Page 272 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

Unit 12: Export Incentives Schemes

Notes

Case Study Duty Exemption and Remission Schemes

he EXIM Policy (1997-2002) will become redundant after March 31, 2002, as a new
comprehensive EXIM Policy for the next five years (2002-2007) is expected to be
Tannounced by the government of India (GUI) shortly. Though annual EXIM policies
have been announced intermittently, they were within the broad framework of the five-
year EXIM Policy (1997-2002). In this context, it is pertinent to highlight the issues
encompassing the prevailing export-linked duty exemption and remission schemes on
account of the liberalisation of imports through the phased elimination of quantitative
restrictions (QRs) announced till March 31, 2001.

There are three export-linked duty free import schemes, viz, Advance Licensing Scheme
(ALS) with duty exemption, Duty Free Replenishment Certificate (DFRC) and Duty
Entitlement Pass Book (DEPB) schemes with duty remission. The ALS is a pre-export duty-
free import facility whereas both DEPB and DFRC are post-export duty-free import schemes.
Advance Licensing Scheme; The ALS with Actual User (AU) condition facilitates duty-free
import of inputs required for export production subject to the fulfilment of a time-bound
export obligation. The material inputs and consumables such as oil, fuel, energy, catalysts,
etc, used in the production of products exports can be imported against an advance licence
without duty. Advance licences can be issued for physical exports, intermediate supplies
and deemed exports. Imports against advance licences are exempted from payment of
basic customs duty, additional customs duty, antidumping duty and safeguard duty. But
countervailing duty, if any, has to be paid. The EXIM policy announced for the year 2001-
02 has modified the ALS by raising the entitlement in certain cases, fixing new standard
input-output norms (SIGN) for 506 items, coverage of additional ports under the scheme,
simplification of the formalities, etc.

Duty-free Replenishment Certificate Scheme: The import under DFRC is exempted from
basic customs duty and special additional customs duty. However, additional customs
duty is payable but it can be drawn back through CENVAT as far as manufacturer exporters
are concerned. Under DFRC, anti-dumping, safeguard and countervailing duties, if any,
are payable. Imports of products for which SION have been notified by the Directorate
General of Foreign Trade (DGFT) are eligible for DFRC except those for which AU condition
is mandatory. The DFRC is also subjected to a minimum value addition of 33.3 per cent in
the FOB value of exports. Though nexus (between exported products and imported items)
is mandatory, the DFRC and the materials imported against it are freely transferable. The
EXIM Policy for 2001-02 has modified DFRC scheme by raising the validity from 12 to 18
months, incorporating the provision for claim of DFRC against advance payment of import
duty, coverage of additional ports, split-up facility, automatic calculation of CIF value
without reference to international prices of individual inputs, etc.
The exporters can thus opt for either the pre-export licensing route of ALS or post-export
licensing route of DFRC to import materials and other consumables used in the production
of products for export.
Duty Entitlement Pass Book Scheme: DEPB provides for duty-free imports by exporters
without passing through any licensing route. Under the DEPB scheme, the incidence of
customs duty payable on the import content of the export product is neutralised by granting
duty credit against the export product. The duty credit under the scheme is calculated on

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