Manufacturing bond scheme: exporters facing problems in getting duty drawback

Exporters are facing serious problems in obtaining duty drawback under the "manufacturing bond scheme", pointing towards immediate amendment in the SRO.450 (I)/2001 for removal of a technical anomaly to clear thousands of pending claims.
Exporters told Business Recorder on Saturday that relevant associations have time and again approached the Board for removal of the technical anomaly in the "manufacturing bond scheme", but necessary amendment has yet to be incorporated in the scheme. On the pattern of "temporary importation scheme", an amendment is also required in the "manufacturing bond scheme" for clearance of pending claims.
This technical anomaly in the SRO450 (I)/2001 of Customs Rules 2001 is creating serious problems for the export sectors particularly textile etc. Due to the pendency of rebate claims, exporters are facing liquidity crunch, which has affected exports making it difficult for the export sectors to compete in the international market.
The issue mainly related to the adjustment of custom duty impact of duty free temporarily imported raw materials from duty drawback payments (export rebate) being imported under SRO.450 (I)/2001 and SRO 1065(I)/2005 and subsequently used in the manufacturing of finished products being exported from Pakistan.
They said that the Board had partially resolved the issue by making amendment in "Temporary Importation Scheme". However, the same amendment in SRO 450(I)/2001 was omitted by the Board. Therefore, the same anomaly still exists in the "manufacturing bond scheme" (SRO 450(I)/2001). Both the SRO1065 (I)/2005 and SRO 450(I)/2001 have been used for duty-free temporary import and subsequently used in the exported goods.
Exporters further pointed out that amendment in the requisite notifications ie SRO450 (I)/2001 and SRO1065 (I)/2005) was required in which temporarily duty free imported raw materials being imported by the exporter and subsequently used in the exported goods in order to resolve the long pending issue/anomaly.
They said that the FBR had repeatedly given instructions to the Export Collectorte Karachi to clear the pending claims under SRO450 (I)/2001. The Export Collectorte Karachi had responded that amendment proposal in the notification is already under consideration with the Board and decision in this regard is still awaited. All pending claims will be disposed of on merit as soon as the clarification/amendment in the said SRO is issued from the Board.
Exporters were of the view that the FBR should amend SRO450 (I)/2001 from retrospective effect as amendment made in "temporary importation scheme" for removal of the same anomaly across the board. Details revealed that the rule 352 of the Customs Rules 2001 is related to the "procurement, manufacture, export and removal of goods by a licensee of a manufacturing bond".
Under the scheme, the licensee may procure duty paid input goods manufactured locally for production of finished goods and he would be entitled for payment of duty draw back and rebate of central excise duty worked out on the basis of standard duty drawback notifications on the f.o.b. value of export. Provided that the amount of duty drawback and rebate of central excise duty shall be reduced by the proportionate duty amount, applicable at current rates, on the quantity of used duty free input goods imported or procured locally.
Sources said that the formula specified in the "manufacturing bond scheme" for calculation of duty drawback rates is not realistic, which is crating problems for the exporters. Certain individual exporters have also approached the relevant collectorate, who have agreed with the viewpoint of the rebate claimants.
According to sources, the admissible amount of duty drawback rate was actually reduced due to technical errors in the notification. The procedure for calculation of drawback given in the rule 352 of the Customs Rules 2001 needed to be reviewed.
Exporters repeatedly demanded a new amendment to settle the issue for clearance of pending claims, as the duty drawback rates were actually reduced due to ambiguity in the Customs Rules. Sources said that both the collectors of customs and exporters have demanded to make similar kind of amendments in Customs Rules, which was made in "Temporary Importation Scheme" to remove ambiguity in the notification.
Following amendment is needed in the SRO450 (I)/2001: "In cases where temporarily imported goods are used in addition to other imported raw materials on the import of which duties and taxes have been paid and repayment is admissible on export of ultimately manufactured products, the f.o.b. price for claiming such repayment shall be the value excluding value of the goods temporarily imported under these notifications"
It is important to mention that the Board had restored the procedure for accurate calculation of duty drawback on the import of temporarily imported accessories as well as duty paid raw materials used in manufacturing of export products under SRO.1065 (I)/2005.
Now, exporters have informed the collectors that similar kind of amendment should be introduced in the Customs Rules. The amount of duty drawback has been reduced under the "manufacturing bonds" as well as the old ambiguity in the SRO.1065. As amendment in SRO.1065 had removed the flaw in the "Temporary Importation Scheme" in 2007, the same kind of amendment in Customs Rules might also solve the problem in case of "manufacturing bonds rules".