No.14/005/176/2005

Aug 23, 2005

Members of the Council

Dear Members,

Sub: 3% duty free import facility available for leather product manufacturers including footwear – Admissibility of procurement of listed inputs from EOUs

As you are aware, duty free import facility to import certain essential and critical components & embellishments is available to the manufacturer-exporters of leather garments as well as all leather products including footwear to an extent of 3% of their previous year’s FOB export value of respective products, in terms of Sl.Nos.167, 167A & 168 read with Condition Nos.21 & 21A of Customs Notification No.21/2002 dated 1.3.2002 as amended from time to time.

Recently, there have been several queries from the members as to whether the 3% duty free import facility can be used for procuring the listed inputs from the Export Oriented Undertakings (EOUs).

In this regard, the Council wish to clarify that apart from the direct imports from abroad, the manufacturer-exporters can also procure the components & embellishments specified in the above Notification from EOUs, without any payment of duty. In other words, the 3% duty free import facility is also available to source the listed inputs from the 100% EOUs.

This is permitted vide Notification No.22/2003-Central Excise dated 31.3.2003. The text of the whole Notification is available in the website of CBEC www.cbec.gov.in and also in www.ieport.com, under the Central Excise heading.

Member-exporters desirous of procuring listed inputs from EOUs can approach EOUs and obtain necessary documents (i.e. invoice specifying the inputs and its costs) duly certified by the Bond Officer in-charge of EOU’s. With such documents, CLE may be approached and import certificates may be obtained, as per the normal procedures & guidelines of the Council.

As related information, we wish to state that supplies of the listed inputs from the EOUs to the Units in DTA under the 3% duty free facility will be counted for the purpose of fulfillment of positive Net Foreign Exchange Earnings (NFE), in terms of Para 6.9(e) of the Foreign Trade Policy. The said Para is reproduced below:

6.9(e) Following supplies effected from EOU/EHTP/STP/BTP units to DTA will be counted for the purpose of fulfillment of positive NFEs:.

Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance.

Member-exporters may kindly take note of the above, and accordingly avail of the 3% duty free import scheme.

Thanking you,

Yours faithfully,

K Abdul Sattar Khan
Asst Director