SEZ units permitted to re-export restricted items

The Government has allowed units in special economic zones (SEZs) to export prohibited or restricted items, provided they import all the raw-materials used for making such products and add value before re-exporting. However, this permission comes with riders. Each such case will have to be placed before the Board of Approval (BOA) for SEZs, headed by the Commerce Secretary, for its nod so that the views of the Directorate General of Foreign Trade, the Revenue Department and others can be considered before taking a decision, the Commerce Ministry said in an instruction note dated March 4. Units in the domestic tariff area (DTA) can supply restricted items to an SEZ developer or unit for setting up infrastructure facility or for setting up of a unit. But significantly SEZ units cannot export any restricted or prohibited item if the raw material used in those is sourced domestically. DTA is the area outside the SEZs, but within the country where all taxes and duties apply. SEZs are tax-free enclaves. DTA units can also supply raw material to a SEZ unit for manufacturing except refrigeration, cutting, polishing and blending. However, these will also require prior approval of the BOA, the instruction said. According to the present Foreign Trade Policy (FTP), SEZ units cannot export “prohibited items of exports”. “This is just correcting a technical anomaly,” a Commerce Ministry official told Business Line. Foreign Trade Policy provisions say that an item whose import is restricted can be imported under Customs Bond for export. For instance, export of imported logs or timber is not prohibited. Therefore, the permission granted to SEZ units, as per the instruction on March 4, puts this exception at par with those in the foreign trade policy and removes the anomaly. The Government imposes prohibitions on exports of some commodities owing to certain national requirements. Therefore, SEZ units are also not permitted to procure these items from domestic area and export the same. – www.thehindubusinessline.com