Finer print in alphabet soup

The new Foreign Trade Policy merges the earlier Focus Product Scheme (FPS), Focus Market Scheme and Vishesh Krishi Gram Udyog Yojana into a single Merchandise Exports from India Scheme (MEIS). This is similar to the earlier Market Linked Focus Product Scheme. Export of specified products to specific groups of countries earn duty credits at a specified percentage of the FOB value realised or FOB value declared on the shipping bill, whichever is less.

The new scheme preserves most of the flexibility of the earlier ones for utilisation and transferability. For a claim of MEIS, declaration of intent on the shipping bills at the time of export is mandatory from June 1. The basic customs duty debited to the scrips can be claimed as duty drawback. Exports from a Special Economic Zone (SEZ) will be eligible for benefits but supplies from the Domestic Tariff Area to an SEZ will not be. MEIS includes duty credits for handloom products, books/periodicals, leather footwear, toys and customised fashion garments, with an FOB value cap of Rs 25,000/consignment if the sale is finalised through e-commerce and their export made through foreign post offices or courier terminals at Chennai, Delhi and Mumbai. For this, the procedures to be adopted will be issued separately by the Central Board of Excise and Customs.

The basis for categorising India's export destinations into three groupings is unclear. For most manufactured products, incentives are denied for exports to neighbouring countries, Australia, New Zealand, Switzerland, Norway and many least developed countries. It is far from clear why exports to some countries earn MEIS whereas those to some others do not. Some items that earlier had earned FPS have been dropped from the list of those eligible for MEIS. In many cases, the exporters of manufactured items find their entitlements get reduced because of lower rates of duty credits for their exports to certain countries and/or denial of MEIS against exports to certain countries.

MEIS must be claimed within 12 months from the Let Export Order date or three months from the date of uploading of EDI (electronic data interchange) shipping bills on to the Directorate General of Foreign Trade server by the Customs or printing/release of shipping bills for non-EDI shipping bills, whichever is later. Considering the stipulation that claims can be made only after realisation of export proceeds, and that payments from buyers can get delayed beyond 12 months from date of exports, exporters must be allowed a minimum of three months from the date of realisation of export proceeds for filing their claims.

Mostly, the description of items in the MEIS table are aligned with those in the Customs Tariff. However, the description of the same item could be different in the duty drawback All Industry Rate (AIR) schedule or the Standard Input Output Norms. When exports are made under the drawback or duty exemption scheme, exporters have to give the description in the shipping bill in line with the description in the AIR schedule or the advance authorisation. Exporters are apprehensive that in such cases, their MEIS entitlements might be denied on the grounds that the description in the shipping bill does not tally with that in the MEIS table. They need to be assured that the MEIS entitlement will be based on the classification code declared on the shipping bill.

Overall, MEIS is less messy but less rewarding than earlier schemes.
email: tncrajagopalan@gmail.com