New scheme for apparel export

The authorisation will be issued for "the import of only the relevant fabrics, including inter-lining, as input. No other input, packing material, fuel, oil or catalyst will be allowed for import under this authorisation

The commerce ministry has notified a special advance authorisation scheme for articles of apparel and clothing accessories. Duty-free import of fabrics will be allowed for export of items covered under chapters 61 and 62 of ITC (HS) Classification of Export and Import.

The unique feature is that exporters using the scheme will also be eligible for the All Industry Rate (AIR) of duty drawback for non-fabric inputs, as notified by the finance ministry. The scheme comes into effect from September 1.

Under it, an exporter can get special advance authorisation for import of fabrics relevant to the export products, on the basis of standard input-output norms (SION) or prior fixation by the norms committee at the Directorate General of Foreign Trade (DGFT). The authorisation will be issued for the import of only the relevant fabrics, including inter-lining, as input. No other input, packing material, fuel, oil or catalyst will be allowed for import under this authorisation. The usual value addition has to be achieved.

The present option to claim the brand rate of drawback as determined by central excise authorities remains. In which case, the value of inputs (other than the fabric imported duty-free under the special advance authorisation) will continue to be based on actuals for the purpose of value addition calculation. However, where the AIR of drawback is claimed, the value of other inputs should be reckoned at 22 per cent of the FOB value of export realised, for the purpose of value addition. This stipulation could confuse some and the DGFT should issue a suitable circular, clarifying the matter by way of an example.

The fabrics imported under the scheme will be subject to pre-import conditions and be physically incorporated in the export products (making normal allowance for wastage). The export obligation must be fulfilled through physical export only. The special advance authorisation and the fabrics imported cannot be transferred even after completion of export obligation. However, the fabrics imported may be transferred to job workers (other than in units located in areas eligible for area-based exemption from central excise duty) as permitted by the central excise authorities. Invalidation of the authorisation will not be permitted.

The finance ministry has issued suitable exemption notification to give effect to this scheme. More significant, a non-tariff notification has been issued, amending the conditions for grant of AIR. The notification gives the alternative AIR of drawback in the drawback schedule for exports made in discharge of an export obligation against the special advance authorisation. The rates for many items are nearly or less than half the original rates, and the value caps are around 65 per cent of the original ones.

The Central Board of Excise and Customs has asked exporters opting for drawback at brand rates under the new scheme to declare the figure 9807 as an identifier in the shipping bill and to mention the tariff item number of goods as shown in the AIR schedule, followed by the character 'D', immediately after the said identifier. Based on this, the shipping bill will be processed for payment of provisional drawback amount equivalent to the Customs portion of these alternative AIRs.

Hopefully, this new scheme will help boost export of apparel.

e-mail: tncrajagopalan@gmail.com