The government has taken a final view on the metallic scrap import issues in a series of circulars issued by the Central Board of Excise and Customs and the Directorate General of Foreign Trade. The pre-shipment inspection certificate at the original port of loading will apply to all scrap in un-shredded, compressed and loose forms regardless of the origin.

The certification requirement was earlier limited to only countries affected by war or rebellion. Shredded scrap, however, is freely importable from any port without a pre-shipment inspection certificate but must pass the test of 10% inspection.

The Directorate General of Foreign Trade too revised the pre-shipment inspection certificate to remove the limitation of certification for countries facing war or rebellion.
The Central Board of Excise and Customs has introduced additional conditions on customs clearance to differentiate between a manufacturer and a trader. The bias is, however, against traders in the belief that the manufacturer is comparatively less prone to malpractices while the trader will escape from the customs net easily in the absence of the factory establishment burden. Apparently, the board has not learnt from the explosions at Bhushan Steel where a long-established manufacturer is said to be the culprit.

The Central Board of Excise and Customs circular of October 18 prescribes October 25 as the crucial cut off date for determining the status in terms of past and future consignments.

Consignments which left the port of origin before October 25 will be subject to 100% physical examination at the port itself where the importer is a trader. Given the congestion at the container depots and ports, consignments may well remain stuck at ports for months incurring demurrage, container rent and interest on capital, besides pilferage.

The manufacturer-exporter, on the other hand, is allowed to remove the held up scrap containers to his factory under re-warehousing procedure for 100% examination by the jurisdiction excise officer.

The second category of imports after October 25 will be subjected to the new procedure which allows import of metal scrap only in shredded condition in the normal case.
In the special case of imports in un-shredded, compressed and loose form, imports will be only through major sea ports and the ICD Tughlakabad at New Delhi.

Special areas in the ports will be identified for storage and examination of the scrap. The EOUs and special economic zones (SEZs) can clear the un-shredded scrap in their own units for customs examination, but the imports must be through 15 specified points only.

Shipping lines have been warned that they will be penalised under the Customs Act for any abatement for irregular imports if any consignment of un-shredded scrap is loaded in their ships without the specified pre-shipment certification.

There is no penalty prescribed for wrong or improper certification by the pre-shipment inspection agencies. Presumably, the delisting in the Handbook of Procedure is the only penalty which will be enforced by the DGFT. In practice, the certification from a foreign agency whose services are paid by the exporter, who himself is the subject of inspection, makes little sense.

The un-shredded scrap is subject to 25% examination by the manufacturer-exporter and 50% examination in the case of trader- importer. The selected containers will be examined 100%.

It is expected that the current spurt in the prices of scrap will peak and start falling now that the government has made up its mind to deal with customs clearance of scrap.
The users have other complaints also on the current changes in policy and procedure.

They say the current problem is mainly due to steel scrap. Clubbing all types of metal scrap with steel scrap is not correct since the other scrap is completely different in terms of supply source, price, processing technology and end use.

Separate and liberal procedures should be prescribed for copper, brass, nickel, aluminium, lead, zinc and tin. In fact, enterprising customs inspection may well ask for import of gold and silver scrap with pre-shipment inspection on the grounds that these are also classified as metals.

There is well laid down system of detailed scrap classification on international standards for the non-ferrous scrap which is working successfully for the past eight years without any problem. The conditions of shredding or pre-shipment inspection will create new problems in an otherwise smooth system.

Follow up on FTP: The Central Board of Excise and Customs (CBEC) has finally issued detailed circulars on follow up on the announcement made by commerce minister Kamal Nath in the foreign trade policy released on August 31.

A very simple form is now prescribed for advance licence and EPCG imports. All exports above Rs 5 core or central excise registered manufacturer exporter above Rs 1 crore are exempted from bank guarantee. Manufacturers-exporters need put up only 25% of the duty forgone by way of bank guarantee to back the bond. Small traders will, however, must furnish bank guarantee for 100% of the duty forgone to import raw materials or capital goods at zero duty or concessional duty of 5%.

The new Drawback Commissioner, PK Mohanty, has issued a circular to withdraw an earlier circular in which DEPB benefit was denied to exporters who use their own DEPB for making duty free imports. The narrow technical interpretation was used earlier to kill the very spirit of the DEPB licence. Fortunately, the correction is now in plea and let us expect that the measure has retrospective effect.

The Drawback Commissioner has also issued a long circular covering 12 points to follow up on the promises made in the Foreign Trade Policy.

The status report on each point is given in the circular along with the gist of the implications of the customs. The field formation have been told that they can debit countervailing duty against the DEPB and Cenvat credit will be available on the debit, the earlier system of cash payment condition for Cenvat benefit has been dropped in the new Foreign Trade Policy.