JULY 11, 2015

By Debasish Bandyopadhyay

ON the occasion of release of the new Foreign Trade Policy (FTP 2015-2020), the Hon'ble Minister of State for Commerce and Industry while highlighting the Government's focus on improving the ease of doing business in India commented -

"Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objectives of the FTP is to move towards paperless working in a 24x7 environment."

In keeping with the vision of our Prime Minister, the new government has continuously been working on the areas of trade facilitation and removal of regulatory bottlenecks, ever since it came to power. Likewise, through the new Foreign Trade Policy, the government has taken up a series of measures to improve the ease of doing business by rationalization of existing regulations in order to improve the business environment towards making it more efficient, effective, simple and business-friendly for tapping the huge potential for international trade consisting of imports and exports.

In respect of procedural simplification, one important issue is the execution of Bond and Bank Guarantee (BG) before Customs authorities for various purposes under the provisions of the Customs Act and Foreign Trade Policy. In terms of para 2.35 of FTP read with para 2.29 of Handbook of Procedures, holders of Advance Authorisation/ EPCG are required to execute BG/ Legal undertaking (LUT) with Customs Authorities before clearance of goods. Further, it is prescribed that Authorisation holder shall furnish BG/LUT to Regional Authority (RA), DGFT as per Customs Circular No.58/2004 dated 31.10.2004, as amended in case of indigenous sourcing. It is also mandated under the said Handbook of Procedures that the Customs authority shall release/redeem the BG/LUT only after receipt of NOC or EODC from the RA concerned.

It is pertinent to note that the Customs Authority, from time to time issues Circulars on the norms for execution of Bond and Bank Guarantee for various Schemes under the Foreign Trade Policy. Incidentally, the procedures for execution of Bond and Bank Guarantee are clearly spelt out and reviewed from time to time by the Customs Authority in order to redress the difficulties faced by the trade and industry but there is a complete lack of procedural clarity on the mechanism of release of such Bond and Bank Guarantee by the Customs Authority . In respect of reference for such release of Bond and Bank Guarantee in the relevant laws, Handbook of Procedures under FTP simply mentions that Customs authority shall release the BG/LUT only after receipt of NOC or EODC from the RA concerned but no such documentary requirement or necessary modalities are prescribed therein. Further, in the Customs Act, 1962, there is no such clear documentary pre-requisite or any other specified process for cancellation of Bond and Bank Guarantee enumerated.

Let us have a look at the procedures that are being currently followed in various Custom Houses towards cancellation of bond and bank guarantee executed for the purpose of export promotional schemes under the Foreign Trade Policy. The documents that are presently required to be submitted with the Customs Authority are as follows;

• Copy of EODC/Redemption letter issued by the RA concerned,

• Copy of Licence,

• Copy of application for the above Licence,

• Copy of Installation Certificate, if applicable,

• Copy of Shipping Bills and BRCs,

• Copy of import Bill of Entry,

• Import-Export statement.

The relevant customs authority verifies the above documents and once satisfied with the obligation on bond and bank guarantee, releases the bond and bank guarantee and makes necessary entry in their records on fulfilling the obligation.

Simplification of Customs procedures for enhanced ease of doing business and trade facilitation is the top priority of the Government which has already taken several steps towards trade facilitation and procedural simplification including reduction in number of mandatory documents for export / import of goods from / into India & the above may be one of such uncharted areas where clarity is a pressing need. Government should prescribe a simplified process for release of Bond and Bank Guarantee from the Customs and/ or DGFT Authority, as the case may be, to ease out the confusion and difficulty faced by the trade .

It may well be of relevance to refer that online filing of documents or applications and Paperless trade in 24x7 environment are the goals of the new FTP. Now, hard copies of certain applications and specified documents are not required to be submitted with the relevant authorities resulting into considerable saving of paper as well as cost and time for the importers/exporters. Moreover, as part of the e-governance initiatives, communication between DGFT & Customs on transmission of certain documents and online data exchange are already put in place. Practically, only NOC or EODC from the RA concerned shall suffice to release the Bond and Bank Guarantee from the customs authority.

Keeping in view the above development on the e-governance front, repeated submission of huge documents such as copies of application for Licence, Installation Certificate, related Shipping Bills, BRCs and import Bill of Entry etc. with the relevant authority is an unnecessary compliance burden and true testimony to the height of ensuing irrationality that has been plaguing the tax administration in India. Here, i t is significant to note that during the course of issuance of EODC, the RA concerned verifies all the above referred documents and the EODC is issued only if he is satisfied with the obligation on bond and bank guarantee.

Hopefully, suitable procedure/clarification will find its way into the relevant laws to get rid of the above avoidable difficulty.

(The views expressed are strictly personal)