Circular No. 64/2003-Cus.

21st  July, 2003

F.No.605/142 /2002-DBK
Government of  India
Ministry of  Finance
Department of  Revenue

Sub:  Limit for payment of agency commission on exports  – reg.  

It has been observed that some Indian  exporters  appoint  agents  abroad  for  securing  their  export  contracts and  such  agents  are  paid  agency commission  as a  percentage  of the  f.o.b.  value  by the  Indian  exporters.   For various  Export  Promotion Schemes including  Duty  Drawback  and  DEPB, the  f.o.b.  value  is  reckoned  for  granting  the  export  benefits.  In terms of  the  Policy  Circular  No.55(RE-98) 98-99, dated  10.12.98 of  the  Director  General of  Foreign  Trade,  it  has  been   prescribed that  the  foreign agent’s  commission upto the specified limit prescribed by the Reserve Bank of India be  included  in f.o.b. value  for  calculating  DEPB  entitlement.    In this regard the  Department of  Revenue   permits  duty   drawback  benefits to  the  exporters on the  element of  agency commission.

2. Customs  field formations  so far  have  been  permitting  agency  commission  to the  extent  of  12.5% of  the  f.o.b.  value  by  following  RBI’s  Circular  No.AD (MA Service) 17, dated  19.5.1999.

3. However, of late, instances have been noticed where the Indian exporters are paying agency commission much higher than the above limit, which in some cases has exceeded even 50% of the f.o.b. value.  Doubts have arisen  in the  minds of the field  officers  whether  in the wake  of  Circular  No. 12,  dated  9.9.2000,  issued by the  RBI,  the  limit  of 12.5% of  the  f.o.b.  value regarding  payment  of  agency  commission is superseded.

 4. The  issue  has  been examined  in the Board.  It is observed  that  RBI  has  not  revised  its  earlier  instructions as regards  the  limit  of  payment of  agency  commission.  Therefore,  it is clarified  that  the field formations  may continue  to  permit  export  benefits on f.o.b.  value without  deducting  agency  commission  if  such  commission  is  upto the limit  of  12.5% of  f.o.b.  value.    Agency  commission  exceeding   this  limit  should  be  deducted  from the  f.o.b.  value  for  granting  export  benefits  under  Drawback/DEPB/Advance Licences /DFRC  Schemes.

5. Suitable standing orders for guidance of the staff may kindly be issued accordingly.     

6. The receipt of this Circular may kindly be acknowledged.

S.S. Renjhen
Joint Secretary to the Government of India

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