AMENDMENTS IN FOREIGN TRADE POLICY 2004-09

The Union Minster of Commerce and Industry Shir Kamal Nath announced the annual supplement of Foreign Trade Policy 2009-10 on February 26, 2009. DGFT issued Public notice no. 151(RE-2008)/2004-09 dated February 26, 2009 to amend the Foreign Trade Policy 2004-09 and Handbook of Procedure (Vol-I) accordingly.

The major amendments and their impact are as follows:

I. Amendments in Chapter 3 of the Handbook of Procedures (Vol-I) i.e. Promotional schemes:

(1) Prior to amendment in the Policy, DEPB was available on FOB value declared on the shipping bill provided the said amount received by the company. The commission and discounts payable by the exporter was reduced from FOB value to arrive at the net FOB value on which DEPB was available.

Now it is provided that the amount of commission and discounts will not be deducted for arriving FOB value.

(2) DEPB issued prior to realization of export proceeds was not transferable. However, w.e.f. 1-4-09, the same has been made transferable. The FOB value will be determined as by converting the foreign currency amount into rupee on the date of let export order by adopting the customs exchange rate. Any excess/short realization will lead to adjustment as discussed in Para (II) below. However, if the short realization is on account of any expenditure authorized by RBI, DEPB will be granted on the amount which is used for the said expenditure provided approval from RBI is obtained for setting off of such amount. For example, the exporter has billed US$5000 for supply of goods and the exporter is required to pay a sum of US$250 as commission. The exporter has option either to get US$ 5000 from the importer and pay back US$250 to agent. If he does so, the exporter will get BRC for US$5000, there will be no difficulty in obtaining the DEPB for gross amount. However, if the importer deducted the amount of US$250 and remits the amount of only US$ 4750, the exporter shall get approval from RBI for permitting deduction of US$250 by the importer. In case such deduction is permitted by RBI the DEPB will be issued for the entire amount of US5000.-

II. Amendments in Chapter -4

1. Duty Entitlement Pass Book Scheme (DEPB) :
(a) As per para 4.44 the DEPB was transferable only after realization of foreign exchange was confirmed by the holder of the passbook. This provision have been amended. Henceforth, DEPB shall be issued transferable irrespective of the status of realisation of export proceeds.

(b) Monitoring of realization :
Para 4.45 governs the provision to monitor the realization of foreign exchange. As per the said para the DEPB holder had to pay the amount of excess entitlement granted to him in cash. The holder can now either debit the said amount from the valid DEPB or can adjusted against any of the pending entitlement claim of DEPB.

(c) Excess or Short Realization:
In case, the foreign exchange realized is less then the billed amount, the payable amount shall stand reduced proportionately to that extent.

In this case the realisation of FOB value script exceeds the FOB value of BRC. Hence the entitlement of the holder shall stand increased to excess amount of foreign exchange so realised. In this case, it can file a supplementary claim for such excess entitlement. The claim shall be filed with in 6 months from the date of realization.

(d) Submission of Bank Guarantee:
The applicant shall furnish a bank guarantee at the time of submission of application without Bank Realisation Certificate. The bank guarantee shall be discharged only after the export proceeds have not been realized by the applicant.

(e) Time period for submission of application:
Para 4.46 of handbook of procedures (HBP) provides the time period within which the application for DEPB should be submitted. This para has been amended. Cases where FOB realization in foreign exchange is higher in BRC then the value of FOB declared in shipping bill, the supplementary claim for enhance entitlement shall be filed within six (6) months from the date of realization.

(f) Provisional Shipment.
Para 4.47 deals with provisional shipment. In such cases time limit prescribed was 6 month from the date of release of the shipping bill or 6 month from the date of realization which ever is later. After the amendment the application is to be filed with in 6 months from the date of release of such shipping bill only.

(g) Amendment in ANF 4G:
The application form for DEPB is ANF 4G. There are many cases where the applicant off set the export proceeds against their outstanding liability with the foreign supplier. In such cases only net amount is realized and the same is appeared in the BRC. Hence, the invoice amount and the amount indicated in the BRC differ. In such cases the applicant will have to furnish copy of approval from RBI to off set the export proceeds.

2. Advance Authorization:
a) Export obligation period: As per para 4.22 export obligation shall be fulfilled within 24 month from date of authorisation. In view of ongoing recession the period to fulfill export obligation has been changed to 36 months.
It is not clear from the policy whether extension of Export Obligation Period of 36 months is permissible for the existing licenses or is permissible for the licenses which will be issued in future. One will have to wait for clarification in this respect.

b) DGFT has issued public notice no. 79 dated 2/01/2006 to lay down the procedure to grant discharge of export obligation certificate (EODC) for advance license issued prior to 1/04/2002. It was prescribed in the notification that a document evidencing non-availment of MODVAT/ CENVAT Credit should be annexed along with the application for redemption of license. However, this requirement was dispensed for export of non-dutiable products. After the amendment this dispensation has been extended for advance licenses issued under custom notification 80/95 dated 31/03/1995 which require payment of additional custom duty at the time of clearance of consignment against the license.

c) It is proposed that no hard copy of shipping bills shall be require to be filed for Export Obligation discharge from 1/04/2009. However, this facility shall be available only for shipments made from EDI ports.

3. Advance authorization and DFIA for intermediate supply:

Para 4.13 of HBP prescribed the procedure to be followed to obtain advance authorization or DFIA for intermediate supplies. As per the said para the intermediate supplier could directly sent the goods to the port from his factory premises. It is now clarified that shipping bill should be in name of ultimate supplier and name of the intermediate supplier should be endorsed on it. Hence, the shipping bill shall remain in the name of ultimate exporter.
Original copy of Shipping Bill is required to be annexed along with application of redemption of Advance Authorisation. Following details should be indicated on the Shipping bills:
1) File number/Authorisation number
2) Authorisation number of the Intermediate Supplier
3) Name of the Intermediate Supplier.

III. Amendment in Chapter-5 i.e. Export Promotion Capital Goods Scheme (EPCG):
Chapter 5 of the HBP provides various provisions for EPCG. Para 5.11.3 provides for 5% of proportionate reduction in average export obligation in cases where total exports in that sector/product has decline by more than 5%. This facility was available only for the year 07-08. However, due to on going recession it has been extended for the year 08-09. Hence, if exports for the year 07-08 have declined by more than 5% then the average export obligation for the year 08-09 shall stand reduced by 5%.

IV. Amendment in Chapter-8 i.e. Deemed Export Benefits :

Amendment in ANF 8 :

It is an application form to avail benefits prescribed for deemed export supplies.
(a) For refund of terminal excise duly ER-1/ER-3 duly attested by central excise along with invoices was to be submitted. However, now depending upon the benefit claimed following documents shall be required to be submitted:
(b) Para 2 of the guideline mentioned in the form provides documents to be submitted for refund claim of terminal excise duty.
i) Supply to EOU: Initially invoices attested by excise authority were required to be submitted. However, this requirement has been relaxed. Now ARE-3 or invoice duly certifies by bond authorities shall be required to be submitted.

ii) Para 2(e) provides for submission of original interstate invoices alongwith ER-1/ER-3. Subsequent to amendment this requirement has been relaxed. Henceforth, in substitution of copies of invoices, a statement of invoices attested by Central Excise Authorities can be submitted. This amendment has been made to aling the requirement of the documents with procedure prescribed in circular 15/2008 Cus. In order to facilitate the attestation the authority should be intimated within 48 hours of the receipt of the goods. In lieu of ER-1/ER-3 a statement confirming duty duly attested by Excise authorities can also be submitted.

iii) Similar amendment has been made for documents required to be furnished to avail the benefit of duty drawback at bank rate.

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