Circular No. 37/2002-Cus.

28th June, 2002

F. NO.305/22/2002-FTT

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Subject : New EXIM Policy 2002-2007 and Handbook of Procedures, 2002- 2007.  Amendments in the Provisions Relating to Gem & Jewellery Export Promotion Schemes- Reg.

I am directed to invite your attention to the new Export and Import Policy and Handbook of Procedures, 2002-2007 announced by Ministry of Commerce & Industry on 31st March 2002. The new five year Export and Import Policy and the Handbook of Procedures replace the old EXIM policy and Handbook of Procedures, Vol.I 1997-2002. In the new EXIM Policy & HOP, certain changes have been introduced in the provisions relating to Gem and Jewellery Export Promotion Schemes. To implement the changes, amendments have been made in the notifications governing duty free import of goods by Gem and Jewellery units vide notification No. 64/2002-Cus, dated 24-6-2002. Further, a fresh notification (No. 60/2002-Cus, dated 7-6-2002) has been issued for allowing import of pearl, precious and semi-precious stones against replenishment licences without payment of duty in supercession of notification No. 35/2001-Cus, dated 30-3-2001. A copy each of the notifications is enclosed for easy reference. Introduction of new EXIM Policy and HOP has also necessitated amendments in existing circulars/instructions and the same has been made wherever necessary. The salient features of the changes are explained below:

(i) Amendments in Exim Policy:

2. Under the previous Exim Policy and HOP, the diamond, gem and jewellery export promotion schemes were covered under Chapter 8. In the new EXIM Policy and Handbook of Procedures, Vol.I, 2002-07, gem and jewellery export promotion schemes have been shifted to Chapter 4.

3. In the existing notifications relating to gem & jewellery export promotion schemes, at several places, references have been made to various paragraphs of the old EXIM Policy and HOP. Consequent to the re-numbering of Chapters and Paragraphs in the new EXIM Policy & Handbook, these notifications have been amended suitably so as to correctly reflect the new Chapter and Paragraph numbers. Further, in these notifications, references have been made to the Export and Import Policy, 1997-2002 and Handbook of Procedures, 1997-2002. As the old Policy and HOP have been replaced by the new EXIM Policy and Handbook of Procedures, Vol.I, 2002-07, notification Nos. 41/99-Cus, dated 28-4-99; 42/99-Cus, dated 28-4-99; 56/2000-Cus, dated 5-5-2000, 57/2000-Cus, dated 8-5-2000 and 55/2001-Cus, dated 16-5-2001 have been suitably amended so as to align them with the new Exim Policy and HOP 2002-2007.

(ii) Paragraph 4.4.16 (para 8.13 under old Exim Policy): Diamond Imprest Licence (DIL)

4. Paragraph 8.3 of the previous Policy provided that Diamond Imprest Licence (DIL) may be issued, in advance for import of rough diamonds. It also provided that DIL may be issued for import of cut & polished diamonds for mixing with other cut & polished diamonds and export thereafter or for exports as it is. Such licences carry an export obligation. Now, this provision has been amended so as to allow import of semi-processed diamonds, half-cut diamonds and broken diamonds alongwith the cut & polished diamonds under DIL (Paragraph 4.4.16 of the new policy)

5. At present, notification No. 42/99-Cus dated 28-4-99 allows import of cut & polished diamonds and gemstones upto 5% of the FOB value of the preceding financial year’s export of cut&polished diamonds or studded jewellery without payment of duty subject to re-export of the same within a period of one year. The facility to import cut & polished diamonds is allowed only to status holders and actual users. The maximum size of diamond allowed to be imported under the notification has been fixed at one-fourth of a carat or less.

6. To implement the change in the Policy, notification No. 42/99-Cus, dated 28-4-1999 has been suitably amended so as to allow import of semi-processed, half cut and broken diamonds along with cut and polished diamonds against Diamond Imprest License issued under Paragraph 4.4.16 of the Exim Policy.

(iii) Export of Cut & Polished Diamonds for Certification /Grading and Re-import thereof

7. In the last EXIM Policy, in para 8.13(b)(now para 4.4.2 of new Policy), a new provision was made to allow gem & jewellery exporters with a track record of at least three years and having an annual average turnover of Rs.5 crore and above during the preceding three licensing years to export cut & polished diamonds each weighing 0.50 of a carat and above for the purpose of certification/grading by specified laboratories/agencies as mentioned in the said para and for re-import thereof without payment of duty. The diamonds so exported are to be re-imported within a period of three months. The diamonds would be exported subsequently as per the provisions of the Policy. At the time of the export of the diamonds for certification purposes, all the essential particulars necessary for establishing identity of the goods at the time of re-import are required to be furnished by the exporters.

8. A notification (No. 55/2001-Cus, dated 16-5-2001) has been issued to implement the above policy provision. Under new policy, this provision has been amended to allow authorised offices/ agencies of such institutes/laboratories to export cut & polished diamonds and re-import the same after certification or grading. To implement the changes in the Policy, notification No. 55/2001-Cus dated 6.5.2001 has been suitably amended

(iv) Abolition of Licenses for Import of Rough Diamonds

9. Hitherto, the exporters of Gem & Jewellery were allowed to import rough diamonds, pearl, precious & semi-precious stones without payment of duty against various licenses e.g. Diamond Imprest license, Bulk license, Gem Rep Licenses etc as specified in the Policy & HOP under notification No. 35/2001-Cus, dated 30-3-2001.

10. In the new Exim Policy, the following licenses for import of rough diamonds have been done away with.

  1. Replenishment license issued under, and in accordance with paragraph 8.2 of the Exim Policy;
  2. Replenishment licenses issued under and in accordance with the paragraph 8.37 of the EXIM Policy;
  3. Bulk licenses issued under and in accordance with the paragraph 8.10 of the EXIM Policy;
  4. Replenishment licence issued under and in accordance with paragraph 8.13(a) of the EXIM Policy read with paragraph 8.26 of the HOP;

11. Further, the import duty on rough diamonds has been reduced from 5% to Nil vide notification No. 37/2002-Cus, dated 11-4-2002. This means that now for import of rough diamonds, no exemption notification allowing duty free import against replenishment license is required.

12. Consequent to discontinuation of certain licenses in the New Exim Policy and HOP and abolition of duty on import of rough diamond, notification No. 35/2001-Cus, dated 30-3-2001 has been superceded and replaced by a fresh notification No. 64/2002-Cus dated 7-6-2002 so as to allow duty free import of raw pearl, natural or cultured and precious (other than rough diamonds) or semi-precious stones, unset & uncut against gem rep licences (para 4.4.13) and replenishment license (para 4.4.1) of the Exim Policy

(v) Exports through Exhibition /Export Promotion Tours /Export of Branded Jewellery –

13. Under paragraph 8.57 (a) (ii) of the HOP, 1997-2002, personal carriage of gold /silver/platinum jewellery, precious, semi-precious stones, beads and articles as samples upto US $ 1,00,000 (one lakh) for export promotion tours and temporary display/sale abroad was permitted with the approval of Gem&Jewellery Export Promotion Council subject to the condition that the exporter would bring back the jewellery/ goods or repatriate the sale proceeds within 45 days from the date of departure through normal banking channel. The said paragraph has been modified and the new paragraph 4.71.2 (a)(ii) of the HOP, 2002-2007 now specifically includes cut and polished diamonds in the category of goods allowed to be taken out through personal carriage for the purpose specified in the para.

14. Diamond falls in the category of precious stones. Therefore, technically speaking, personal carriage of diamonds is already allowed under the Policy. However, for the purpose of clarity, the same has been specifically mentioned in paragraph 4.17.2(a)(ii) of the HOP. Personal carriage of diamonds for export promotion tours may, therefore, be allowed. However, to establish the identity of goods, it may be ensured that the specifications such as size, shape, circumference, caratage (weight), colour, cut & height etc of the cut and polished diamonds would be declared by the exporter at the time of export so that the same could be matched at the time of re-import of the goods into the country.

(vi) Wastage Norms

15. Under paragraph, 8.28 of the HOP, 1997-2002, chains/bangles of gold /platinum /silver manufactured by a full-mechanized process were allowed wastage of 1.25%. The said paragraph has been modified and the new paragraph 4.56 of the HOP now allows the same wastage norm for any unstudded jewellery/articles of gold/ platinum /silver manufactured by a fully mechanized process. This means that any unstudded jewellery/articles manufactured by a fully mechanized process would be eligible for 1.25 per cent wastage or manufacturing loss.

(vii) Value Addition

16. Under paragraph 8.28 A of HOP, 1997-2002, the value addition prescribed for plain gold/silver/platinum jewellery articles and ornaments like Mangal Sutra containing black beads/imitation stones/ cubic zirconia etc. was 10%. This has been amended vide paragraph 4.56.1 of the HOP 2002-2007 so as to reduce the value addition norm from 10% to 7%.

17. Under paragraph 8.28 A of HOP, 1997-2002, the value addition norm for gold / platinum /silver unstudded chains and bangles manufactured by a fully mechanized process was 3%. The same value addition has been prescribed in the new HOP for all unstudded jewellery/articles manufactured by a fully mechanized process.

(viii) Replenishment Licence for Import of Consumables

18. Under the old HOP (paragraph 8.88), plain/studded jewellery items equal to 2.5% of FOB value of exports of preceding year was allowed to be imported on payment of applicable duty against a replenishment licence. This provision has been deleted in the new Handbook of Procedures 2002-2007 (paragraph 4.80 of the HOP).

(ix) Personal Carriage of Gem & Jewellery Export/Import Parcel

19. Under the previous HOP, foreign bound passengers were allowed to carry gems and jewellery export parcels in baggage from all EOU/EPZ/SEZ units and all firms in DTA through the airports in Delhi, Mumbai, Kolkata, Chennai & Bangalore. This provision has been modified and paragraphs 4.81 and 4.82 of the new HOP now allow personal carriage of gem and jewellery export and import parcels through Hyderabad and Jaipur Airport also. The Commissioners of the Customs/Excise, Hyderabad and Jaipur may kindly make suitable arrangements for implementation of this provision.

20. Wide publicity may be given to the above changes by issue of a Public Notice in this regard.

21. Difficulties, if any, faced in implementation of the above changes may be brought to the notice of the Board at an early date.

Kindly acknowledge receipt of this circular.

C. P. Goyal

Sr. Technical Officer (FTT)

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