Workshop on Foreign Trade Policy

1
Workshop on Foreign Trade Policy
2
Agenda

• Co-relation between the Departments
• Various Export Promotion Schemes
• General Provisions regarding Imports and Exports
• Promotional Measures
• Star Export Houses
• Focus Market Scheme
• Focus Product Scheme
• Target Plus Scheme
• Duty Exemption/Remission Scheme
• Advance Authorisation including Advance
  Authorisation for Annual requirement
• Duty Free Import Authorisation
• Duty Entitlement Passbook Scheme

3
Agenda

• Various Export Promotion Schemes
• Export Promotion Capital Goods Schemes EPCG
• 100 Export Oriented Unit EOU.
• Deemed Exports
• Special Economic Zones

4
Correlation Between the Departments
5
Ministry of Commerce

• DGFT
• Foreign Trade Policy
• Foreign Trade (Development and Regulation) Act,
  1992
• 1) Foreign Trade Policy
• 2) Handbook of Procedures Vol.1
• 3) ITC (HS) Classification of Export and Import
  Items
• 4) Handbook of Procedures Input-Output Norms
  Vol.2
• 5) Schedule DEPB Rates
• Tools Notification, Public Notice, Policy
  Circular, ALC Circular and Trade Notice

6
Ministry of Finance

• Customs Excise
• Validity of Imports and Exports Export
• Collection of Duty Under Bond -
  Exemption
• Inspection and Supervision Rebate of
  Excise Duty
• of Cargo Monitoring Factory Stuffed
  Container
• Import
• Monitoring Cenvat
• Governing Acts and Laws Governing Acts and Laws
• 1) Customs Act, 1962 1) Central
  Excise Act, 1944
• 2) Customs Tariff Act, 1975 2) Central Excise
  Tariff Act, 1985
• 3) Customs Law Manual 3) Central Excise Law
  Manual
• Tools Notification, Tools Notification,
• Public Notice Central Excise Circular
• Customs Circular, General Exemption
  Notification
• General Exemption Notification

7
RBI

• Monitoring Forex
• Inflow - Exports
• Outflow - Imports
• 1) FEMA 1999
• 2) Exchange Management Manual
• Tools
• Master Circulars
• FEMA Notification
• A.P. (DIR. Srs.) Circular

8
General Provisions related Imports and Exports
9
Revalidation of Import/Export Licence
Certificate/Authorisation/Permissions

• Licence/certificate/Authorisation/permissions can
  be revalidated for a period of six months from
  the date of expiry of validity period.
• No revalidation is allowed to transferable
  Authorisation unless the same is expired while in
  the custody of Customs Authority/Regional
  Authority

10
Duplicate Copies of Export-Import
Licence/Certificate/Authorisation/ Permissions/
CCPs

• In case of loss of Licence/Authorisation, an
  application for grant of a duplicate copy thereof
  can be made along with a copy of an affidavit, as
  given in Appendix-24, to the Regional Authority
  which has issued the original licence/
  Authorisation.

11
Duplicate Copies of Export-Import
Licence/Certificate/Authorisation/ Permissions/
CCPs

• The following documents are to be submitted along
  with the Application
• An application with a fee equivalent to 10 of
  duty saved or duty credit.
• A copy of FIR reporting the loss.
• A copy of the original affidavit on notorised
  stamp paper.
• Indemnity bond on a stamp paper undertaking to
  indemnify the revenue loss to the Government
  which may be caused on account of issue of
  duplicate licenses covering the duty saved/ duty
  credit amount.

12
Duplicate Copies of Export-Import
Licence/Certificate/Authorisation/ Permissions/
CCPs

• The validity of duplicate licence/ Authorisation
  shall be co-terminus with the original license.
  No request will be entertained if the validity of
  the original licence/Authorisation has expired.
• However, in case when DEPB, scrips issued under
  Focus Market scheme/scrips issued under Focus
  Product scheme/Transferable DFIA is lost by
  Customs/Regional Authority, duplicate licence/
  Authorisation/ can be issued for a validity of
  six months.

13
Duplicate Copies of Export-Import
Licence/Certificate/Authorisation/ Permissions/
CCPs

• However, in the case of loss of DEPB/scrips
  issued under Focus Market scheme/scrips issued
  under Focus Product scheme/Transferable DFIA not
  involving either the Customs or the Regional
  Authorities, the duplicate issued would have a
  validity equivalent to the balance period of
  validity of the original on the date of
  application for the duplicate.

14
Execution of Bank Guarantee and LUT

• In cases of direct import before clearance of
  goods through customs, the licence/ Authorisation
  holder shall execute a legal undertaking
  (LUT)/Bank Guarantee (BG) with the customs
  authorities in the manner as prescribed by them.
• Regional Authority will endorse the following
  condition on the licence/ Authorisation
• Bank Guarantee/ LUT as applicable to be
  executed as per relevant Customs Notification/
  Circular

15
Execution of Bank Guarantee and LUT

• In case of direct import the authorisation holder
  will have to follow Customs Circular No. 58/2004
  dtd. 21/10/2004 as amended vide Customs Circular
  No. 49/2005 dtd. 29/11/2005.
• In case of indigenous sourcing the norms of
  BG/LUT is given in the Para 2.20 of HBP.

16
Promotional Measures
17
Star Export House

• Export Performance based Scheme.
• Merchant, Manufacturer, Service Provider, EOUs,
  EHTPs, STPs, BTPs, SEZs, AEZs can apply for Star
  Export House Certificate.
• The applicant has to make application depending
  on his total FOB/FOR export performance during
  the current plus the previous three years. The
  criteria is

Category Performance (Rupees in Crores)
One Star Export House 15
Two Star Export House 100
Three Star Export House 500
Four Star Export House 1500
Five Star Export House 5000
18
Star Export House

• A Star Export House shall be eligible for the
  following facilities
• Authorisation/ Licence/ certificate/ permissions
  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. The remittance, however,
  would continue to be received through banking
  channels

19
Star Export House

• 100 retention of foreign exchange in EEFC
  account
• Enhancement in normal repatriation period from
  180 days to 360 days
• Exemption from furnishing of Bank Guarantee in
  Schemes under this Policy.
• Two Star Export Houses and above shall be
  permitted to establish Export Warehouses, as per
  the guidelines issued by Department of Revenue in
  this regard.

20
Focus Market Scheme

• Introduced in the Foreign Trade Policy 2006-2007
  Annual Updation.
• Export of all products to the notified countries.
• Entitlement 2.5 of the FOB value of exports.
• List of Countries notified vide Public Notice No.
  19 Dtd. 13.06.2006. This covers Latin American
  Countries and African Countries. However, South
  Africa and Brazil are not covered.

21
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Sr. No. Focus Market Code Country Code Country
Countries in Latin American Block Countries in Latin American Block Countries in Latin American Block Countries in Latin American Block
1 L 001 015 ARGENTINA
2 L 002 039 BOLIVIA
3 L 003 073 CHILE
4 L 004 109 ECUADOR
5 L 005 317 PARAGUAY
6 L 006 319 PERU
7 L 007 427 URUGUAY
8 L 008 433 VENEZUELA
22
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Countries in African Block Countries in African Block Countries in African Block Countries in African Block
9 A 001 011 ANGOLA
10 A 002 035 BENIN
11 A 003 041 BOTSWANA
12 A 004 050 BURKINA FASO
13 A 005 053 BURUNDI
14 A 006 057 CAMEROON
15 A 007 061 CANARY IS
16 A 008 063 CAPE VERDE IS
17 A 009 067 C AFRI REP
18 A 010 069 CHAD
19 A 011 085 COMOROS
20 A 012 087 CONGO P REP
23
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Countries in African Block
21 A 013 115 ETHIOPIA
22 A 014 116 ERITREA
23 A 015 117 EQUTL GUINEA
24 A 016 135 FR S ANT TR
25 A 017 141 GABON
26 A 018 143 GAMBIA
27 A 019 167 GUINEA
28 A 020 169 GUINEA BISSAU
29 A 021 199 COTE D' IVOIRE
30 A 022 227 LESOTHO
24
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Countries in African Block
31 A 023 229 LIBERIA
32 A 024 231 LIBYA
33 A 025 241 MADAGASCAR
34 A 026 243 MALAWI
35 A 027 249 MALI
36 A 028 255 MAURITANIA
37 A 029 257 MAURITIUS
38 A 030 265 MOROCCO
39 A 031 267 MOZAMBIQUE
40 A 032 269 NAMIBIA
25
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Countries in African Block
41 A 033 289 NIGER
42 A 034 339 REUNION
43 A 035 345 RWANDA
44 A 036 347 SAHARWI A.DM RP
45 A 037 349 SAO TOME
46 A 038 353 SENEGAL
47 A 039 355 SEYCHELLES
48 A 040 357 SIERRA LEONE
49 A 041 363 SOMALIA
50 A 042 371 ST HELENA
26
APPENDIX 37C HANDBOOK OF PROCEDURES VOL. I
Countries in African Block
51 A 043 385 SWAZILAND
52 A 044 399 TOGO
53 A 045 407 TUNISIA
54 A 046 417 UGANDA
55 A 047 459 CONGO D. REP.
56 A 048 461 ZAMBIA
57 A 049 463 ZIMBABWE
Note The export performance of notified markets under Para 3.9.2.1 of Policy shall be regularly reviewed and the list of countries in Appendix 37 C may be modified from time to time, in terms of Para 3.9.5 of the Policy. Note The export performance of notified markets under Para 3.9.2.1 of Policy shall be regularly reviewed and the list of countries in Appendix 37 C may be modified from time to time, in terms of Para 3.9.5 of the Policy. Note The export performance of notified markets under Para 3.9.2.1 of Policy shall be regularly reviewed and the list of countries in Appendix 37 C may be modified from time to time, in terms of Para 3.9.5 of the Policy. Note The export performance of notified markets under Para 3.9.2.1 of Policy shall be regularly reviewed and the list of countries in Appendix 37 C may be modified from time to time, in terms of Para 3.9.5 of the Policy.
27
Target Plus Scheme

• Star Export Houses entitled for a duty credit
  based on incremental exports
• Benefit is allowed for the year 2004-2005 only
  for Petroleum Products this scheme is
  discontinued with retrospective effect for the
  year 05-06 vide NTF. NO. 48/2005, DT. 20/02/2006.
• Non-transferable, however, can be used for group
  companies.
• Allows import of freely permissible items and
  capital goods subject to Actual User Condition.

28
Duty Exemption/ Remission Scheme
29
Duty Exemption Scheme

• The Duty Exemption Scheme enables duty free
  import of inputs required for export production.
• Duty Exemption Scheme consists of
• Advance Authorisation Scheme
• Duty Free Import Authorisation Scheme DFIA

30
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.

31
Advance Authorisation
32
Advance Authorisation

• Based on SION or Adhoc Norms
• Exemption from payment of
• Basic Customs Duty
• Additional Customs Duty
• Education Cess
• Anti-dumping Duty if any
• Safeguard Duty if any
• However, the imports for supplies covered under
  paragraph 8.2 (i) projects funded by UN
  agencies (j) nuclear power projects through
  competitive bidding will not be exempted from
  the payment of applicable anti-dumping and
  safeguard duty, if any.

33
Advance Authorisation

• Exemption from payment of Special CVD
• In terms of notification No. 20/2006-Cus. dated
  1.3.2006 (vide Sr.No.1 of the table to the said
  notification), all goods which are exempt from
  basic customs duty and additional duty leviable
  under Section 3(1) of CTA, 1975 are exempt from
  the 4 special CVD. Hence payment of Special CVD
  is also exempted under Advance Authorisation.
• clarified vide Customs Circular No. 18/2006
  dtd. 15.06.2006

34
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) to the main contractor for supply of goods
  to the categories mentioned in paragraph 8.2 (b),
  (c), (d), (e), (f), (g), (i) and (j) of the
  Policy for import of inputs required in the
  manufacture of goods.
• 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
• Positive Value Addition

35
Advance Authorisation

• Transferability Advance Authorisation and/or
  materials imported there under shall not be
  transferable even after completion of export
  obligation. However, the Authorisation Holder
  will have the option to dispose off the product
  manufactured out of the duty free inputs once the
  export obligation is completed.
• Validity 24 months.
• Revalidation One revalidation for 6 month is
  granted.
• Value Addition Advance Authorisation shall be
  issued with positive value addition.
• Import through registered port as mentioned in
  Para 4.19 of HBP. Export can take place from any
  port.

36
Advance Authorisation

• Standardization of Adhoc Norms
• An application may be made by the manufacturer
  exporter or merchant exporter tied to supporting
  manufacturer, duly filled in with complete data.
• applications shall be made to the Norms Committee
  (NC) in the form given in Aayaat Niryaat Form.
• Import of fuel may also be allowed under SION by
  NC subject to the following -
• (a) The facility of import of fuel shall be
  allowed only to the manufacturer having captive
  power plant.

37
Advance Authorisation

• Standardization of Adhoc Norms
• (b) In cases where SION specifically allows
  fuel, the same shall be permitted under advance
  authorisation. However, if fuel is not covered
  specifically under SION, it may be allowed as per
  general fuel Policy for products covered under
  SION or under paragraph 4.7 of HBP.
• (c) Fuel should be allowed only against an
  actual user authorisation. However in case of
  transferable DFIA/DFRC, fuel can only be
  transferred to agencies granted marketing rights
  by the Ministry of Petroleum and Natural Gas.
• (d) Even where fuel is included as an input
  under SION, it shall not be taken into account
  while fixing the DEPB rate for such products
  against which fuel has been allowed as an input.

38
Advance Authorisation

• Standardization of Adhoc Norms
• (e) The applications of fixation for fuel
  entitlement for new sectors and modification of
  the existing entitlement as per the General Note
  for Fuel in the Handbook of Procedures (Vol.2)
  would be made to the Norms Committee along with
  the requisite data in Aayaat Niryaat Form
  pertaining to the Data Sheet for Fuel Rate.
• The Advance Authorisation holders wishing to
  procure the fuel indigenously may apply for an
  Advance Release Order or Back to Back Inland
  Letter of Credit.

39
Advance Authorisation

• Standardization of Adhoc Norms
• The indigenous supplier supplying fuel shall be
  entitled for deemed export benefits given in
  paragraph 8.3(a), (b) (c) of the Policy, as the
  case may be. In case the indigenous supplier is
  not willing to avail of deemed exports benefits
  under such supplies of fuel to the Advance
  Authorisation holder, he may issue a disclaimer
  (along with his IEC Number enclosed on it) on the
  basis of which the Advance Authorisation holder
  can avail of the deemed export benefits as per
  procedure given in Chapter 8 of this Handbook.
• Note All oil Companies can issue Disclaimer
  and recipient can claim Deemed Export benefits.
  Quoting of IEC no. on Disclaimer is mandatory.

40
Advance Authorisation

• Financial Powers for Petroleum and Petrochemical
  Products
• Regional Authority if CIF value of
  authorisation is less then 500 crores.
• Regional Authorities on the recommendation of
  Norms Committee if CIF value of authorisation
  is 500 crores or above.

41
Advance Authorisation

• Port of Registration
• To facilitate accounting of duties exempted,
  accounts need to be maintained at a particular
  port. The port of registration, therefore, plays
  a very vital role.
• In application, one has to give specific port
  where Authorisation would be registered. The
  authorisation holder is permitted to import only
  through registered port unless permission is
  taken from the Customs.
• Exports, however, can take place from any port.

42
Advance Authorisation

• Port of Registration
• If imports are desired from any other port than
  the port of registration, authorisation holder
  can make an application for Telegraphic Release
  Advice (TRA) to the customs authorities at the
  port of registration.
• The list of such seaports, airports, ICDs, LCSs
  is given in Para 4.19 of HBP.

43
Advance Authorisation

• Export Obligation
• Export obligation EO has two limiting factors
  
• quantity and
• value.
• Hence, export obligation is treated as complete
  only when quantity stated is physically exported
  and value stated is actually realized. Any
  shortfall is required to be regularized by paying
  applicable duty plus interest on unutilised
  inputs and penalty if any.

44
Advance Authorisation

• Fulfillment of Export Obligation EO
• Export obligation is to be fulfilled by the
  Advance Authorisation Holder.
• Where merchant exporter is authorisation holder
  and (supporting manufacturer is endorsed on the
  authorisation), export obligation is his
  responsibility.
• Once the export obligation is fulfilled in terms
  of value and quantity both, the licence holder
  needs to submit documents as per Para 4.25 of
  HBP in support of having fulfilled the EO.

45
Advance Authorisation

• For Physical Exports
• (i) Bank Certificate of Exports and Realisation
  in the form given at Appendix-22A or Appendix 22B
  or Foreign Inward Remittance Certificate (FIRC)
  in the case of direct negotiation of documents.
  Realisation is not insisted upon if the shipments
  are made against
• (a) confirmed irrevocable letter of credit or
• (b) bill of exchange is unconditionally
  Avalised/ Co-Accepted/ Guaranteed by a bank and
  the same is confirmed by the exporters bank.
• In above mentioned cases, column 14/15 of
  Appendix- 22A must be certified by the Bank.

Contd..
46
Advance Authorisation

• For Physical Exports
• (ii) EP copy of the shipping bill(s) containing
  details of shipment effected or bill of export in
  case of export to SEZ.(iii) A statement of
  exports giving details of shipping bill wise
  exports indicating the shipping bill number,
  date, FOB value as per shipping bill and
  description of export product.(iv) A statement
  of imports indicating bill of entry wise item of
  imports, quantity of imports and its CIF value.

47
Advance Authorisation

• For Deemed Exports
• (i) A copy of the invoice or a statement of
  invoices duly signed by the unit receiving the
  material and their jurisdictional excise
  authorities certifying the item of supply, its
  quantity, value and date of such supply.
• However in case of supply of items which are non
  excisable or supply of excisable items to a unit
  producing non excisable product(s), a project
  authority certificate (PAC) certifying quantity,
  value and date of supply would be acceptable in
  lieu of excise certification.
• However, in respect of supplies to EOU, the
  supplier has the additional option to furnish a
  copy of CT-3/ARE-3 duly signed by the
  jurisdictional excise authorities/Bond Officer
  certifying the item of supply, quantity, value
  and date of such supply in lieu of the excise
  attested invoice (s) or statement of invoices as
  given above.

Contd..
48
Advance Authorisation

• For Deemed Exports
• (ii) Payment certificate from the project
  authority in the form given in Appendix-22C. In
  the case of supplies to EOUs, deemed exports
  (including Intermediate Supplies), documentary
  evidence from the bank substantiating the
  realisation of proceeds from the Authorisation
  holder or EOUs or the Project Authority, as the
  case may be, through the normal banking channel,
  shall be furnished in the form given at
  Appendix-22B. However realisation of proceeds
  shall not be insisted upon if the shipments are
  made against
• (a) confirmed irrevocable inland letter of
  credit or
• (b) inland bill of exchange is unconditionally
  Avalised/Co- Accepted/ Guaranteed by a bank and
  the same is confirmed by the exporters bank.
• The stipulations at (a) or (b) above must be
  certified by the bank in column 5/6/7 of
  Appendix- 22B.

Contd..
49
Advance Authorisation

• For Deemed Exports
• (iii) A statement of supplies giving details of
  supply invoices and indicating the invoice
  number, date, FOR value as per invoices and
  description of product.(iv) A statement of
  imports indicating bill of entry wise item of
  imports, quantity of imports and its CIF value.

Contd..
50
Advance Authorisation

• Extension of Export Obligation Period
• The period of fulfillment of export obligation
  under an Advance Authorisation will commence from
  the date of issuance of licence.
• The export obligation shall be fulfilled within
  aperiod of 24 months except in the case of
  supplies to the projects/turnkey projects in
  India/abroad under deemed exports category where
  the export obligation must be fulfilled during
  the contracted duration of execution of the
  project/ turnkey project.

51
Advance Authorisation

• Extension of Export Obligation Period
• Application in Aayaat Niryaat Form Sub section
  XI
• 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 saved on
  all the unutilized imported items as per
  authorisation.
• The composition fee on the duty saved on all the
  unutilized imported items is to be computed with
  reference to the actual exports and imports made
  by the Authorisation holder.

Contd..
52
Advance Authorisation

• Extension of Export Obligation Period
• The Customs may allow provisional clearance of
  export consignment as and when the Authorisation
  holder produces documentary evidence of having
  applied for EO extension to the concerned
  Regional Authority.

53
Advance Authorisation

• 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.

54
Advance Authorisation

• Facility of Clubbing
• The Regional Authority, under whose jurisdiction
  the authorisation is issued or NC in other cases,
  can consider a request for clubbing all imports
  and exports of more than one Advance
  Authorisation.
• Provided
• The imported inputs are properly accounted for as
  per norms.
• The value addition of the authorisations so
  clubbed shall be the average of the minimum value
  addition prescribed in the Policy and the
  Procedure laid thereunder, imposed on individual
  authorisations.
• Upon clubbing, the authorisations can, for all
  purposes, be deemed to be one authorisation.

55
Advance Authorisation

• Facility of Clubbing
• The accountability of imports and exports shall
  be restricted in relation to the individual
  categories of Advance Authorisations including
  Advance Authorisation for annual requirements
  issued under this scheme.
• The facility is available only for Advance
  Authorisation(s) where there is shortfall in
  fulfillment of export obligation, and which is
  sought to be clubbed with an Advance
  Authorisation(s) which is valid for imports.

56
Advance Authorisation

• Facility of Clubbing
• For expired authorisation(s) with EO shortfall
  and which is sought to be clubbed with an Advance
  Authorisation(s) which is valid for imports, the
  applicant will have to pay the composition fee
  for E.O. period extension
• In such cases, the exports effected beyond the
  E.O. extension period after the issuance of the
  earliest authorisation can not be considered for
  clubbing.
• Clubbing of all expired licences may also be
  permitted provided all the expired licences have
  been issued during the Exim Policy period
  1992-1997 1997-2002 i.e., 1st April, 1992 to
  31st March, 2002.
• However clubbing of erstwhile Value Based Advance
  licences is not allowed.

57
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.
• One to Five Star Export House can be entitled for
  the Advance Authorisation for annual requirement.
  
• All other categories of exporters having past
  export performance (in the preceding two years)
  shall also be entitled for the Advance
  Authorisation for annual requirement.
• A merchant exporter can also be issued the
  Advance Authorisation for Annual Requirement
  provided they agree to the endorsement of the
  name(s) of the supporting manufacturer(s) on the
  relevant Authorisation.

58
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.

59
Indigenous procurement against the Authorisation

• Many times the input covered by the Authorisation
  is also available indigenously. In such cases it
  would be wise to examine whether indigenous
  procurement against the Authorisation is
  cost-effective and commercially viable. There
  are a number of reasons for opting out in favour
  of indigenous procurement. Some of them are as
  under
• Shorter delivery time
• Logistical advantages
• Financial ease (local supplier may not insist on
  letter of credit)

60
Indigenous procurement against the Authorisation

• 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 is
  comparative ease to inspect the cargo)
• Indigenous procurement is free of currency risk
  since payment can be made in Indian Rupees.

61
Indigenous procurement against the Authorisation

• Owing to these reasons, Authorisation holder may
  look to procure goods indigenously. To
  facilitate such procurement, following
  instruments are available
• Advance Authorisation for Intermediate Supplies
• Advance Authorisation for Deemed Exports
• Advance Release Order
• Back-to-Back Letter of Credit

62
Advance Authorisation for Intermediate Supplies

• Original Advance Authorisation is made invalid
  for direct import of one or more inputs and
  invalidation letter is issued in favour of local
  supplier.
• The supply price would be a negotiated price as
  the indigenous supplier is entitled to obtain an
  Advance Authorisation against such invalidation
  letter.
• This in turn allows the indigenous supplier to
  claim duty-free inputs thereby neutralising the
  duty component for such imports.

63
Advance Authorisation for Intermediate Supplies

• Indigenous supplier can supply the goods without
  payment of excise duty following the
  conditionalities of excise notification no.
  44-CE(NT) dtd. 26.06.200.
• In this case the indigenous supplier is entitled
  to duty free imports of inputs and clearance of
  goods without payment of excise duty under bond.

64
Advance Authorisation for Deemed Exports

• Advance Authorisation for Deemed Exports offer
  benefits similar to those of Advance
  Authorisation for Intermediate Supplies. The
  only difference is that the recipient of the
  goods is not an Advance Authorisation holder.
• Instead the recipient is an EOU/SEZ unit or
  project authority.
• The inputs required by the local supplier can be
  imported duty free.

65
Advance Authorisation for Deemed Exports

• When local supplier supplies the goods
  indigenously, he may not be able to execute a
  bond for supply purposes without payment of
  excise duty particularly in respect of projects
  which are not registered under excise.
• In such cases the holder of Advance Authorisation
  for Deemed Exports can pay Terminal Excise Duty
  (TED) and ask for refund from DGFT office. As
  per the provisions of Foreign Trade Policy,
  excise duty exemption is available if goods are
  supplied against International Competitive
  Bidding.

66
Advance Release Order (ARO)

• ARO is useful in case where indigenous supplier
  do not want to import his inputs.
• The indigenous supplier is entitled to Deemed
  Exports Drawback in lieu of duty free import of
  inputs.
• For this purpose the original Advance Licence is
  invalidated for direct imports and a document
  called Advance Release Order is issued to the
  local supplier.
• The purpose of ARO is to help the indigenous
  supplier claim Deemed Exports Duty Drawback and
  refund of Terminal Excise Duty.

67
Back to Back Letter of Credit

• Back to Back Letter of Credit is similar in
  operation. The only difference is ARO is issued
  by Regional Authority whereas Back to Back Letter
  of Credit is issued by the Bank directly making
  and endorsement on the Authorisation copy towards
  invalidation of direct imports.
• Before opening the LC, the bank will ensure that
  the necessary BG / LUT has been executed by the
  Advance Authorisation holder and an endorsement
  to that effect has been made on the
  Authorisation.

68
Back to Back Letter of Credit

• The non negotiable copy of inland LC together
  with the photocopy of the Advance Authorisation
  duly carrying endorsements made by the bank shall
  be sufficient for the indigenous supplier to
  claim deemed export benefits.
• LC for Advance Authorisation shall be entitled to
  benefits of Deemed Export Drawback and Refund of
  Terminal Excise duty.

69
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
  indicating
• the shipping bill number(s),
• date(s),
• FOB value in Indian rupees as per shipping
  bill(s) and
• description of export product
• to the Customs Authority at the port of
  registration.

70
Advance Authorisation

• Redemption
• 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.

71
Advance Authorisation

• Redemption
• After verification, Customs will discharge BG/LUT
  within 30 days of issuance of EODC/bond waiver by
  the Regional Authority.
• The Regional Authority can also take action
  against the Authorisation holder in case of
  non-submission of Appendix 23, or for any
  misrepresentation, misdeclaration and default
  detected subsequently in the details declared and
  furnished in Appendix 23. An endorsement to this
  effect will be made by the Regional Authority in
  the redemption certificate.

72
Advance Authorisation

• Maintenance of Proper Accounts
• 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.
• Appendix 23 is to be submitted at the beginning
  of each licensing year for all those
  Authorisations which have been redeemed in the
  previous licensing year.
• These records in Appendix 23 are mandatory to be
  submitted for authorisations issued on or after
  13-05-2005. This does not however mean that you
  are not required to maintain details for licences
  issued prior to 13.05.2005.
• Records is to be preserved for a period of
  atleast 3 years from the date of redemption.

73
Checklist

• WHILE PREPARATION OF APPLICATION
• Whether product is covered under SIONs
• Product group and Sr. No.
• Application for ad-hoc norms (Only in case of
  Advance Authorisation)
• Input-output ratio (quantity required per unit of
  resultant product)
• Quantity and value of resultant products / inputs
• Port of registration
• Value addition (Positive or Minimum prescribed
  value addition)

74
Checklist

• WHILE PREPARATION OF APPLICATION
• Application fees (Mode of payment on Electronic
  Fund Transfer mode) - EFT transaction status, BID
  number (Proof of successful transactions) etc.
• Outstanding authorisation details
• Past export performance, if any
• Any changes in provisions related to policy and
  procedures
• Customs notification under which the scheme
  falls.
• Exact classification of the products ITC (HS)
  Code.
• Transferable or Non transferable (Only in case of
  DFIA)
• Declarations

75
Checklist

• WHILE PREPARATION OF APPLICATION
• Additional Precautions to be taken only in case
  of Application for Adhoc Norms (Only in case of
  Advance Authorisation)
• Detailed manufacturing process flow chart with
  stage wise generation of wastages.
• Generation of by-product with quantity and value.
• Production and consumption data of
  Manufacturer/supporting manufacturer for last
  three years.

76
Checklist

• POST SUBMISSION OF ONLINE APPLICATION
• Creation of file number (Electronically
  generated)
• POST-RECEIVING THE AUTHORISATION
• Checking details on the authorisation
• Any specific endorsement by regional authority
  (BG/LUT, etc)
• Description, quantity, value of inputs and
  resultant products
• Endorsement of notification pertaining to the
  authorisation
• Port of registration
• Details of supporting manufacturer
• Currency area (GCA/RPA)
• Export product group and serial no.

Contd.
77
Checklist

• POST-RECEIVING THE AUTHORISATION
• Checking details on the authorisation
• Signature and seal of officer of the regional
  authority
• In case of amendments, endorsement of amendment
  on the authorisation/ amendment sheet
• Any specific condition incorporated in condition
  sheet.
• Submission of authorisation for registration at
  port
• Execution of LUT/Bank Guarantee. In case of local
  procurement, it should be submitted to regional
  authority

78
Checklist

• MAINTENANCE OF AUTHORISATION
• Day to day monitoring of imports and exports
  taking place against the authorisation
• Enhancement / Reduction
• Application to be made before or after exports
  when required
• Revalidation / Extension
• One month prior to the expiry of the
  authorisation, if required.
• Consumption register in Appendix 23 to be
  maintained

79
Checklist

• MAINTENANCE OF AUTHORISATION
• Clubbing
• In case of redemption/regularization, clubbing
  provisions as per Para 4.20 of HBP Vol.I should
  be checked.
• Redemption of licence
• Description on shipping bill should tally with
  description of resultant product.
• Exempted material list should also be given.
• Correlation with ARE also to be kept in mind
• Bank Realisation Certificate
• REFERENCE
• Input Output norms (SION), refer Hand Book of
  Procedure Vol. 2
• ITC (HS) Code, Duty Structure and Import Policy
  notes.

80
GENERAL NOTE FOR FUEL

• Duty free import of fuel shall be allowed as per
  the quantity indicated in the relevant Standard
  Input Output Norms (SION). However, in cases
  where fuel has not been specifically included in
  the SION, duty free imports of fuel shall also be
  allowed under Actual User Advance Authorisation
  subject to the condition given in the Foreign
  Trade Policy/Handbook of Procedures as per
  percentage rate indicated against each product as
  under

81
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
1. Bulk Drug and Drug Intermediates 5
2. Dye and Dye Intermediates 4
3. Glass 5
4. Ceramic Products 5
5. Paper made from wood pulp/waste paper 5
6. Pesticides (Technical)/ Pesticides formulation from Basic Stage 5
82
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
7. Refractory items of the following types-  
7. a. Shaped and Fired 7
7. b. Shaped and Tempered 3
7. c. Others 2
8. Ferrous engineering products manufactured through forging/castings process 7
9. Non-ferrous basic metals (including down-stream products of aluminium) 4
83
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
10. Plastic and plastic products from Basic/Monomer Stage 5
11. Fibre to yarn 4
12. Yarn to finished fabrics/made-ups 3
13. Fibre to finished fabrics/made-ups 7
14. Organic Chemicals 4
15. Inorganic Chemicals 3
84
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
16. Glass Artwares 3
17. Leather Footwears and its Leather components 3
18. Graphite Electrodes (against SION at C-485) 6
19. Bras Art Wares 2
85
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
20. For export of Rice, fuel is allowed at the rate of 2 of FOB value with a value cap of Rs. 15 per kg of rice with the condition that(a) The fuel entitlement will be only for those firms having captive power plant (installed and in running condition)(b) Licence / ARO will be subject to actual user condition.(c) No DFRC will issued.(d) HSD will be procured only through the canalizing agency.(e) Export of rice will be subject to export policy in vogue For export of Rice, fuel is allowed at the rate of 2 of FOB value with a value cap of Rs. 15 per kg of rice with the condition that(a) The fuel entitlement will be only for those firms having captive power plant (installed and in running condition)(b) Licence / ARO will be subject to actual user condition.(c) No DFRC will issued.(d) HSD will be procured only through the canalizing agency.(e) Export of rice will be subject to export policy in vogue
86
GENERAL NOTE FOR FUEL
Sl. No. Product Group Value of fuel to be permitted as percentage FOB value of exports.
21. Finished fabric to garment 2
22. Yarn to garment 5
23. Carbon Steel submerged Arc welded pipes coated/uncoated 4
87
GENERAL NOTE FOR FUEL
For the purpose of import of fuel under Actual
User Advance Licence, the applicant shall
indicate the name of the specific fuel sought for
import in their application. Import of fuel
however shall not be permitted against DFRC or
under para 7.5 of Handbook of Procedures or
against Ad hoc Norms. Also, for the calculation
of DEPB rates, the cost of the fuel shall not be
taken into account. Note In any case, as per
above General Note, the fuel shall not be allowed
more than 7 of FOB value of exports.
88
Standard Input Output Norms SION

• In addition to the above norms, there are
  specific norms where fuel is used as an input and
  not for generation of power.
• Wherever, such products are exported the exporter
  is entitled to claim duty free import of fuel as
  per specific norm.
• A list of such norms is as under

89
Standard Input Output Norms SION
SION Sl. No. Description of export product Description of input Qty. allowed
Chemical and Allied Products Chemical and Allied Products Chemical and Allied Products Chemical and Allied Products
A2691 Paraxylene  Naphtha 1.58 MT
A2692 Orthoxylene  Naphtha 1.44 MT
A2693 Benzene  Naphtha 1.04 MT
A3174 White Cement Clinker   Furnace Oil  0.100 MT
90
Standard Input Output Norms SION
SION Sl. No. Description of export product Description of input Qty. allowed
Engineering Product Engineering Product Engineering Product Engineering Product
C258 PVC 3 Core Flat Cable suitable upto 1100 V of size - 3x4.0 sq.mm(57/.3) Overall Dimension Width(mm)xThickness(mm) i.e. 17.2x7.4  Lubricants 1.36 KG.
91
Standard Input Output Norms SION
SION Sl. No. Description of export product Description of input Qty. allowed
Leather Products Leather Products Leather Products Leather Products
G1 All type Leather garments including coats/jackets having consumption of finished leather above 25 Sq.ft.  HSD 4.76 litre
HSD (High Speed Diesel) is allowed subject to
actual user condition. These norms for fuel are
applicable only to those units having facilities
for captive power generation using HSD as fuel
92
Standard Input Output Norms SION

• Standard norms for your own products are covered
  under following sr. nos.
• A2689 for LDO HSD
• A2688 for Naphtha Motor Spirit
• A2687 for LPG
• A2690 for LSHS Furnace Oil
• A2897 and A3238 Lubricating Oil Additives
• A1806 Lubricants
• For comparison purpose related DEPB rate is given
  along with SION. Wherever such rates are
  available.

93
Standard Input Output Norms SION

• All Industry Rate of Drawback is not available
  for Chapter 27
• However Drawback can be availed on furnace oil
  and HSD as per following Notifications issued by
  DGFT.
• NOTIFICATION NO. 49/2005 DT. 02/03/2006 for
  Furnace Oil
• NOTIFICATION NO. 29/2005, DT. 06/10/2005 for HSD

94
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB Rates Drawback Rates
2710 19 30 HSD A2689 Note- This norm does not include lubricating oils and petrochemical products like Benzene, Toluene, MTBE etc. Middle Dietlliates (MD) viz., ATF, SKO, HSD (Gas Oil) MTO, LABFS, AROMEX, JBO, LDO, VGO, Solvents   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 1.072 MT CIF value limited to 0.1 of FOB value of export. However, for HSD and ATF CIF value shall be limited to 0.25 of FOB value of export. N.A N.A.
95
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
Motor spirit i) 2710 11 ii) 27101111 iii) 27101112 iv) 27101113 v) 27101119 A2688 Note- This norm does not include lubricating oils and petrochemical products like Benzene, Toluene, MTBE, etc. Light Ends (LE) viz., Naphtha, Motor Spirit (Gasoline) solvents, Reformate, Hexane, TAME, excluding C3,C4 Hydrocarb-ons and mixtures thereof   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 1.265 MT CIF value limited to 0.1 of FOB value of export. However, for Naphtha and Motor Spirit CIF value shall be limited to 0.25 and 1 of FOB value of export respectively. N.A. N.A.
96
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 19 40 LDO A2689 Note- This norm does not include lubricating oils and petrochemical products like Benzene, Toluene, MTBE etc Middle Dietlliates (MD) viz., ATF, SKO, HSD, Gas Oil, MTO, LABFS, AROMEX, JBO, LDO, VGO, Solvents   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 1.072 MT CIF value limited to 0.1 of FOB value of export. However, for HSD and ATF CIF value shall be limited to 0.25 of FOB value of export. N.A. N.A
97
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 19 50 Furnace Oil A2690 Note- This norm does not include lubricating oils and petrochemicals products like Benzene, Toluene, MTBE, etc Heavy Ends (HE) viz., FO, Furnace Oil, Fuel Oil, LSHS, HPS, Puch, Asphalt, Petroleum Bitumen, Raw Petroleum Coke Calcined Petroleum Coke, Slack Wax Paraffin Wax, Microcrystallin Wax, CBFS, RPO, Sulphur   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 0.820 MT CIF value limited to 0.1 of FOB value of export. N.A. N.A.
98
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 1119 Naphtha A2688 Note- This norm does not include lubricating oils and petrochemical products like Benzene, Toluene, MTBE, etc. Light Ends (LE) viz., Naphtha, Motor Spirit (Gasoline) solvents, Reformate, Hexane, TAME, excluding C3,C4 Hydrocarbons and mixtures thereof   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 1.265 MT CIF value limited to 0.1 of FOB value of export. However, for Naphtha and Motor Spirit CIF value shall be limited to 0.25 and 1 of FOB value of export respectively. N.A. N.A.
99
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 1990 LSHS A2690 Note- This norm does not include lubricating oils and petrochemicals products like Benzene, Toluene, MTBE, etc Heavy Ends (HE) viz., FO, Furnace Oil, Fuel Oil, LSHS, HPS, Puch, Asphalt, Petroleum Bitumen, Raw Petroleum Coke Calcined Petroleum Coke, Slack Wax Paraffin Wax, Microcrystallin Wax, CBFS, RPO, Sulphur   1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 0.820 MT CIF value limited to 0.1 of FOB value of export. N.A. N.A.
100
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2711 19 00 A2687 Note- This norm does not include lubricating oils and petrochemical products like Benzene, Toluene, MTBE, etc. C3/C4 Hydrocarbons Viz. Propane, Propylene, Butane, Butylene/ Butene (Various grades), Liquified Petroleum Gas (LPG) (Various grades) and mixtures thereof 1 Crude Oil 2 Relevant catalysts and chemicals used in refineries 1.564 MT CIF value limited to 1 of FOB value of exports. N.A. N.A.
101
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 19 80 Lubricating Oil A2897 Calcium Dodecyl Phenate Detergent (Lubricating Oil Additive) Containing Calcium Dodecyl Phenate 40 Min.   1. Dodecyl Phenol 2. Isodecyl Alcohol 3. C20-C24 Linear Alkyl Benzene Sulfonic Acid 4. Slaked Lime 5. Filter Aid 6. Monoethelene Glycol (MEG) 7. Base Oil 0.367 KG 0.010 KG 0.023 KG 0.141 KG 0.015 KG/KG 0.0724 KG/KG 0.387 KG/KG Sr. No. 769 Speciallity Textile Lubricating Oil (STLO) DEPB RATE 4 N.A.
102
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 19 80 Lubricating Oil A3238 Lubricating Oil Additive (200 TBN) containing Calcium Dodecyl Phenate 40 Min. and Polybutene Succinic Anhydride 4.5   1. Dodecyl Phenol 2. 150 Solvent Neutral 3. Polybutene 4. Hydrated Lime 5. Filter Aid (Diatomaceous Earth) 0.409 KG 0.395 KG 0.042 KG 0.141 KG 0.015 KG Same as Above N.A.
103
ITC HS Classifications SION Sr. No. and description of the product under SION. Description of Export Item as per SION Description of the import items Qty. allowed DEPB DBK
2710 19 80 A1806 Industrial/Automotive Lubricants  1 Base Mineral Oil (Industrial grade) 2 Lube Oil Additives 1.03 kg/kg content in the export product 1.03 kg/kg content in the export product Sr. No. 545 Industrial/automotive lubricants DEPB RATE 7 VALUE CAP Rs. 140/kg N.A.