Clarification regarding duty drawback allowed in cases of short- realisation of export proceeds due to bank charges deducted by foreign banks - Customs - Public Notice No. 25/2019

OFFICE OF THE COMMISSIONER OF CUSTOMS (PUNJAB, HIMACHAL PRADESH CHANDIGARH) CUSTOM HOUSE , G.T.ROAD, SAHNEWAL, LUDHIANA- 141120 C. No. VIII-48(13)Tech/46 47/Ldh/2017 Dated: 30.10.2019 Public Notice No. 25/2019 Subject: Clarification regarding duty drawback allowed in cases of short- realisation of export proceeds due to bank charges deducted by foreign banks - reg. Kind attention of the members of trade (importers/exporters/Customs brokers) and all persons concerned is invited to the above mentioned subject. 2. Representations have been received by the Board from Export Promotion Councils, Trade Bodies and individual exporters regarding show cause notices issued by some Customs field formations for recovery of duty drawback on account of short-realisation of export sale proceeds due to bank charges deducted from export invoice by the banks. Exporters have contended that these short realisations are actually service charges deducted by intermediary banks while remitting payments from abroad and the said charges are documented by the banks. It has been requested such short-realised export sale proceeds may be considered as full realization and that duty drawback not be recovered for such short realisation. 3. The matter has been examined by the Board. In this regard, the Reserve Bank of India has clarified that such deductions are enabled under Notification No. FEMA 23(R)2015-RB dealing with Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. In respect of various export promotion schemes, para 2.52 of FTP 2015- 20 also states that free foreign exchange remitted by buyer after deduction of bank service charges are taken as export realisation under export promotion schemes of FTP. Earlier also, in respect of agency commission paid to agents abroad for securing export contracts, Board vide Circular No. 64/2003- Customs dated 21.07.2003 has allowed such commission up to the limit of 12.5% of FOB value to be considered for payment of duty drawback without deducting it from FOB value in line with the RBl's Circular No.AD (MA Service) 17, dated 19.5.1999 and DGFT's Policy Circular No. 55 (RE- 98) dated 10.02.1998. 4. In view of the above, the Board has clarified that duty drawback may be permitted on FOB value without deducting foreign bank charges. It has been further clarified that since agency commission up to the limit of 12.5% of the FOB value has been allowed, such deduction on account of foreign bank charges is allowed within this overall limit of 12.5% of the FOB value. However, agency commission and foreign bank charges, separately or jointly, exceeding this limit should be deducted from the FOB value for granting duty drawback. 5. Accordingly, the field formations may consider on merits exporter's requests for regularising such short-realisation on account of foreign bank charges based on documentary evidence such as export invoice, bank's confirmation regarding foreign bank charges, etc. to justify such deductions. 6. All the Officers concerned are hereby directed to follow the above mentioned instructions scrupulously. Difficulties, if any, in this regard may be brought to the notice of the Joint Commissioner (Drawback). (A. S. Ranga) Commissioner