The Customs
finally released the notification for the new Duty Free Import
Authorization (DFIA) scheme announced in the April 2006 Foreign Trade
Policy. With this, both the post export DFRC scheme and the pre export
Advance License scheme are subsumed under the DFIA with effect from 1
May 2006. (Exporters should note on their shipping bill that export is
under “DFIA scheme vide para 4.4.1 and para 4.4.2 of Foreign Trade
Policy 2006”. This will help them get the incentive and prevent the
hijacking of the shipping bill to another scheme). Once the export
obligation against duty free import of relevant raw materials is
completed, the DFIA can be transferred to any person. In fact, the DFIA
turns into a negotiable instrument and commands a premium in the market
which is related to the exemption of basic, countervailing duty of
excise and VAT, anti-dumping duty and safeguard duties. The DFIA is
thus an improvement over the earlier post export DFRC. The
transferability part is a step ahead of the pre export advance license
in the earlier system.
A close
reading of the customs notification and the Foreign Trade Policy shows
that the flexibility for 23 sensitive items has been removed in the
DFIA when compared with the erstwhile advance licensing scheme/DFRC
scheme. The import of sensitive goods such as alloy steel, bearings,
textiles fabrics and lining materials, perfumery compounds, non ferrous
metals, plastic resins must be exactly the same as that in the export
goods in terms of specifications, quality and technical
characteristics. This guide lines detract the scheme to some extent.
There is no close nexus specification for other material.
The DFIA will be popular with the traders who will provide the scrip to
the importers at a premium related to the duties on the main items in
the shopping list. Small and medium users who are not in the CENVAT
chain and thus pay the full duty on their inputs will use DFIA to save
duty. Exporters will find the DFIA instrument useful where the DEPB
scheme does not bear a rate for a particular item in the schedule or
where the rate is poor on account of very low value cap. The current
boom in the commodities has raised raw materials as well as final
product prices substantially but the value caps in the DEPB, which
determine the limits of the entitlement, are at the low rates at the
pre-boom phase.
There is another problem with the DFIA. After discounting export
quantity and value for the standard value addition of 20 percent, the
import authorization is further subjected to a ceiling of the lower of
the quantity and value parameter. Thus a particular discounted value
results in a very low quantity due to the high prices in the world
market. The DFIA is known by its earlier name of Quantity Based Advance
License (QBAL). The entitlement should be specified solely in quantity
terms only and the value should not be come into the picture at all.
The export trade is waiting for the revised DEPB and drawback schedule.
Even as the Budget has been cleared by Parliament and President long
time also and the Foreign Trade Policy too released more a month ago,
there is no signs of revised tables.
The Target Plus entitlements too are stuck with an unrealistic actual
user condition. Transferability on the lines of other similar schemes
will help the exporters realize the gain to truly rewarded exporters
for growth.
Follow rules please:
The CBEC has issued an instruction circular on 31 March, 2006 saying
that its ban on seizure of export goods is not being followed by the
field formation. It has reiterated that the circular should be applied
by all in a uniform manner and the compliance report should be sent to
the customs wing of the Board.
It
may be recalled that on 2nd August, the CBEC has said that export goods
charged with mis-declaration of quantity or value should be released
for export immediately on provisional basis pending
investigation/adjudication appeal proceedings. There should be no
detention to avoid congestion in the ports and demurrage. Only the
incentives on the disputed export consignment may be held back to till
the matter is decided. Only a bond, without security or bank guarantee
should be taken from the exporters. The bond should be equivalent to
the value of the export goods and the probable and penalty which may
fall upon the exporters.
The CBEC has also said its instructions on limiting the sampling on
export to five percent of the packages subject to a maximum of 20
packages at the customs clearance stage in the examination procedure
are not being followed. There is no examination for factory stuffed
goods or exports under pre shipping bill and only two percent sampling
on small value consignment where the incentive is less than rupees one
lakh. There is no examination where there is no claim to incentive.
The real test will come when the CBEC starts pulling up those customs
officers who have made a habit of harassing exporters. It is time add
this clause in the CBEC circulars.
