Home Short payment terms SME Chatroom: Banks may write off import entry in IDPMS due to quality issues

SME Chatroom: Banks may write off import entry in IDPMS due to quality issues


Q. We are export merchants. We source various items from local parties and export under the Duty Drawback (AIR) and RoDTEP programs. Sometimes we get very good prices from buyers for various reasons, including our negotiating skills. But our shipments are often detained by customs on the grounds that the price at which we export is more than 150% of the price at which we purchase goods from domestic parties. What are the relevant legal provisions under drawback or other rules, on the basis of which Customs can raise such objections?

Rule 9 of the Central Customs and Excise Duty Drawback Rules, 2017 states that “the amount or rate of drawback determined under Rule 3 shall not exceed one third of the market price of the product of export”. The first reservation to condition (1)(b) in paragraph 2 of Notification No. 76/2021-Cus(NT) dated September 23, 2021, relating to the RoDTEP regime, states that “the value of the said goods for the calculation of the Duty credit to be granted under the program shall be the declared FOB export value of said goods or up to 1.5 times the market price of said goods, whichever is lower”.

Rule 8(2)(iii)(b) of the Customs Valuation (Determination of Value of Export Goods) Rules 2007 states that “the competent officer shall have the power to raise doubts as to the value declared on the basis of certain reasons which may include the significantly higher value compared to the market value of goods of similar nature and quality at the time of export”.

Q. We had imported a sample product on a trial basis in 2017 from a potential supplier. It has not been successfully tested and failed our QC test. No payment was made to the customer as it was only sent for testing/trials. However, the seller didn’t mention sending sample or trial on the invoice. The entry invoice is pending in the IDPMS. Now our bank is asking us to either get a letter from customs stating that the invoice was a test shipping invoice, or make payment for the value shown on the invoice (approximately $3,000) to the party . How to deal with this situation?

Paragraph C.8 (xi) of RBI Master Directive No. 17/2016-17 dated 1 January 2016 (as amended), states that “Tier 1 AD banks may close the BoE for such transactions of import where delisting is in progress account of quality issues; undershipment or destruction of goods by port/customs/sanitary authorities in terms of existing guidance on the matter subject to the presentation of satisfactory documentation by the importer, regardless of the amount involved. AD Bank will settle and close the ORM/BoE with an appropriate “adjustment indicator” in the IDPMS”.

In your case, the delisting is only due to quality issues. Thus, your bank should not hesitate to agree to cancel and close the entry invoice in the IDPMS on the basis of your letter explaining the situation and the appropriate documents in support of your statements.

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