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Regarding Deduction of Air Freight Element from F.O.B. Value
Customs
Circular No. 74 dated 8th November 2002
Apparel
Export Promotion Council (AEPC) has represented that Customs authorities have
initiated recovery proceedings in respect of certain garment exporters on the
premise that they have wrongfully availed excess drawback on consignments, on
the f.o.b. value including the element of air freight which otherwise merited
deduction.
2.
AEPC on the contrary has asserted that the contracts/ LC have been on
freight collect basis with the terms of shipment by sea. However, in few cases
only, due to production constraints and other unavoidable circumstances, the
exporters were compelled to airlift the shipments and have borne the airfreight
independently without affecting the f.o.b. value of the goods. AEPC has thus
contended that there is no wrongful availment of drawback.
3.
The issue has been examined. It is clarified that if the buyer and the
seller have contracted the goods on f.o.b. basis and the same is reflected in
the contract and the LC, it is immaterial that the exporter has shipped the
goods by sea or by air. If the freight is on collect basis and the exporter is
paying more as air freight due to the exigency of the situation without
affecting the f.o.b., it would not be justified to re-work the drawback amount
by deducting the freight element from the contracted f.o.b. value.
4.
This applies to all kinds of commodities. All pending cases of the
parties may be decided accordingly.
5.
Suitable public notices for information of the trade and standing orders
for guidance of the staff may kindly be issued accordingly.
6.
The receipt of this Circular may kindly be acknowledged.
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