'Capital goods import on lease of under three years allowed'

We are importing capital goods on lease. We may send it back after two to three years. We understand that there is an exemption notification for imports on a lease basis. But, can we import the goods under Export Promotion Capital Goods (EPCG) scheme?
Import of capital goods on a lease of less than three years is no problem under FEMA (Foreign Exchange Management Act) Regulations. Your bankers can remit the lease rent, which is a current account payment. But, if it the lease period exceeds three years or if the period is uncertain, the bankers may insist that there is no hire-purchase aspect to the transaction and some may even ask you to get Reserve Bank approval.

 

As far as the customs duty is concerned, exemption notification no. 27/2002 dated 1.3.2002 deals with imports under lease for execution of contracts but under that notification, re-export of the imported goods must take place within 18 months.

You can very well import on a lease basis and seek clearance under the EPCG scheme, as per Para 2.28 of the Handbook of Procedures, Vol. 1. However, as per Para 5.16 of the Handbook of Procedures, Vol. 1, re-export of the capital goods imported under the EPCG scheme may be allowed only if the goods are found defective or unfit for use. Besides these requirements, the conditions include a time limit of three years, permission from the licensing authorities/Customs and re-fixation of export obligation. Anyway, if you fulfill the export obligation and then seek re-export, you may not face any major problems.

I am an importer of PVC resin and polymers in New Delhi and regularly import bulk of containers in 20-25 FCLs for each consignment at Tughlakabad Port, New Delhi. As we opt for factory destuffing of the material (due to our product being of an expensive nature, which often gets spoiled when handled inside the port), we agree to pay a sum to local transporters for delivering the containers at our warehouse. But often lately, the shipping lines have started instructing our CHA to deposit the FCL at Dadri or Ballabhgarh port due to unavailability of space at Tughlakabad. For this particular reason we have to incur an additional charge of up to Rs 5,000 per FCL, which adds considerably to our cost. Please advise as to how we can escape it.
The relationship between you and the shipping lines is a contractual relationship. As in the case of all contracts, mutual free will is the essential basis of contracts; although sometimes you may be placed in a position where you have no choice. It is a matter of demand and supply and the law cannot come to your help. It is the bargaining strength that can help. In a competitive situation, you may talk to other shipping lines and see what alternatives are available. The supply of the same service by different service providers at competitive prices is your best hope of better bargaining strength as a user of the service.

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