FREE ON BOARD ( named port

of shipment) Cost of Goods plus cost of Getting goods on board and preparing shipping documents This is the most popular term and is widely in use. FOB means that the seller delivers when the goods pass the ship's rail at the named port of shipment. Under this term the buyer has to bear all costs and risk of loss of damage to the goods from that point. This term requires the seller to clear the goods for exports. This term is used only for sea or inland waterway transport. It is not suitable for shipment by air.

INCOTERMS 2000

@ CFR = COST AND FREIGHT ( named

port of destination)

Cost of Goods plus cost of Freight cost (port to port) Earlier this term was popularly known as C&F or CNF. CFR means the seller must pay the cost and the freight necessary for the goods to reach at the named destination. However, the risks of loss or damage to the goods after the time of the delivery is on buyers account. The seller is required to clear the goods for exports. This term can be used only for sea and inland waterway transport.

INCOTERMS 2000

@ CIF = COST INSURANCE AND FREIGHT (

named port of destination) Cost of Goods plus cost of Marine Insurance Cost, Insurance and Freight means that the seller, delivers when the goods pass the ships rail in the port of shipment. The CIF price refers that it covers the cost of the goods, freight necessary to bring the goods to the named port of destination and also marine insurance. Compared to the previous term, CFR the seller contracts for the

insurance and pay the insurance premium. It will be essential for the buyer to know that under the CIF term the seller is required to obtain the insurance only on minimum cover. If the buyer wishes to have more protection then he should make his own insurance arrangement extra or should specify to the seller at the time of contract. In this term the seller must clear the goods for exports and the buyer must arrange necessary clearance for import. This term can be used only for sea and inland water transport.

INCOTERMS 2000

@ CPT = CARRIAGE PAID TO ( named place

destination) Carriage Paid To means the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This refers to the fact that all the risks and any other cost occurring after the goods have been delivered will be on buyers account. This term is used for all modes of transport including multimodal transport.

@ CIP = CARRIAGE AND INSURANCE PAID TO (

named place of destination) Carriage and Insurance Paid To means that the seller delivers the goods to the carrier nominated by him, but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyer's risk of loss of or damage to the goods during the carriage.

INCOTERMS 2000

@ DAF

= DELIVERD AT FRONTIER ( named

place) This term is used when goods are to be delivered at land frontier, irrespective of the mode of transport. "Delivered At Frontier" means the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for exports but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country.

@ DES = DELIVERD EX SHIP

INCOTERMS 2000

Cost of Goods plus cost of Putting goods at disposal of customer on board vessel at port of destination Delivered Ex Ship means that the seller delivers when goods are place at the disposal of the buyer on board ship not cleared for import at the named port of destination. In this term all the cost and risk in bringing the goods to the named port of destination before discharge is on seller. This term can be used only when the shipment is by sea or inland waterway or multimodal transport in the vessel at the port of destination.

@ DEQ = DELIVERED EX QUAY ( named port of

destination) Cost of Goods plus cost of Unloading charges at port of destination Delivered Ex Quay means that the seller delivers when the goods are placed at the disposal of the buyer not cleared for, import on the quay (wharf) at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf). The DEQ term requires the buyer to clear the goods for import

and to pay for all formalities, duties, taxes and other charges upon import.

INCOTERMS 2000

@ DDU = DELIVERED DUTY UNPAID

Delivered Duty Unpaid means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto other than where applicable any duty for import in the country of destination. Such duty has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time.

INCOTERMS 2000

@ DDP = DELIVERED DUTY PAID (named

place of destination) Cost of Goods plus cost of Payment of duties and transport to customer Delivered Duty Paid" means that the seller delivers the goods to the buyer, cleared for

import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any duty for import in the country of destination.

INCOTERMS 2000

@ Incoterms 2000 an example

A customer in Hanover, Germany, asks for a quotation for 3000 pairs of shoes, to be delivered DDP at his warehouse. You have decided on a unit selling price of $2, giving a total nominal price of $ 6000 for the goods when sold domestically. For export you will have to calculate with an additional set of costs which are involved in making them physically available to your customer. What are the additional costs of getting the goods from your factory in (e.g.) Agra, India, to the customer? How (*) is your quotation affected by the terms of delivery? (*) In this calculation example, all costs are

hypothetical.

INCOTERMS 2000

@ Incoterms 2000 an example

INCOTERMS 2000

@ Incoterms 2000 an example

INCOTERMS 2000

@ Incoterms 2000 an example

INCOTERMS 2000

@ Incoterms 2000 an example

Terms of Payment
Terms of Payment

@ Types

of

International

Trade

Settlement:

@Advance Payment @Open account @Bills on collection basis @Documents against Acceptance @Documentary Credits (Letters of credit) @Standby letter of Credit
Advance Payment

@Seller may insist for advance payment : @ @

When he is not confident on the buyers financial position When the buyers Country is not stable.

@Under this method seller is able to secure his

commercial risk on the buyer by receiving the advance payment for his supply.

@While agreeing for advance payment buyer is

exposed to a risk on the seller and his capacity to supply the materials.

@In a competitive buyers market seller may

not be able to receive advance payment.

@If it is the sellers market and if the seller has

monopoly in certain items, seller can insist for

advance payment.

Open account

@It is an arrangement between the buyer and

the seller that seller delivers the goods to the buyer directly or to his order and the buyer agrees to pay on an agreed date.

@Under this method, the goods are with the

buyer on trust and the buyer is expected to pay the seller on the due date.

@Seller is exposed to a high degree of risk

since the goods are under the control of the buyer.

@This type of trading requires a high degree

of trust between buyer and seller and this method is more advantageous to the buyer.

@This method is also known as consignment

sale or on account sales.

Documents against payment

@It is an arrangement by which the seller

after shipping the goods submits the documents to his bank with a request for collecting the payment from the buyer.

@Sellers bank forwards the document to the

buyers bank with a request to collect the payment from the buyer against the documents.

@Documents are presented to the buyer and if

the buyer makes payment, buyers bank collects the payment and remits to the sellers bank, which in turn will transfer the payment to the seller.

@Under this method sellers bank does not

undertake any responsibility for payment. acts as agent for collection. It

@If

the payment is not received documents are returned to the seller.

the

@Payment

risk is with the seller. If the payment is not forthcoming, seller has to recall the documents or direct it to a new buyer.

Documents acceptance

against

@Under this arrangement all the commercial

documents are forwarded by the sellers bank to the buyers bank.

@Sellers @Bill

bank specifically instructs the buyers bank to deliver all the commercial documents to the buyer only on acceptance of the payment liability by the buyer on the bill of exchange. of exchange is drawn on the buyer demanding payment on the due date. accepts his payment liability by signing on the bill of exchange and collects all the original documents.

@Buyer

@With the original shipping document he is

able to take delivery of the consignment.

@Buyer goes to the bank on the due date and

pays the dues with or without interest as per the arrangement.

Letters of Credit

@ What is Letter of Credit [LC]? @Under letter of credit mechanism the Bank
lends its name to the buyers reputation by undertaking on buyer's behalf that it will pay the seller provided seller presents its claim/documents strictly in terms of the undertaking given by the Bank on behalf of buyer.

@As per the UCPDC 600 definition of LC is

given as under Credit means any arrangement, however name and described, that is irrevocable and

thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.

Letters of Credit

@ What is Letter of Credit [LC]? @ Honour means: @To pay at sight if the credit is available
by sight payment.

@To

incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment.

@To accept a bill of exchange (draft)

drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

@Presentation means either the delivery of

documents under a credit to the issuing bank or nominated Bank or the documents so delivered.

Letters of Credit

@ Why an exporter should insist on LC as

a payment term?

@LC

open doors to international trade by providing a secure mechanism for payment upon fulfillment of contractual obligations.

@A bank is substituted for the buyer as the

source of payment for goods or services exported.

@The

issuing bank undertakes to make payment, provided all the terms and conditions stipulated in the LC are complied with.

Letters of Credit

@ Why an exporter should insist on LC as

a payment term?

@Financing @Bank

opportunities, such as preshipment finance secured by a LC and/or discounting of accepted drafts drawn under LC, are available in many countries.

expertise is made available to help complete trade transactions successfully.

@Payment

Letters of Credit

for the goods shipped can be remitted to your own bank or a bank of your choice.

@ How it is beneficial to the importer? @Payment will only be made to the seller when

the terms and conditions of the letter of credit are complied with.

@The importer can control the shipping dates

for the goods being purchased.

@Cash resources are not tied up.

Letters of Credit

@ Who are the parties to the LC? @Applicant/Buyer - on whose behalf

opened [importer] opened [exporter]

LC is

@Beneficiary/Seller - in whose favour the LC is @Opening Bank - which opens/establishes the

LC

@Advising Bank - which advises the LC

@Confirming Bank - which confirms the LC @Negotiating Bank - normally beneficiary's

bank

@Reimbursing Bank - which normally maintains

Letters of Credit
nostro account of the opening reimburses the negotiating bank. bank and

@ Types of LC: @ Irrevocable LC: @Cannot be amended or cancelled without

the consent of the issuing bank, the confirming bank, if any, and the beneficiary.

@ Confirmed Credit: @When a confirming bank has added its

confirmation by way of an additional

Letters of Credit

undertaking to make payment at the specific request of the Issuing Bank, it becomes a confirmed credit. All credits need not be confirmed credits.

@ Types of LC: @ Unconfirmed credit:

An unconfirmed LC is one to which the bank does not add its confirmation, and thereby, does not accept liability to make payment under the LC.

@ Transferable credit: @A LC is transferable only if the Issuing

Bank expressly designates it.

@The Beneficiary in such credit has the

right to request the nominated bank to transfer the credit in full or parts in favour of one or more second beneficiaries if partial shipment is permitted.

Letters of Credit

@ Types of LC: @ Back-to-Back Credit: @In case if the exporter is not the actual
manufacturer and he gets his work done by the sub-suppliers and if the sub-suppliers demands LC in their favour, the exporter who has received a letter of credit for export, approaches his banker to establish second set of letters of credit on the basis of the export letter of credit received by him.

@The second set of Credit opened by a

bank at the request of the exporter is known as back-to-back credit.

@The beneficiary of the original letter of

credit will become the applicant for the second set of credit.

Letters of Credit

@ Types of LC: @ Revolving Credit: @In a Revolving

Credit the amount of drawing is re-instated and made available to the beneficiary again unto the agreed period of time on notification of payment by the applicant or merely on submission of documents.

@The maximum value and period unto that

the Credit can be revolved will be specified in the Revolving Credit.

@The

re-instatement clause and the maximum amount of drawings under the credit should always be incorporated in Revolving credit.

Letters of Credit

@ Types of LC: @ Deferred Payment Credits and Acceptance

Credits: Under Deferred Payment Credit the amount is payable in installments for a stipulated longer period. Usually a part is paid in advance and the balance is payable in agreed installments in terms of conditions of the LC.

Letters of Credit

@ STANDBY LETTER OF CREDIT: @Standby credit is payable only on default of

the buyer.

@Undertaking

of the bank will specifically commit payment only in case of the default of the buyer. It can be treated as a guarantee for payment only in case the buyer fails to pay.

@Standby credits are useful not only in trade

related transactions but in any of transactions where there is a possibility of default like loan repayment.

Procedure

@Buyer

and seller agree to conduct business. The seller wants a letter of credit to guarantee payment.

@Buyer applies to his bank for a letter of

credit in favor of the seller.

@Buyer's bank approves the credit risk of

the buyer, issues and forwards the credit to its correspondent bank (advising or confirming). The correspondent bank is usually located in the same geographical location as the seller (beneficiary).

Procedure

@Advising bank will authenticate the credit and

forward the (beneficiary). original credit to the seller

@Seller

(beneficiary) ships the goods, then verifies and develops the documentary requirements to support the letter of credit. Documentary requirements may vary greatly depending on the perceived risk involved in dealing with a particular company.

@Seller presents the required documents to the

advising or confirming bank to be processed for payment.

@Advising

Procedure

or confirming bank examines the documents for compliance with the terms and conditions of the letter of credit.

@If the documents are correct, the advising or

confirming bank will claim the funds by:

@ @ @

Debiting the account of the issuing bank.

Waiting until the issuing bank remits, after receiving the documents. Reimburse on another bank as required in the credit.

@Advising or confirming bank will forward the

documents to the issuing bank.

@Issuing bank will examine the documents for

compliance. If they are in order, the issuing bank will debit the buyer's account.

@Issuing bank then forwards the documents to

the buyer.

Important Exporter

Tips

to

the

@Upon receipt of the letter of credit, the credit

professional should review all items carefully to insure that what is expected of the seller is fully understood and that he can comply with all the terms and conditions. When compliance is in question, the buyer should be requested to amend the credit.

@Communicate
needed.

with your customers in detail before they apply for letters of credit.

@Consider whether a confirmed letter of credit is @Ask for a copy of the application to be fax to
you, so you can check for terms or conditions that may cause you problems in compliance.

Important Exporter

Tips

to

the

@Upon first advice of the letter of credit, check

that all its terms and conditions can be complied with within the prescribed time limits.

@Many

presentations of documents run into problems with time-limits. You must be aware of at least three time constraints - the expiration date of the credit, the latest shipping date and the maximum time allowed between dispatch and presentation.

@If

the letter of credit calls for documents supplied by third parties, make reasonable allowance for the time this may take to complete.

@After

dispatch of the goods, check all the documents both against the terms of the credit and against each other for internal consistency.

Import Procedure
Customs Duty

Calculation List of Customs Rules and Regulations

List of main Acts, Rules and Regulations under Customs

@CUSTOMS ACT, 1962 @CUSTOMS TARIFF ACT, 1975 @COMPUTERS (ADDITIONAL DUTY) RULES, 2004 @CUSTOMS (IMPORT OF GOODS AT CONCESSIONAL
RATE OF DUTY FOR MANUFACTURE OF EXCISABLE GOODS) RULES, 1996

@RE-EXPORT OF IMPORTED GOODS (DRAWBACK

OF CUSTOMS DUTIES) RULES, 1995

@CUSTOMS @CUSTOMS @CEGAT

(PROVISIONAL REGULATIONS, 1963

DUTY

ASSESSMENT)

AND CENTRAL DRAWBACK RULES, 1995

EXCISE

DUTIES

(COUNTERVAILING DUTY AND ANTIDUMPING DUTY) PROCEDURE RULES, 1996

@BILL OF ENTRY (FORMS) REGULATIONS, 1976 @BILL OF ENTRY (ELECTRONIC DECLARATION)

REGULATIONS, 1995

@UNCLEARED

GOODS REGULATIONS, 1972

(BILL

OF

ENTRY)

List of main Acts, Rules and Regulations under Customs

@COURIER IMPORTS AND EXPORTS (CLEARANCE)

REGULATIONS, 1998

@CUSTOMS @CUSTOMS @CUSTOMS

HOUSE REGULATIONS, 2004 REFUND REGULATIONS, 1995

AGENTS

LICENSING

APPLICATION

(FORM)

VALUATION (DETERMINATION PRICE OF IMPORTED GOODS) RULES, 1988

OF

@BAGGAGE RULES, 1998 @PROJECT IMPORTS REGULATIONS,1986 @CUSTOMS (ADVANCE RULINGS) RULES, 2002 @IMPORT MANIFEST (AIRCRAFT) REGULATIONS,
1976

@IMPORT
1971

MANIFEST

(VESSELS)

REGULATIONS,

@CUSTOMS (SETTLEMENT OF CASES) RULES, 1999

Import Clearance Procedure Import General Manifest

@ Import

General

Manifest-Important

Document

@To get an entry inward the Master of the

Vessel or his agent is required to submit to the proper officer in the Custom House a document called Import General Manifest or Import Manifest in a prescribed form.

@The manifest is nothing more than a list of all

goods carried on board including those meant for other ports in India or abroad with all details like number of packages, marks and numbers, description of the goods and the importers name. Except with the permission of the proper officer, no import goods can be unloaded at any Customs Station unless they are mentioned in the aforesaid import manifest for being

unloaded at that Customs Station.

Import Procedure EDI Import Procedure EDI Import Procedure EDI Import Procedure EDI Import Procedure EDI

@ Examination of Goods: @In case the importer does not have complete
information with him at the time of import, he may request for examination of the goods before assessing the duty liability. This is called First Appraisement.

@The

goods are examined subsequent to assessment and payment of duty. This is called Second Appraisement.

@Examination
basis.

is normally done on random

Import Procedure EDI

@ Examination of Goods @Under the EDI system, the bill of entry,

after assessment by the group or first appraisement, as the case may be, need to be presented at the counter for registration for examination in the import shed.

@A declaration for correctness of entries and

genuineness of the original documents needs to be made at this stage.

@After registration, the B/E is passed on to

the shed Appraiser for examination of the goods.

Import Procedure EDI

@ Examination of Goods: @

Along-with the B/E, the CHA is to present all the necessary documents. After completing examination of the goods, the Shed Appraiser enters the report in System and transfers first appraisement B/E to the group and gives 'out of charge' in case of already assessed B/E.

@ @

Thereupon, the system prints Bill of Entry and order of clearance (in triplicate).

Checklist

All these copies carry the examination report, order of clearance number and name of Shed Appraiser. The two copies each of B/E and the order are to be returned to the CHA/Importer, after the Appraiser signs them. One copy of the order is attached to the Customs copy of B/E and retained by the Shed Appraiser.

@While filing of Bill of Entry, one must always

comply with following details:

@HS Code proper classification @Declarations @Valuation as per CUSTOMS

(DETERMINATION OF GOODS) RULES, 1988 PRICE

VALUATION OF IMPORTED

@Authorisation No. & Date @Customs Notifications No. & Date @Rate of Duty and Duty calculations @Foreign Exchange Rate @Country of Origin @IGM No. & Date @Container No.

Export Clearance Procedure

Check Sheets

@While

filing of Shipping bill one must always comply following details:

@HS Code proper classification @Declarations @Licence No. & Date @Customs Notifications No. &
Date

@Terms of Payment @Foreign Exchange Rate @Country of Origin

Various Export Promotion Schemes Export and Trading Houses

Export House

@Export Performance based Scheme. @Merchant, Manufacturer, Service @The

Provider, EOUs, EHTPs, STPs, BTPs, SEZs, AEZs can apply for Star Export House Certificate. applicant has to make application depending on his total FOB/FOR export performance during the current plus the previous three years (taken together) upon exceeding limit [given in the table at right].

@For

Export House (EH) Status, export Performance is necessary in at least two out of four years (i.e., Current plus previous three years). The criteria is

Export House

@A Status Holder shall be eligible for the

following facilities:

@Authorisation and Customs clearances for

both imports and exports on self-declaration basis;

@Fixation of Input-Output norms on priority

within 60 days;

@Exemption from compulsory negotiation of

documents through banks. Remittance / Receipts, however, would be received through banking channels;

@100%

retention of foreign exchange in EEFC account;

Export House

@Enhancement @Exemption
Schemes

in normal repatriation period from 180 days to 360 days; from furnishing of BG in under FTP; and

@SEHs

and above shall be permitted to establish Export Warehouses, as per DoR guidelines.

@ Maintenance of Accounts: @True and proper account of exports and

imports are to be maintained during the

validity period and three years thereafter.

Focus Market Scheme [FMS]

Focus Market Scheme [FMS]

@Introduced in the Foreign Trade Policy

2006-2007 [Annual Updation].

@Export of
countries. exports.

all products to the notified

@Entitlement 2.5% of the FOB value of @List

of Countries eligible for benefit under this scheme is given in Appendix 37C of HBP Vol.I.

@In the annual updation of the FTP, 16

new countries have been notified.

Duty Exemption/ Remission Scheme

Duty Exemption Scheme

@The

Duty Exemption Scheme enables duty free import of inputs required for export production. Exemption Scheme consists

@Duty
of:

@Advance Authorisation Scheme @Duty Free Import Authorisation

Scheme [DFIA]

Duty Exemption Scheme

@The

facility of Advance Authorisation entitles exporter to import required inputs for export production without payment of duty subject to export obligation to be completed within prescribed time. This scheme reduces burden of customs duties on the inputs and thereby facilitates cost-competitiveness.

@The facility of newly introduced Duty Free

Import Authorisation entitles exporter to avail the benefit of duty free import of inputs plus transferability after the exports have been completed. The Scheme has been operationalized by issue of Customs Ntfn No. 40-Cus. Dtd. 01.05.2006.

Advance

Authorisation
Advance Authorisation

@SION/Adhoc Norm: Ratio of input and

output which permit allowable wastages mainly related to production process.

@Wastage:

Recoverable/Non-recoverable effect of wastage in fixing of norms.

@Value addition: Positive Value Addition

Value addition is a concept where it is expected that the exports against Advance Authorisation should result in additional earning of foreign exchange.

Advance Authorisation

@ Exemption from payment of

@Basic Customs Duty @Additional Customs Duty @Education Cess @Anti-dumping Duty if any @Safeguard Duty if any
Advance Authorisation

@Advance

Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s): i) for Physical exports (including exports to SEZ); and/or ii) for Intermediate supplies; and /or iii) for deemed exports iv) supply of ship stores on board of the foreign going vessel/aircraft subject to the condition that there is specific SION in

respect of the item(s) supplied.

@Subject to actual user condition

Advance Authorisation

@ Transferability: @Advance Authorisation @It

and/or materials imported there under will be with actual user condition. will not be transferable even after completion of export obligation.

Advance Authorisation

@ Export Obligation [EO]: @EO is imposed to Safeguard Revenue foregone

by way of giving exemption.

@Two limiting factors Quantity and Value. @To be fulfilled in 24 months @Any shortfall is required to be regularized by
paying applicable duty plus interest unutilised inputs and penalty if any. on

@ Import Entitlement: @Limited by Quantity and Value. @Import is to be completed in 24 months. @Actual User Condition applied.
Advance Authorisation

@ Port of Registration: @To facilitate accounting of duty exempted.

@Authorisation need to be registered at the

specified port

@The

authorisation holder is permitted to import only through registered port unless permission [TRA] is taken from the Customs Authority.

@Exports can take place from any port. @Port of registration is specified in Para 4.19
of the HBP.

Advance Authorisation

@ Enhancement

or Reduction in the Authorisation Value:

@The reason of @Enhancement sudden increase in export

order

@Reduction
cancelled

Export

order

may

get

@Provision
[EOP]:

is made for reduction on pro-rata basis

enhancement

or

@ Extension of Export Obligation Period @The period of fulfillment of export obligation

under an Advance Authorisation will commence from the authorisation issue date.

Advance Authorisation

@ Extension of Export Obligation Period

[EOP]:

@1st

Extension for 6 months subject to payment of composition fees of 2% of the duty saved on all the unutilized imported items as per authorisation.

@2nd

Extension for 6 months subject to payment of composition fees of 5% of the duty based on all unutilized imported items as per Authorisation.

Advance Authorisation

@ Revalidation: @Only one revalidation of 6 months is allowed @ Fulfillment of Export Obligation: @Export obligation is to be fulfilled by the
Advance Authorisation Holder.

@Once

the export obligation is fulfilled in terms of value and quantity both, the licence holder needs to submit documents as per ANF 4F of Handbook of Procedures Vol.I (HBP) in support of having fulfilled the EO.

Advance Authorisation

@ Redemption: @In case the

export obligation has been fulfilled, the Regional Authority will redeem the case.

@After redemption, the Regional Authority will

forward a copy of the redemption letter to the Customs Authority at the port of registration.

@ Discharge of BG/LUT:
Before discharging BG/LUT,

@in case of physical exports, Customs will

verify all the details as given in Redemption Letter as per their records.

@in

case of intermediate supplies and deemed exports, Customs will verify details of supplies from the Central Excise Authority/Bond Officer.

@After

verification, Customs will discharge BG/LUT within 30 days of issuance of EODC/bond waiver by the Regional Authority.

Advance Authorisation

@ Penalty for Shortfall:

Advance Authorisation

@ Penalty for Shortfall:

Advance Authorisation

@ Penalty for Shortfall:

Advance Authorisation

@ Penalty for Shortfall:

Indigenous Procurement

@Reasons

for opting out in favour of indigenous procurement:

@Shorter delivery time @Logistical advantages @Financial ease (local supplier may not insist
on letter of credit)

@The

same material may be available at cheaper cost if the supplier is in a position to claim benefits available under deemed exports.

@Possibility of inspecting the cargo (since the

supplier is within the country, there comparative ease to inspect the cargo) is

@Indigenous procurement is free of currency

risk since payment can be made in Indian Rupees.

Indigenous Procurement

@ Instruments: @Advance @Advance

Exports] Authorisation Intermediate Supplies] [for

Authorisation [for Deemed

@Advance Release Order

Maintenance of Proper Account CONSUMPTION REGISTER

@Back-to-Back Letter of Credit

@True and proper account of consumption and

utilisation of duty free imported / domestically procured goods against each authorisation is to be maintained as prescribed in Appendix-23.

@These records in Appendix 23 are mandatory

to be submitted for authorisations issued on or after 13-05-2005.

@Records is to be preserved for a period of

atleast 3 years from the date of redemption. Ref: Public Notice No. 08/2005 (RE) dtd. 13.05.2005

Other Provisions

@ Fixation of Norms: @Where SION for export product is not fixed,

advance authorisation can be obtained on selfdeclaration basis.

@The norms are fixed by Norms Committee

[based on Chartered Engineers certificate] with or without modification.

@In case where Norms Committee has already

Other Provisions
ratified norms for same export and import products in respect of an Authorisation obtained under paragraph 4.7, the RA will issue Authorisation under Ad hoc Norms fixed category.

@ Standardisation of Norms: @Norms are fixed by Norms Committee and

circulated to industry by way of public notice.

@Standard
industry.

norms are applicable to entire

@Such norms are fixed normally when atleast

three applications are received from different entities for the same export product.

@Such norms are fixed on an average wastage

basis.

@However,

the authorisation holder has to account for actual consumption.

Other Provisions

@ Modification of Norms: @Authorisation Holder can modify the existing

SION.

@The reasons for modifications are @Due to inclusion of inputs not available
under SION.

@Difference

in Consumption more/less wastages.

ratio

@Due

to greater efficiency manufacturing process.

in

the

@Where manufacturing is possible by using

alternate inputs.

Other Provisions

@ Facility of Clubbing: @The facility of clubbing shall be available

only for redemption/regularisation of the cases.

@No further import or export is allowed. @For this facility, authorisations are required
to have been issued under similar Customs notification even pertaining to different financial years.

@However in case of authorisations issued in

2004-09 period, Advance Authorisations of different customs notification can be clubbed.

Advance Authorisation for Annual Requirement

@Advance Authorisation can also be issued

on the basis of annual requirement for physical exports, intermediate supplies and / or deemed exports.

Advance Authorisation for Annual Requirement

@The entitlement in terms of CIF value of

imports under this scheme is upto 300% of the FOB value of physical export and / or FOR value of deemed export in the preceding licensing year or Rs 1 crore, whichever is higher.

@Advance

Authorisation can be issued with a positive value addition.

@Validity : 24 months. One revalidation

for six months is granted.

@Extension of Export Obligation : Same as

Advance Authorisation.

Corresponding Customs Notifications

@91/2004-CUSTOMS @93/2004-CUSTOMS

dated 10th September, 2004 - Advance Authorisation for deemed export dated 10th September, 2004 - Advance Authorisation

@94/2004-CUSTOMS

dated 10th September, 2004 - Advance Authorisation for Annual Requirement

Duty Free Import Authorisation

Duty Free Authorisation Import

@New instrument to replace DFRC scheme

introduced in the Foreign Trade Policy 2006-2007 [Annual Updation].

@Import

of duty free inputs subject to export obligation.

@Minimum Value Addition required 20%

@Material

imported under the Authorisation and Authorisation itself is transferable once export obligation has been fulfilled and the case is redeemed by Customs Authority.

Duty Free Authorisation

Import

@Once transferability is endorsed, imports

against authorisation or transfer of imported inputs shall be subject to payment of applicable additional customs duty / excise duty.

@Such additional customs duty / excise

duty would be reimbursed to exporter as drawback.

@In case of local sales by excisable unit,

CENVAT credit would equal excise duty already paid.

@CENVAT credit facility shall be available @Corresponding

Customs Notification 40/2006-CUSTOMS dated 1st May, 2006.

for inputs either imported or procured indigenously.

Corresponding Notification

Customs
st

@40/2006-CUSTOMS dated 1

May, 2006.

Comparison between Advance Authorisation and DFIA

Duty Remission Scheme

Duty Remission Scheme

@The Duty Remission Scheme enables post

export replenishment/ remission of duty on

inputs used in the export product.

@Duty Remission scheme consist of:

(a) Duty Entitlement Passbook Scheme [DEPB]. (b ) Duty Drawback Scheme

@Earlier DFRC Scheme is now discontinued

Duty Remission Scheme
DEPB is towards neutralization of basic customs duty on the inputs. DEPB, per se, is duty credit instrument and therefore allows import of any permissible input irrespective of the fact whether the same input has been utilized in the export product or not. DEPB is, therefore, more flexible in nature. Both DEPB are transferable instruments and w.e.f. 01.05.2006.

hence they are equally easy to operate.

Duty Entitlement Passbook Scheme

Duty Entitlement Passbook Scheme [DEPB]

@Objective

of DEPB is to neutralize incidence of customs duty on import content of export product. of Special Additional Duty and customs duty on fuel shall also be allowed under DEPB (as a brand rate) in case of non-availment of CENVAT credit.

@Component

@Credit may be utilized for payment of

Customs Duty on freely importable items.

@The
DEPB

DEPB is valid for a period of 24 months.

@Additional

customs duty / Excise Duty and Special Additional Duty paid in cash or through debit under DEPB may also be adjusted as CENVAT Credit or Duty Drawback as per DoR rules

@The DTA supplier can claim DEPB, in case where

supplies are made to SEZ Developer/SEZ units and payment received from Foreign currency account of SEZ Developer/SEZ unit.

@DEPB

and/or items imported against it are freely transferable.

@Transfer of DEPB shall however be for import at

specified port, which shall be the port from where exports have been made.

DEPB

@Transferable DEPB will be issued only @confirmed irrevocable letter of credit or @bill of exchange is unconditionally

where the payment is received or shipment is made against

Avalised/ Co-Accepted/ Guaranteed by a bank and the same is confirmed by the exporters bank and certified by the bank in the relevant Bank certificate of export and Realisation.

@In

DEPB

other cases, Non-transferable DEPB will be issued. Once the export proceeds received, the same DEPB shall be made transferable.

@Time

period: The application for obtaining DEPB shall be filed

@within a period of twelve months from the

date of exports or

@within @within

six realization or

months

from

the

date

of

three months from the date of printing/ release of shipping bill, whichever is later, in respect of shipments for which the claim have been filed.

DEPB

@ Customs Verification: @Shipping bills issued before 01.10.2005 and

non-EDI Shipping bills will be verified by Customs before allowing import.

@In case of EDI shipping bills issued on or

after 1-10-2005 from EDI ports which are being transmitted electronically by Customs to DGFT, the DEPBs issued shall be sent to Customs at the port of registration through an electronic message exchange system and the DEPB shall be registered at the port of registration electronically.

@No verification of shipping bills against which

DEPB
such DEPBs have been issued, will be required before allowing imports against these DEPBs.

@ Present Market Value: @If DEPB rate is 10% or more, the amount of
credit against export product should not exceed 50% of the Present Market Value (PMV) and a declaration to this effect has to be given on the Shipping Bill at the time of making the shipment under DEPB scheme.

@The PMV consists of applicable excise duties,

sales tax, octroi, etc and therefore normally 30% more than FOB value of exports.

DEPB

@ Value Cap: @There is

a system of value cap where irrespective of the value realized against per unit quantity of export product, the DEPB is given only upto a specified value.

@Let us say, the value cap is Rs. 30/kg and the

rate of DEPB is 10%. Even if exporter achieves a rate of Rs. 40 FOB/kg, he would not be entitled to claim DEPB on Rs. 40/-as value cap restricts such entitlement at Rs. 30/kg.

DEPB

@ POSITIVE POINTS OF DEPB SCHEME

@The credit entitlement is expressed as a

percentage of FOB value and therefore it represents the amount of duty credit available for debit in Rupee terms.

@Since
DEPB

DEPB is not a licence but an instrument of duty credit, it is free of nexus with respect to item exported and item imported.

@ POSITIVE POINTS OF DEPB SCHEME @It is also possible that an exporter

of readymade garments gets his DEPB at a specified rate and sells it to another person who might import chemicals by using DEPB for debit of duty. Hence, acceptability of DEPB is higher compared to any other instrument.

@DEPB offers flexibility because it can be

utilized for debit of duty against any freely

permissible item.

DEPB

@ NEGATIVE POINTS OF DEPB SCHEME @Since calculation of DEPB rate is not

based on the actual customs duty lost, it may not be compatible with WTO rules.

@With increasing exports the amount

of DEPB also goes up. To this extent, the customs have to forego actual duty receipts in cash.

Corresponding Customs Notification

@89/2005-CUSTOMS
2005

dated 4th October,

Duty Drawback
Duty Drawback

@ Meaning & Scope

Duty Drawback in relation to the export of indigenously manufactured goods, means refund of duties paid on :-

@Raw materials, @Component parts, and @Packing materials.

consumed in the production and export thereof and now also on goods processed or on which any operation has been carried out in India. These duties may be duties of Customs paid on imported materials and / or duties of Central Excise paid on indigenous materials. Drawback is not admissible in respect of duty paid on goods exported under claim of rebate of duty in terms of Rule 18 of Central Excise Rules, 2002.

Duty Drawback

@ No Drawback where value addition is

Negative If the total foreign exchange spent on inputs used in the goods exported is more than the F.O.B. value of the exports, them no drawback will be paid. Drawback if Sale proceeds not realised within Time Limit Newly inserted rule 16A of the Customs & Central Excise Duties (Drawback) Rules, 1995 has made a provision for recovery of amount of drawback where export proceeds are not realised within the period allowed under the Foreign Exchange Regulation Act, 1973 including any extension of such period.

@ No

Duty Drawback

@ Drawback not Mandatory

Under Section 75 of the Customs Act, 1962, it is discretionary with the Central Government to allow drawback on goods manufactured in India and exported outside India. Therefore, it cannot be said that it is mandatory for the Government to grant drawback on all goods manufactured in India for export out of India. not Admissible if Cenvat

@ Drawback

Duty Drawback

Availed of In case where exporters has availed CENVAT credit under Rule of Cenvat Credit Rules, 2002, they will not get benefit of duty drawback on Central Excise Allocation.

@ Types of Drawback Rate Determination

@ All Industry Rate of Drawback

The one which is based upon determination of average incidence of duties suffered on inputs used in the manufacture of the product exported as manufactured generally, such rates of Drawback which are determined in terms of Rule 3 of Drawback Rules, 1995 are known as All industry Rates of Drawback.

Duty Drawback

@ Types of Drawback Rate Determination @ Brand Rate

The second provision seeks to give relief of actual amount of duties suffered on the inputs (not rebated/ relieved otherwise) used in the manufacture of export product of specified description/ characteristics of a particular manufacturer. This rate determination is known as Brand Rate

fixation.

Duty Drawback

@ Types of Drawback Rate Determination @ Special Brand Rate

Where any manufacturer/exporter finds that the All Industry Rate of Drawback fixed for any class of goods is less than 4/5th of the duties paid on the materials or components used in the production/manufacture of the goods he can make an application for fixation of an appropriate rate of duty drawback for his product of specified description/characteristic.

Duty Drawback

@ Procedure for fixation of Brand Rate

A new procedure has been introduced for fixation of brand rate via CBEC Circular No. 14 dtd. 06.03.2003.

Further amendments have been made to this circular via the following circulars:

@83-CBEC dtd. 18.09.2003 @89-CBEC dtd. 06.10.2003 @97-CBaEC dtd. 14.11.2003 @108-CBEC dtd. 17.12.2003
New Duty Rates Drawback

@The

New Drawback Rates have been notified vide Notification No. 68/2007-Cus. (NT) DTD. 16.07.2007.

@ As per Sr. No. 4 of this Notification,

the new rates announced will come into force on 18th day of July, 2007.

@The

rates which would be made applicable retrospectively w.e.f. 01.04.2007 are only for specified entries and not for every single entry covered in the Notification. List of these entries is provided in the above Notification [Sr. No. 4].

Export Promotion Capital Goods Scheme

Export Promotion Schemes [EPCG] Capital Goods

@This

scheme allows import of capital goods and spares at concessional rate of duty [@3% of Customs Duty] coupled with export obligation equivalent to 8 times the duty saved amount to be completed in 8

years.

EPCG

@In case CVD is paid in cash on imports

under EPCG, the incidence of CVD would not be taken for computation of net duty saved provided the same is not Cenvated.

EPCG

@ Imports under EPCG: @The capital goods, including @spares @tools, @jigs,

(including refurbished/reconditioned spares),

@fixtures, @dies and moulds. @Second hand capital goods without any
restriction on age may also be imported under the EPCG scheme.

EPCG

@ Imports under EPCG: @ Import of Spares:

Spares (including refurbished / reconditioned spares), tools, spare refractories and catalyst for existing plant and machinery (imported earlier, under EPCG or otherwise) is allowed to be imported subject to an export obligation equivalent to 8 times of duty saved to be fulfilled in 8 years reckoned from Authorisation issue date.

EPCG

@ Imports under EPCG: @Import of spares: @The application shall

contain list of plant/ machinery installed in the factory/ premises of applicant, duly certified by Chartered Engineer or Jurisdictional Central Excise Authorities.

@EPCG Authorisation must indicate the

following:

@Name of plant/machinery for which

spares are required.

@Value of duty saved allowed under

the Authorisation.

@Description
EPCG

of product to be exported with value of export obligation as per the Policy.

@ Imports under EPCG: @Import of spares: @The installation certificate

shall be submitted by the importer within a period of three years from the date of import. [provision inserted vide PN NO. 22/2007 (RE) DTD.17.07.2007].

@At

the time of final redemption of export obligation Authorisation holder will have to submit certificate from the Independent Chartered Engineer confirming the use of spares, tools, spare refractories and catalysts in the installed capital goods on the basis of stock & consumption register maintained by Authorisation holder.

EPCG

@ Eligibility:

The scheme covers manufacturer exporters

with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.

@ Conditions for import of Capital Goods:

Import of capital goods is subject to Actual User condition till the export obligation is completed.

EPCG

@Incentives for Fast Track Companies:

In cases where the Authorisation holder has fulfilled 75% or more of the export obligation under the Scheme (including average level of exports) in half or less than half the original export obligation period specified in the Authorisation, the remaining export obligation is condoned and the Authorisation redeemed by the

licensing authority concerned.

EPCG

@ Indigenous Sourcing of Capital Goods @A person holding an EPCG Authorisation may

source the capital goods from a domestic manufacturer instead of importing them.

@The

domestic manufacturer supplying capital goods to EPCG Authorisation holders are eligible for deemed export benefits Authorisation for critical components or raw materials or Deemed Export Drawback. and

@Advance

@Refund of terminal excise duty. @The domestic sourcing from EOU unit is also
permitted. Such supply by EOU will be counted

for the purpose of fulfillment of NFE.

EPCG

@ Fulfillment of Export Obligation: @Export Obligation is 8 times of duty saved

amount and it is to be fulfilled over a period of 8 years. maintenance of minimum export obligation has been dispensed with in the recent Annual Updation of FTP.

@ Block-wise

EPCG

@ Conditions

for Fulfillment of Export Obligation [EO]:

@Following exports is to be considered for

fulfillment of EO

@Export

obligation shall be fulfilled by export of goods, manufactured / services rendered by the applicant. [There is no corelation to be established]

@Production

co-relation with imported plant and machinery under EPCG under EPCG is no more required.

@Direct and third party exports. @Export proceeds to be realized in freely

convertible currency exports. except for deemed

EPCG

@ Conditions

for Fulfillment of Export Obligation [EO]:

@ Maintenance of Average:
The export obligation under the scheme has to be, over and above, the average level of exports achieved by Authorisation Holder in the preceding three licensing years. Such average would be the arithmetic mean of export performance in last 3 years. However, certain categories such as handicraft, handlooms, cottage and tiny industries, agriculture, etc. except services are exempted from maintenance of average as per the provision of Para 5.7.6 of HBP V1.

EPCG

@ Conditions

for Fulfillment of Export Obligation [EO]:

@Export obligation may also be fulfilled by

exports of group company which has EPCG Authorisation.

@However, in such cases, additional export

obligation imposed shall be over and above average exports achieved by unit / company / group company in preceding three years, despite exemption in Para 5.7.6 of HBP v1.

@For this purpose, average would be based

on previous export of goods and services put together.

EPCG

@ Conditions @Shipments

for Fulfillment of Export Obligation [EO]:

under Advance Authorisation, DFRC, DFIA, DEPB or Drawback scheme would also count for fulfillment of EPCG export obligation.

@The supplies made to the Oil and Gas sector

can be counted towards discharge of EO provided the Authorisation has been issued on or before 31.3.2000 and no deemed exports benefit has been claimed on such supplies.

EPCG

@ Conditions @Foreign

for Fulfillment of Export Obligation [EO]:

exchange counted towards fulfillment of export obligation (over and above the average) shall not be eligible for incentives / rewards under promotional measures / schemes.

@ Wherever

more than one EPCG authorisations are issued simultaneously or concurrently, fresh

EPCG

EPCG authorisation would build upon last average export obligation only, notwithstanding actual achievements.

@ Conditions @Royalty

for Fulfillment of Export Obligation [EO]:

payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.

@Payment received in rupee terms for port

handling services, in terms of Chapter 9 of FTP shall also be counted for export obligation discharge.

EPCG

@ Maintenance of Average Export under

EPCG:

Example: Let us say:

@Average Exports Rs. 20 crores @Duty saved amount Rs. 10 crores

The EO is in addition to maintaining the annual average for the same or similar product. If your average is Rs. 20 crore and duty saved amount is Rs. 10 crore your total obligation would be as under:

EPCG

@ Extension of Export Obligation Period: @1st Extension up to 2 years

@subject

to payment of composition fees of 2% of the total duty saved. OR

@an enhancement in EO imposed to the

extent of 10% of the total EO.

@2nd Extension up to 2 years

subject to condition that 50% of duty payable in proportion to the unfulfilled export obligation is paid by the Authorisation holder to the Customs authorities before an endorsement of extension is made on the EPCG Authorisation by the Regional authorities.

EPCG

@In

case the firm is still not able to complete the export obligation the duty already deposited will be deducted from the

total duty plus interest to be paid for EO default.

@Waiver of EO may be considered where,

because of force majeure or other unforeseen circumstances / reasons, exporter is unable to fulfill export obligation. Such requests shall be considered by a committee comprising representative(s) of DoC and DoR under DGFT. Decision of this committee shall be notified by DoR for implementation.

EPCG

@ Monitoring of Export Obligation: @Progress report on fulfillment of EO is

to be submitted by 30th April every year.

@Regional authority will issue partial EO

Fulfillment Certificate to the extent of

EPCG

EO fulfilled in a particular year.

@ Maintenance of Records
Every EPCG Authorisation holder will have to maintain, for a period of 3 years from the date of redemption, a true and proper account of the exports/supplies made and services rendered towards fulfillment of export obligation under the scheme.

Corresponding Customs Notification

@97/2004-CUSTOMS dated 17th

September, 2004.

Export Oriented Units [EOUs]

Export Oriented Units [EOUs]

@Units undertaking to export their entire

production of goods and services except permissible sales in Domestic Tariff Area (DTA) are known as Export Oriented Units (EOUs).

@EOUs are allowed to manufacture goods

including repair, re-making, reconditioning, re-engineering, and rendering of services wherever applicable.

Export Oriented Units [EOUs]

@Trading @Only

activity is however, permitted under EOU scheme.

not

project having a minimum investment of Rs.1 crore and above in plant and machinery shall be considered for

establishment under EOU scheme.

When one should set up an EOU

@Raw
imported.

materials/components

are

mainly

@New capital goods or second hand capital goods

are to be imported/purchased and installed.

@Where

the orientation of the company is towards export and not towards DTA sale as under the new policy DTA sale permission is limited to 50% of physical exports in value terms and therefore in order to enjoy the benefits of DTA the company must export physically.

@IT benefits for a New unit and IT benefits for

Conversion of DTA into EOU (as per CBDT Circular No. 1 Dtd. 06.01.2005) are to be considered.

@When hassle free operations are desired. (Since

there is no need of applying for Authorisations like Advance Authorisation etc.)

Benefits of EOUs

@Duty free import/procurement of @Raw materials @Capital goods @Second hand capital goods without
age limit Except items prohibited under ITC (HS)

@EOUs
Local EOU

operate under system of no licence. Hence, there is no need of making separate application for Advance Authorisations, which ultimately results into hassle free operations.

Procurement

under

@EOUs

are allowed to source the materials, capital goods etc. from local supplier.

@The procedure to be followed is laid down in

Excise Notification 22/2003-CE Dtd. 31.03.2003.

@EOU Unit will have to obtain CT-3 to procure

excise duty free materials from DTA.

@The

local supplier will get Deemed Export Benefits.

@Interest on delay in refund of CST would be

paid, as notified.

@New Appendix 14-I-O has been added.

It contains procedure in respect to outstanding export commitment under EPCG and Advance Authorisation Scheme.

Important Notifications

@ Notification

No. 52/2003-Cus. dtd.

31.03.2003 Exemption to specified goods imported or procure from Public/Private warehouse or from International exhibitions held in India by EOU for production or packaging or job work for export of goods and services No. 22/2006-Cus. dtd.

@ Notification

01.03.200 Additional duty in lieu of Sales Tax/VAT Exemption to specified goods

Important Notifications

@ Notification No. 22/2003-CE dtd.

31.03.2003

Exemption to goods brought into EOU units

@ Notification No. 23/2003-CE dtd. Deemed Exports

Deemed Exports
31.03.2003 Exemption to DTA Clearances of specified goods produced in EOU

@This

is a special facility provided for supplies of indigenous products which can be consumed ultimately in the production of goods to be exported. The conditions are that supplied goods as it is do not leave the country but get consumed in the process of manufacture, payment for which is received in Indian Rupees or in foreign exchange.

@The

categories eligible for deemed exports benefits are given in Para 8.2 of Foreign Trade Policy which are listed here below:

Important Provisions

@ Benefits: @These benefits are covered under Para 8.3

of Foreign Trade Policy which are as under:

@Advance
Authorization Requirement/DFIA.

Authorisation/Advance for Annual

or
b) Deemed Exports Drawback. c) Exemption from terminal excise duty where supplies are made against International Competitive Bidding. In other cases, refund of Terminal Excise duty will be

given.

Important Provisions

@As far as (a) and (b) are concerned, these are

mutually exclusive because if exemption from duty is claimed, refund cannot be claimed.

@Hence,

deemed exporter will either claim Advance Authorisation for Intermediate supply/ Advance Authorisation for deemed exports/ DFIA or deemed exports duty drawback.

@Deemed exports duty drawback can be claimed

on the basis of All Industry rate or on the basis of Brand rate following the procedure for fixation of brand rate.

@The deemed exports duty drawback is refunded

by DGFT.

Important Provisions

@As far as claiming of refund of Terminal Excise

Duty (TED) is concerned, the same principle applies.

@Terminal Excise Duty need not be paid by the

deemed exports supplier if the supplies are given to EOU units under exemption notification no. 22 dtd. 31.03.2003 (which is commonly known as CT-3 procedure) or when supplies are made to Advance Licence holder under excise notification no. 44 dtd. 26.06.2001.

@In all other cases, deemed export suppliers

have to pay Terminal Excise duty and claim refund, except when supplies are made against international competitive bidding.

@If the recipient units take CENVAT credit of

terminal excise duty, then also the Govt. will not grant refund.

Important Provisions

@In

case of deemed exports duty drawback as well as refund of terminal excise duty, both are to be claimed from licensing authorities alone.

@Deemed exports, per se, are monitored

by DGFT and Excise and not by Customs.

@In

case of EOU, Refund of Terminal Excise Duty and Duty Drawback must be claimed from the concerned Development Commissioner.

Supply to SEZ Developer/SEZ Unit

Supply to SEZ Developer/SEZ Unit

@ Rule 30 - Procedure for procurements from

the DTA:

@The supplies from DTA to a SEZ unit, or to

SEZ developers for their authorized operations inside a SEZ, may be treated as physical exports.

@Supplies from DTA to SEZ are exempted from

payment of any Central Excise duty under Rule 19 of Central Excise Rules, 2002. [Under Bond]

@Similarly, such supplies are eligible for claim

of rebate under Rule 18 of Central Excise Rules, 2002 subject to the fulfillment of conditions laid there under.

@ The provisions relating to exports under

Central Excise Act, 1944 and rules made there under may be applied, mutatismutandis, in case of procurement by SEZ units & SEZ developer from DTA for their authorized operations.

Contd Contd Contd

Supply to SEZ Developer/SEZ Unit

@ Procedure

in case where goods are procured from a DTA, who is not registered with the Central Excise authorities, or is a trader or merchant exporter: The above procedure will be applicable mutatis mutandis, except that the goods are to be brought to the SEZ under the cover of an Invoice and the ARE-1 will not be required.

@The SEZ Unit/Developer may also procure

goods from DTA without availing exemptions, drawbacks and concessions on the basis of invoice or transport documents, issued by the supplier; In this case, invoices or transport documents

are to be endorsed to the effect that no exemptions, drawbacks and concessions have been availed on the said supplies.

Thought for the Day Where ignorance is our master, there is no possibility of real peace

@Shri Dalai Lama

Thank You