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Regarding Special Value Based Advance Licensing Scheme for export of
ready - made garments -Changes effected in the Handbook of Procedure, Vol. I
published on 30.4.95 - Issue of notifications
Circular No. 65 dated 13th
June 1995
Special Value based Advance Licensing Scheme Introduced in 1992
A Special Value
Based Scheme for exporters of ready-made garments was introduced by Ministry of
Commerce vide their Notification No. 39 (N-7) /92-97 dated 27th August 1992. To
give effect to this scheme Notification No. 104/ 93-Customs dated 16th March
1993 was issued. In this connection attention is invited to Circular No. 6/93
dated 30th April 1993 issued from F.No. 605/98/93-DBK. In the revised
edition of Handbook of procedure, Vol.I published on 30th March 1995
the Special Value Based Advance Licensing; Scheme for garment sector has
undergone significant changes. Accordingly, Notification No. 104/93-Customs has
been amended vide Notification No. 105/95*-Custom dated 2nd June 1995 to
restrict its applicability for import against licences issued on or before 30th
April 1995 under the scheme.
2.
New Scheme 'A' for Garment Sector: The scheme as contained in
Appendix XXIIA of Handbook of Procedure, Vol.I issued on 30th April, 1995 has
been redesignated as Scheme 'A' and another Scheme designated as Scheme 'B' has
also been introduced. Scheme 'S' which is in continuation of the earlier scheme
has undergone some changes as under:
(a) With the deletion of
para 70 from the Exim Policy, exports under the Scheme will now beeligible for drawback
wherever admissible. Since no All Industry Rate of drawback has beennotified for exports under
this scheme, the exporters can claim Brand Rate of drawback for the inputs other
than those permitted to be imported duty free under the scheme.
(b)
Earlier trimmings and embellishments listed in the notification were
permitted only to theextent of 25% of the value of the fabrics
actually imported. The revised scheme permits import of such Trimmings and
Embellishments does not exceed 20% of the CIF value of the licence.
(c)
It has been specifically provided that at the time of closure of DEEC
Book. The exporter shallsatisfy the Licencing Authority that the
quantities of fabrics, trimmings and embellishmentsimported have been actually used
in the garments, which were exported under the Scheme.Thus the Scheme
continues with actual user condition i.e. imports of inputs have to precedeexports
and all inputs are required to be used in the export product only.
(d)
In the new Exim Policy announced with effect from 1st April, 1995, a
provision has beenmade under Duty Exemption Scheme for
execution of bond with the Customs authorities.Accordingly, the Licencing
authority whereas a bond with suitable surety or security isrequired
to be executed with the Customs authorities. The quantum of Bank Guarantee to betaken
with the bond has been prescribed vide Ministry's Circular No. 52/95 dated
25.5.95issued from F.No. 605/72/95- DBK.
A notification No.
106/95-Customs dated 2.6.95 has been issued to give effect to this Scheme.
3.
New Scheme 'B' for Garment Sector: A new Scheme 'B' which has been
introduced, provides for issuance of Value Based Advance Licence upto 150% of
the FOB value of appellant's exports for ready-made garments in the preceding
licencing year. After obtaining the licence, the exporter can accept export
orders from the foreign buyer, against an irremovable letter of credit opened by
foreign buyer in freely convertible currency. The licence holder will be
permitted to open back to back overseas letter of credit for souring his
inputs from abroad subject to the condition that such back to back overseas
letter of credit should not exceed 50% (fifty percent) of the value of
irrevocable letter of credit opened by the foreign buyer of goods in favour of
the exporter. Thus, value addition under the scheme would automatically by 100%.
3.1 The Scheme
'B' allows import of fabrics required for manufacture of garments to be exported
and also allows import of trimmings, embellishments and sample yardage by the
exporter. The Indian exporter can only import trimmings, embellishments and
sample yardage upto a value not exceeding 3% of the value of the Letter of
Credit he can open for procuring his inputs (which is 50% of the value of the
irrevocable Letter opened by his purchasers abroad) for such imports either
individually or collectively. The balance portion of the Letter of Credit could
be utilised for the import of fabrics. For example, if the Indian exporter gets
an irrevocable Letter of Credit in his favour for export of garments for value
of Rs. 100/-, he can procure raw materials from abroad for a value not exceeding
Rs. 50/-, on the basis of back-to-back Letter of Credit. Since the value of
Letter of Credit opened by the Indian exporter is Rs. 50/-, he can import
trimmings and/ or embellishments and/or sample yardage for a value not exceeding
3% of the value of his Litter of Credit, i.e. for 3% or Rs. 50/-, that is, Rs.
1.50 only. The value limit of Rs. 1.50 can be utilised for import of trimmings
or embellishments or sample yardage or any combination ot these three items.
Accordingly, the value of import of fabrics (other than sample yardage) for
purpose of fabricating the garments for export would be to the extent of 97% of
the value of the Letter of Credit opened by him, i.e. Rs. 48.50 in this case. In
case the Indian exporter does not want to import trimmings, embellishments or
sample yardage at all, or imports the same to the extent or lesser than 3% of
value of back to back overseas Letter of Credit opened by him for import of his
inputs, he can use the full value of Letter of Credit or the balance of value of
Letter of Credit as the case may be, for import of fabrics required for
manufacture of export product.
4. A
Notification No. 107/ 95-Customs dated the 2nd June 1995 has been issued to give
effect to this Scheme. Conditions regarding drawback, execution of bond with
bank guarantee, actual use of the imported materials shall apply to this scheme
also. Physical imports have to take place before exports and the items imported
cannot be transferred or sold in any form in the domestic market
5. Other
conditions of Value Based Advance Licences to the extent they are not
inconsistent with the special provisions of this scheme are applicable for
import and exports under these schemes also.
6. You
are requested to take note of the Exim Policy, details of the schemes in
Appendix XXIIA of the handbook of Procedure, Vol.I and the Customs notification
and bring the aforesaid changes to the notice of field officers by issuing
suitable standing orders separately for old schemes (if not already done), new
Scheme 'A' and Scheme 'B'. Similarly by separate detailed Public Notice/ Trade
Notice, the trade interests may be suitably informed of the Schemes. Copies of
the Standing orders and Public Notice issued should be forwarded to Commissioner
(DRAWBACK) as well as to Director general of Inspection & Audit
(Customs and Central Excise).
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