Protecting exporters from govt bans

EXIM MATTERS

This circular will help exporters of cement, pulses etc. whose exports were banned recently. However, such a dispensation is also necessary for exporters of steel products on which export duty has been imposed. Many steel exporters are unable to export because of export duty. They need a similar relief. Moreover, such a dispensation is necessary even in the case of advance authorisation holders, who are unable to export either because of export ban or imposition of export duty.

The DGFT has also clarified (Policy Circular no.6 dated May 7, 2008) that EPCG authorisations issued from 1.4.2008 to 11.4.2008 shall be deemed to be issued at 3% custom duty as per FTP [Foreign Trade Policy Revised on 11-4-2008] and Customs shall automatically allow clearance of goods at 3% Customs Duty.

This useful clarification is unnecessarily marred by the sentence that follows stating that the Regional Authorities may call back the authorisations and make changes in the authorisations. The trade is not clear on whether the amendments are mandatory or optional and there are reports some customs authorities asking the importers to get their authorisations amended.

In any case, the problems of importers who obtained EPCG authorisations after 1.4.2008 (or even 11.4.2008) but could not get clearance at 3% duty for want of customs notification till April 28, 2008, continues. Such importers have paid 5% duty and need suitable relief in accordance with the FTP 2008-09.

The issue of 'nexus' under the Target Plus scheme continues. The DGFT has now clarified (Policy Circular no. 10 dated 5th June 2008) that the items allowed will be mentioned in the duty credit scrips and gives a list but the list mentions in generic terms inputs and capital goods having nexus with the exported products as per Para 3.2.5 of HB-1 (2004-05 and 2005-06).

The problem that is likely to continue despite this clarification is that the Customs Circular no. 45/2007 dated December 19, 2007, says that the intended input must have a relationship with the export product. Whereas Standard Input Output Norms (SION) will act as a prima facie evidence of 'inputs', the exporter is not debarred from satisfying the authorities that there is a 'broad nexus' between the intended import item as an 'input' with the export product, both falling within the same product group, says the circular.

The mischief in the circular is the use of the words 'within the same product group'. For example, an exporter of cobalt sulphate can import cobalt metal under SION. But, cobalt metal can be manufactured from cobalt concentrates but that is not covered under SION and gets covered under another product group and so cannot be cleared, unless the words