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Q 226: We had earlier imported equipment from Germany.
We sent the party the said equipment for repairs. We submitted Export Declaration Form (EDF) Waiver Certificate from the bank.
We understand that a few items could be repaired at additional cost. Some other items are beyond repair and therefore they are to be discarded and destroyed. The remaining equipment require substantial upgradation. They will be almost becoming new, as the earlier design is outdated. Hence, identification issue at Customs is likely to emerge during return shipment.
Additionally, the party is charging warehouse rental charges. EDF waiver conditions do not permit any forex remittance. How do I resolve this issue? If those discarded items could be repaired in China, can we directly divert the same from European warehouse to save logistics?
A: 1. Your case is covered under export for repair and return of capital goods.
2. It is permitted. However, the procedure for the same is required to be followed.
3. Before the export, did you received any estimate about the repair cost?
4. In most cases, the cost of the repair and other charges relevant to that are generally known to you when the overseas party has physically examined the goods.
5. We trust you must have filed Export Value Declaration as per Annexure-A to Shipping Bill as per Rule 7 of Customs Valuation (Determination of Value of Export Goods) Rules, 2007 as a part of Custom documents.
6. In this form you must have appropriately selected the box, other.
7. We understand that you have approached your banker and have taken a letter from them certifying that against this shipment, no foreign exchange will be realised. This was earlier known as GR waiver. The GR form is discontinued.
8. For many years exporters were required to submit GR form in duplicate.
9. This GR form was a declaration by the exporter undertaking that he will bring foreign exchange of equal amount of the goods exported.
10. Thereafter, this form was modified as Statutory Declaration Form (SDF) to comply with online submission of export documents.
11. Thereafter, by RBI Circular, this SDF and declaration were subsumed in Shipping Bill itself.
12. No separate declaration/form is now required.
13. Since all your exports are for repair and return, you will not be able to give this declaration in Shipping Bill; you have obtained a letter from your bank which states that against these exports, no foreign exchange will be brought by you.
14. This complies RBI requirements.
15. Your transaction can be divided as follows:
(A)
16. Few items could be repaired at additional cost
a) You may get a Proforma invoice/estimates from overseas company stating the amount of total cost which they will charge for repairing goods.
b) If that is acceptable to you, then submit this estimate along with your covering letter to your bank (AD) for remittance of this repair charges.
c) Your bank will not have any problem for remittance of this amount. This will be considered as Current Account Transaction.
d) When these goods arrive in India, the Customs Department, for the purpose of import duty, computes the cost of repair also.
(B)
17. Some other items are beyond repair and therefore they are to be discarded and destroyed
a) Your initial export was declared as export and re-import; you will not be able to fulfill this condition.
b) Therefore, you must obtain a destruction certificate from the overseas company.
c) This letter should mention complete description of goods along with identification as per your export invoice.
d) In this destruction letter, the overseas company should narratively mention the reasons for destruction instead of repair.
e) In case there is any realisation by way of scrap value, then it is to be indicated and remitted to India.
f) In case there is any expenditure for destruction, then the bill for the same must be raised giving full details.
g) You will have to remit the amount through your bank.
h) These goods will not come back to India.
i) You have to submit this destruction certificate to your bank for closure of waiver letter issued by them.
j) There will be no import duty on goods destroyed.
k) If you wish to transfer these goods to China for repair, inform your bank and they may grant you permission for the same.
(C)
18. Remaining equipment require substantial upgradation. They will be almost becoming new, as earlier design is outdated - hence identification issue at Customs to emerge during return shipment
a) Please get a letter from the overseas company mentioning the facts of the case.
b) Let the company deny the normal repairing assignment.
c) The company should provide you with quotation for substantial upgradation.
d) Discuss with your bank that has issued to you waiver letter about accepting this letter.
e) Remit the charges for substantial upgradation.
f) At the time of import, if the identification of the goods is lost or not available, then the Customs will assess full value of new product and will charge the duty.
g) Customs may still view that the said goods (although identification is not available) can be charged import duty based on:
i. Outward freight and insurance
ii. Inward freight and insurance
iii. Repair cost
h) The challenge will be with your bank to close the waiver letter within the time limit.
19. You can remit warehouse rental charges which overseas party is charging. This will be added in repair cost. Duty too will be applicable indirectly on this amount.