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Guidelines for notifying ad hoc DEPB rates

Exim Matters

T N C Rajagopalan  |  New Delhi 

One of the highlights of this year's Exim Policy was the decision to empower the DEPB (duty-entitlement passbook) Committee to notify rates on ad hoc basis for select products for a limited period of time to encourage diversification and exports of new products.

The Director-General of Foreign Trade (DGFT) has now issued guidelines to implement the provisions.

The ad hoc DEPB rates will be set for only those products for which standard input-output norms (SION) have already been notified.

The exporter will have to file the application for fixation of DEPB rates in the form in Appendix 10 of the handbook of procedures, Vol. 1 (HB-1).

The idea behind the new provision is to help those exporters who mainly use indigenous inputs like raw materials, components, consumables etc. in the manufacture of export product and so do not have authentic data on import prices or documents like bills of entry relating to actual import of the required inputs.

So, they need not furnish copies of shipping bills or bills of entry. They only have to declare the FOB value per unit quantity of export product for which fixation of ad-hoc DEPB rates has been sought.

For the CIF value of inputs as per the SION, they can submit copies of Customs data of imports containing the name of raw materials, quantity, CIF value and port of import, etc.

Otherwise, they may also quote CIF prices of the inputs from the recognised sources such as international magazines, journals etc.

The Advance Licensing Committee (ALC) would consider the case based on the information given in the application and may also take CIF value of the inputs if the same is available in earlier files where DEPB rates have already been set and then work out a suitable value-addition.

The DEPB committee will then work out the ad hoc DEPB rate taking into account the Customs duty involved and the value-addition set by the ALC.

The FOB value taken in the calculations would be set as value cap invariably in all cases. The DGFT will then notify the ad hoc DEPB rates through public notices. The ad hoc rates will be valid for six months.

The exporters using the ad hoc DEPB rates have to furnish the details of actual exports made within four months from the date of notification of the ad hoc rates.

Based on the actual performance, the DGFT will consider converting the ad hoc rates into permanent DEPB rates.

The initiative taken by the government to notify ad hoc rates will help exporters unable to export their products because they are not competitive on the basis of the prices at which they source their inputs from the domestic producers.

The DEPB rates will be notified based on the assumption that they have used imported goods and suffered Customs duty incidence on the inputs.

In short, the ad hoc DEPB rates will work as subsidies for them. Even without importing anything, they will get duty credits assuming that they have used imported inputs.

When the government announced the new provision in April, it was widely expected that the only new products in specific sectors that had considerable export potential, like the pharma sector, would be covered.

But the guidelines make the new provisions available to all products for which standard norms have been notified.

First Published: Mon, July 21 2003. 00:00 IST