Policy Amendments in respect of Duty Free Import Authorisation (DFIA)

No. CLE-HO/POL/CIRCULAR/16-17

April 4, 2017

Members of the Council.

Sub : Policy Amendments in respect of Duty Free Import Authorisation (DFIA)

Dear Member

As members are kindly aware, the Duty Free Import Authorisation (DFIA) notified under Chapter 4 of Foreign Trade Policy 2015-20 provides exemption on inputs required for product manufacture from payment of Basic Customs Duty. However, import of such inputs should be as per quantity restrictions notified in Standard Input Output Norms (SION).

During the review meeting on Foreign Trade Policy 2015-20 held in New Delhi recently, CLE had taken-up the following requests concerning DFIA scheme, for export of finished leather.

  1. Since DFIA allows exemption from only Basic Custom Duty, the already notified All Industry Rates of Duty Drawback (CENVAT NOT AVAILED PORTION) should be allowed for compensating the excise potion of the duty, as in the case of earlier DFRC scheme.
  1. Para 4.29 (viii) to be amended to state that any import item/items under SION with actual user condition shall not be allowed for import under DFIA with transferability and rest of the import items under that SION shall be allowed with transferability. This will ensure that only those inputs with Actual User Condition will not be allowed DFIA with transferability facility.
  1. Leather & Leather goods be exempted from provision of PARA 4.12 of FTP 2015-2020 (i.e. from the condition of mentioning input consumption details in shipping bills), since leather industry has over 50 different processes to process raw hides, these processes requires a very diverse range of raw materials Also, export orders are always for a mix of different types of processed leathers and over 125 different raw materials are used to process a single 20’’ container with approximately 3000 Hides. To list all the raw materials on shipping bills and also to keep track of exact quantities used is humanly impossible.
  1. Terminal Excise Duty (TED) refund to be provided for Deemed Exports (I.E. SUPPLY OG Goods to EOUs) under DFIA, PROVIDED recipient of goods does not avail CENVAT credit.

The DGFT has now issued a Notification No. 42/2015-20 dated 21st March 2017 amending some provisions concerning DFIA scheme. The details of amendments are as follows.

Existing para of Foreign Trade Policy 2015-20Amendment made vide DGFT Notification No. 42/2015-20 dated 21st March 2017 and our remarks
Export Obligation – Advance Authorisation

Para 4.22 (ii)

In cases of supplies to turnkey projects in India under deemed export category or turnkey projects abroad, the Export Obligation period shall be co-terminus with contracted duration of the project execution or 18 months whichever is more.
Para 4.29 (ii) - Amendment

"In cases of supplies to projects in India under deemed export category or projects abroad, the Export Obligation period shall be eo-terminus with contracted duration of the project execution or 18 months whichever is more.

Our remarks : This amendment may not apply to leather sector.
4.29 Validity & Transferability of DFIA

Para 4.29 (v)

Applicant shall be allowed to file application beyond 24 months from the date of generation of file number as per paragraph 9.03 of Hand Book of Procedures.
Para 4.29 (v) - Amendment

Applicant shall be allowed to file application beyond 24 months from the date of generation of file number as per paragraph 9.02 of Hand Book of Procedures.

Our remarks

Para 9.02 of Handbook of Procedures states the following.

Late Cut Wherever any application for any fiscal/financial benefits under FTP complete in all respects is received after expiry of last date for submission of such application, the application may be considered after imposing a late cut in the following manner:











i)

Application received after the expiry of last date but within six months from the last date

2%

ii)

Application received after six months from the prescribed date of submission but not later than one year from the prescribed date

5%

iii)

Application received after 12 months from the prescribed date of submission but not later than 2 years from the prescribed date

10%

Para 9.03 of Handbook of Procedures states the following.

9.03 Supplementary Claims : Wherever any application for supplementary claim is received, within specified time limits, such application may also be considered after imposing a cut @2% on the entitlement

Our remarks

DFIA is now issued on post export basis only. i.e. an application for DFIA has to be made online and a file number will be generated. According to Para 4.29 (ii) of Foreign Trade Policy 2015-20 , Export shall be completed within 12 months from the date of online filing of application and generation of file number. After exports, the application + documents for issue of DFIA needs to be submitted to DGFT office.

As per 4.29 (iv) of Foreign Trade Policy 2015-20, after completion of exports and realization of proceeds, request for issuance of transferable Duty Free Import Authorisation may be made to concerned Regional Authority within a period of twelve months from the date of export or six months (or additional time allowed by RBI for realization) from the date of realization of export proceeds, whichever is later.

This amendment is about late fee payable for submission of such application for DFIA beyond the prescribed time limit. Also, the validity of DFIA is 12 months.

By virtue of the above amendment, different levels of late fee are prescribed for late applications submitted.
4.29 Validity & Transferability of DFIA



Para 4.29 (viii)

No Duty Free Import Authorisation shall be issued for an export product where SION prescribes ‘Actual User’ condition for any input.
Para 4.29 (viii) - Amendment

No Duty Free Import Authorisation shall be issued for an input where SION prescribes 'Actual User' condition and/or Appendix-4J prescribes pre import condition for such an input.

Our remarks

This amendment will facilitate issue of DFIA for a product (including finished leather) wherein SION prescribes actual user condition for any input, by excluding that input from DFIA.

Members may kindly note the above.

Thanks and regards

Ramesh Kumar

Executive Director

COUNCIL FOR LEATHER EXPORTS