Submission on Trade Policy
Posted On : 1st May 2010

Submission on Foreign Trade Policy to Director General of Foreign Trade (DGFT)

Founded in 1938 (formerly known as Indian Chemical Manufacturers Association) Indian Chemical Council (ICC) is the umbrella organization of chemical industry in India. ICC provides its members a forum to address their common issues.

Many of our members have significant presence in export market. In the prevailing global economic scenario they are facing major challenges in overseas markets. In this context, ICC would like to submit the following covering policy and procedural issues for the consideration of the Government:

POLICY MATTERS

A.DEPB ISSUES:

  1. Extending the DEPB Scheme till 2013

    Justification:
    Many small & medium scale manufacturers and merchant exporters often do not have capacity to imports all their inputs required for export. These exporters are absorbing local taxes and levies which are often very high and needs to be compensated. Introduction of GST would provide partial relief, but may still not be adequate. The scheme may, therefore, be extended at-least till 2013.

  2. Extending the DEPB benefit to Deemed Exports:

    Justification:
    Deemed Export supplies are made under the same spirit as physical exports. The suppliers of deemed export, however, need to absorb local taxes and duties on local procurements. It would, therefore, be logical to extend the DEPB scheme on Deemed Export suppliers as well. This benefit is already available for units in SEZs. We request that the scheme is extended to all Deemed Exports transactions as well.

Permission for validation of DEPB Licences beyond expiry period:

Justification:
DEPB Licences are required to be utilized within 2 years of the date of issue and the period granted for applying for the same is one year from the date of export.

Original DEPB licences get held up at different Ports (as they get circulated within Customs' offices) and at times at office of DGFT (when given for amendment) and they expire without being utilized.

In case of non-utilization of licenses, we request that permission be automatically granted for the Revalidation of DEPB Licenses by at least 6 months beyond expiry date.

B. EOU ISSUES:

  1. Extending tax benefit period u/s 10B of IT for EOU Units:

    Justification:
    While the tax exemption to EOU has been extended till assessment year 2011/12, this is not adequate under prevailing global economic conditions where the financial viability of many of these units is under threat. Considering this the benefit period may be extended till 2014.

    While the tax exemption to EOU has been extended till assessment year 2011/12, this is not adequate under prevailing global economic conditions where the financial viability of many of these units is under threat. Considering this the benefit period may be extended till 2014.

  2. Exemption from MAT for EOU Units:

    Justification:
    Since EOU also operate in a similar manner as units located in SEZ, exemption from MAT should therefore be extended to EOUs.

  3. SUBMISSION OF RE-WAREHOUSING CERTIFICATES FOR EOUs:

    Presently, EOUs are required to take re-warehousing certificates from the Jurisdictional Bond Officers and they are required to send these certificates by Regd AD Post to the Jurisdictional Customs Authorities of the port of clearance. This is a time taking procedure. Although the certificates are sent by Regd Post they are not traceable later on. We request government to allow Re-Warehousing Certificates to be issued on 'Self Certification" basis and to be submitted by hand delivery.

  4. DRAWBACK ON FURNACE OIL FOR EOUs:

    Justification:
    Benefit of Drawback for EOUs on Furnace Oil has been discontinued in the year 2008. We request that the benefit be restored. This will help EOUs to be competitive in overseas market.

C. EXPORT FINANCING:

1. Interest Subvention Scheme:

The latest Union Budget has extended Interest Subvention scheme (at differential of 2% in the rate) to major exporting industries such as Gems and Jewelry, Textiles etc. Chemical Industry is also one of the major exporting industries affected by shrinkage of markets overseas. Hence, we request that the scheme be extended to chemical and polymer exports as well (i.e. exports of products falling under Chapters 27-39 of Customs Tariff Classification).

2. Extending Post / Pre-shipment Credit Period:

Justification:
ICC requests the government to increase the period for pre-shipment credit to 270 days from 180 days and post-shipment credit period (currently 90 days) needs to be extended to min of 270 days. This would help exporters tie-over the liquidity which is currently under severe pressure for small and medium scale exporters.

3. Extending Interest Free Warehousing Period:

Justification:
The present facility of allowing interest free warehousing period of 3 months is inadequate under prevailing export market condition. This could be increased to six months to custom clearance of small lots without interest payment and provide temporary relief to the exporters.

D. ADVANCE LICENSING/ DEEC AND DFIA SCHEMES:

1. Value Addition Requirement:

Justification:
Prior to August 2009, the value addition norm was 'any positive value addition i.e. above zero%'. However, in the present policy 15% value addition requirement has been stipulated which is sometimes very difficult to achieve in the present competitive global environment. In chemical industry environment, chemical conversion from one chemical entity to the other gives completely transformed products with a complete change in identity and with completely different end-uses. This obviates the necessity to have any minimum value addition criterion. We therefore request roll back to original criterion of merely positive value addition for chemical products. Same provision of mere positive Value Addition may kindly be extended both Physical Exports as well as Deemed Exports.

2. Clubbing of Duty Free Import Authorization (DFIA) Licenses:

Justification:
There is a provision for clubbing of Advance Licenses where there is an export beyond / above the Export Obligation with those licenses for which the Export Obligation has not been fully met. Two or more Advance Licences can be clubbed under Section 4.20 HBP VOL 1. ICC requests the government to extend the scheme of provision for clubbing in case of DFIA Licenses as well.

3. Clubbing of Advance Licenses/ Authorisations:

Justification:
In the present Policy, Clubbing is allowed if the export is made within thirty six months from the date of issue of first license. This puts constraints in availing of this provision. We request that the thirty six months period be extended to sixty months and should be applicable for past cases of clubbing.

4. Clubbing of Advance Licenses is sued against Physical and Deemed Exports:

Justification:
As a further relaxation and widening of the applicability of provision of clubbing, we request that clubbing of Advance Licenses issued for Physical Exports should be applicable for Deemed Exports as well.

5. CST Exemption on Deemed Exports:

Justification:
As a part of the need to extend Duty Exemption benefits to Deemed Exports, we request that Deemed Exports transactions be exempted from levy of Central Sales Tax as well.

E. FOCUSSED MARKET SCHEME:

Extending FMS for export to Europe for 5 years:

Justification:
FMS was formulated to compensate for the additional costs incurred for export to few identified markets where the logistic and other costs are higher arising out of externalities. With implementation of REACH by EU, Indian exporters are faced with huge registration and compliance costs which may be partially compensated. Besides this, the quantum of benefit, which was increased from 2 to 3 % of incremental exports should be increased to 10% to provide adequate benefit to cover costs for making exports to EU countries.

F. AMENDMENT OF ADHOC NORMS:

Justification:
Actual wastage, reaction out-put, time, R&D process etc. are governed during chemical manufacturing processes. It is therefore submitted that Norms Committee may entertain at-least two requests for amendments within the validity of the Advance Authorization.

G. DUTY FREE SCRIP (@5% OF EXPORTS) FOR IMPORT OF CAPITAL GOODS FOR

UPGRADATION OF TECHNOLOGY:

Justification:
The Honourable Commerce Minister introduced a scheme in the last Foreign Trade Policy for issue of Duty Credit/ Duty Free Scrip @1% of FOB value of Exports for all Status Holders to be utilized during Import of Capital Goods for Upgradation of Technology. However, it appears that there have been no circulars/ procedures/ guidelines/ stipulations for availing this benefit. We request the government for urgent release of these procedures for availing these benefits so that Applications for grant of such Scrips can be made without delays.

Besides this, the current dismal situation on export horizon of subdued market sentiments overseas and no light at the end of the tunnel after the Meltdown demands stronger incentives and we therefore request that the Scheme be amended for issue of Scrips at 5% of FOB value of Exports instead of at 1%.

H. INCENTIVE FOR QUANTUM JUMP IN EXPORTS:

Justification:
The adverse impact of Global Financial Meltdown on the demand for chemical products overseas is still being felt months after the onset of crisis in October 2008. We have had negative growth in Exports for one full year and while exports appear to be looking up marginally, this marginal growth is on a much reduced base of year 2009 and therefore recent figures are deceptive.

Under the circumstances, an incentive commensurate with the seriousness of maladie is required. We request the government to introduce a scheme for issue of duty-free scrip equal to 10% of quantum of jump in Exports subject to a minimum 25% growth achieved in Exports year on year.

ADMINISTRATIVE MATTERS:

A. PERMITTING MANUAL REGISTRATION OF DEPB LICENCES ISSUED MANUALLY FOR EDI SHIPPING BILLS:

Justification:
Registration of DEPB issued for EDI shipping bills filed manually can be done only after shipping bills are online between customs and DGFT. Some shipping bills are not synchronized between customs & DGFT resulting in delay in imports. Manual registration would help reduce the delay.

B. SIMPLIFYING PROCESS - DEPB ON SUBMISSION OF PROOF OF EXPORT.

Justification:
The current system of availing DEPB benefit is time consuming and causes losses in trading the licenses in case of non-utilization. The existing procedure should be amended to make it more exporter friendly by granting immediate credit in the company account on submission of proof of exports. This would help in fund availability to the exporters.

C. WAIVER / REDUCTION OF PENALTIES FOR LOSS OF BRCS AND SHIPPING BILLS IF DUPLICATE COPIES ARE SUBMITTED.

Justification:
All shipping bills are processed through EDI only. ICC requests that very nominal penalty be charged (instead of 1% as notified vide notification 79/2002) on submission of duplicate shipping bills or BRCs in lieu of original (as export proof) for the closure of Advance Licenses. This could be 0.25% of FOB value subject to a maximum of Rs.25,000/-

D. DUTY-FREE IMPORT OF RAW MATERIAL AGAINST ADVANCE LICENSE AT ANY PORT:

Justification:
Imports may be allowed at any Port even if the Licenses are registered at say Port X i.e. doing away with the system of tele-releasing advice for at least Star Trading Houses. This will save on delays and demurrages for the exporters.

E. SINGLE WINDOW CLEARANCE FOR BOND CLOSURES:

Justification:
In case of Advance Licensing Scheme, after the importation has been completed and Export Obligation has been completely fulfilled, the Licenses are 'closed' by the DGFT authorities after a detailed scrutiny.

However, for Bond (executed by exporter for the duty amount on imported raw material with Customs Department), closure by DGFT is not sufficient. One needs to go through fresh scrutiny procedure again at Customs. This procedure is repetitive and time consuming and delays export bond closures. There is a need for Single Window Closure.

F. SIMPLIFIED PROCEDURE FOR REFUND OF UNUTILIZED CENVAT CREDIT:

Justification:
Companies who are large exporters and consume domestic raw material accumulate huge Excise balances as CENVAT, which they are unable to utilize as no Excise Duty is required to be paid on goods exported out of India.

The procedures for availing refunds of these balances is highly cumbersome and time consuming and exporters do not get refund within a reasonable period (six months) and refunds are without any interest despite undue delays.

G. E-GOVERNACE:

Justification:
The industry and the exporters appreciate the steps taken by the government in simplifying clearance procedures through e-governance initiatives. We urge that this process be carried further such that very soon industry is able to submit all documents on line without need for resubmitting the same physically.

Customs EDI recognition of INCOTERMS:

Our members have also faced problems with the Customs EDI system regarding recognition of transactions involving certain rarely used INCOTERMS. There is a need for urgent correction in this regard as any explanation to be given to Customs involves time and costs and leads to delays in clearance of goods. There is a need for all Customs computers at all locations to recognize all 13 INCOTERMS framed by the International Chamber of Commerce.

H. UNINTERRUPTED GRANTS OF INCENTIVES/ ADVANCE LICENSES:

Justification:
The procedures of the government for closure of files of Advance Licenses etc. is very elaborate and requires plethora of certificates and documents. This leads to delays in applications for closure of files. Besides this, changing conditions in the overseas markets could lead to delays in meeting export obligations beyond the periods granted in the Foreign Trade policy and such cases are submitted by exporters for special consideration of the Foreign Trade authorities. Pendency of such matters is considered as defaults and government stops issue of further benefits/ incentives/ licenses till exporters are in such default.

While there is a procedure to grant 'abeyance' from time to time, which is done on discretionary basis, the stoppage of licenses puts hurdles in carrying out export businesses. We request that the procedure should allow continuation of grant of licenses/ benefits/ incentives uninterrupted for the so called 'defaulters' without they being required to go through the 'grant of abeyance' procedure.

I. TIME BOUND ASSESSMENT OF PROVISIONAL SHIPPING BILLS AND TESTING OF SAMPLES BY CUSTOMS:

Justification:
The assessment of Provisional Shipping Bills sometimes takes an unduly long time. It is requested that the Commerce Ministry take up the matter with Customs authorities to set up a time limit of maximum one month for such an assessment.

Similarly, testing of samples and arriving at conclusion in terms of identity of product and assessment and clearance takes a long time. It is requested that a time limit of maximum 3 months be set for such testing and assessment or automatic finalization (in the event that testing has not been done till then).

J. PROCESSING OF EXPORT CONSIGMENTS ALL DAYS IN A WEEK AND ROUND THE CLOCK:

Justification:
At some ports, it is reported that practically no cargoes enter or are readied after Saturday evening, Sundays or on public holidays which leads to delays in shipment of export cargoes resulting in loss of customer goodwill or even loss of business.

We request that processing of Export consignments is done round the clock and all days in a week (24*7) i.e. round the clock even during weekends and holidays.

K. FACILITY FOR ISSUING PRE-AUTHENTICATED PROCUREMENT CERTIFICATE AND CT-3 CERTIFICATES:

Justification:
This facility is not granted to chemical exporting EOUs with a turnover of less than Rs. 15 Crores. To avoid delays in shipments, it is requested that this facility is granted to all EOUs irrespective of their Sales/ Exports turnover. Therefore, slab of minimum export turnover of Rs. 15 Crores needs to be completely removed.

Sir, in the prevailing global economic scenario, it is imperative for the industry to seek support from Government to continue manufacturing and export activities at a healthy pace. Chemical industry with significant presence in the export markets would need a well considered stimulus package that helps the industry negotiate in the continuing global demand slow down, particularly emanating from the developed world.

In this context ICC believes that Government would sympathetically evaluate all the submissions made by the ICC and consider them for the long term sustainability of Indian producers and exporters in this industry. We would also be happy to have an audience with you and senior officials in your Directorate to personally brief you on our submissions at your convenience.

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