Goods exempted under notifications can be brought into bonded warehouses

We refer to Para C.13.1 of the RBI Master Direction no.16/2015-16 dated 1st January 2016 (as amended). It says that Authorised Dealers (ADs) can grant permission for opening/hiring warehouses abroad provided  the applicant’s export outstanding does not exceed 5 per cent of exports made during the previous financial year.  This looks quite unrealistic because 5 per cent of our exports made during the previous year amounts to barely 18.25 days of exports. Any export bill sent even on a D/P basis will take more than that much time to get realised. So, export outstanding will always exceed this limit. We seek your comments. 

You are right. RBI itself allows initial period of 9 months to realise export proceeds. RBI also allows this time limit to be extended.  So, this Para C.13.1 does not make any sense unless the 5 per cent is interpreted to mean 5 per cent of the exports outstanding beyond the period allowed by RBI plus the period of extension granted by ADs under the authority delegated by the RBI. Similar restrictions based  on the percentage of export realisations are there in Para C.17.1, C.18, C.20(d) and C.23 of the said Master Direction no.16/2015-16 and also at Para B.10(1)(b) and Para B.10(1)(e) of the Master Direction no.15/2015-16 dated 1st January 2016 (as amended). So, the RBI should clarify that ‘outstanding’ refers only to outstanding beyond the period allowed by RBI and by the ADs under the powers delegated by RBI to grant extension for realisation of export proceeds.  

We have a license to manufacture in bonded warehouse under Section 65 of the Customs Act, 1962. We find it quite a nuisance to pay the duties on the inputs whenever we have to clear the by-products in the domestic market. The input-out norm for our product is notified. Can we take advance authorisation for our import of our inputs, to avoid payment of duties on the inputs each time we clear the byproducts in the domestic markets? 

Yes. Para 14 of the CBIC Circular no.34/2019-Cus dated 1st October 2019 clarifies that imported goods, that are exempt from duty or are chargeable to nil rate of duty, may be brought into the warehouse, upon filing a bill of  entry for home consumption  and  clearance, at the customs station of import. Such goods shall not be considered as warehoused goods in terms of section 60 of the Act. In my view, the words ‘goods exempt from duty’ include ‘goods exempt from duty under any notification’ and so can be brought into the warehouse. 

Our export product attracted an import duty of 4 per cent in the US before the reciprocal tariffs, initially set at 26 per cent and later reduced to 10 per cent, came in. Will our product attract 10 per cent tariff or 14 per cent tariff in the US? 

The reciprocal tariffs are in addition to the MFN rates that were being charged before 5th April 2025. Therefore, your products will attract 14 per cent import duty in the US i.e. the normal MFN rate plus the reciprocal tariff rate.