Manufacturing bond scheme: FBR unveils new formula for duty drawback rates

The Federal Board of Revenue has issued a new formula for calculation of duty drawback rates for exporters under the "manufacturing bond scheme" to clear thousands of pending claims at the level of Model Customs Collectorate (MCCs). The FBR on Thursday issued SRO.612(I)/2009 through amendment in Customs Rules, 2001 to fulfil a major demand of exporters.
The amended SRO will resolve the issue of pending duty drawback claims of exporters lying in different collectorates due to anomaly in calculation of duty drawback payment. The new formula for working out duty drawback rates under the "manufacturing bond scheme" is a right step towards facilitation to the export sector.
According to the new duty drawback calculation formula, 'the licensee may procure duty-paid input goods manufactured locally, in addition to duty free input goods for production of finished goods and if duty drawback and rebate of federal excise duty is admissible on export of such finished goods on the basis of standard duty drawback and rebate notification, the f.o.b. value for claiming such duty drawback and rebate shall be the value excluding value of the duty-free goods imported under these rules'.
Details revealed that exporters were facing 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 further pointed out that amendment in the requisite rules 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.
Under the previous 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 the formula specified in the "manufacturing bond scheme" for calculation of duty drawback rates was not realistic, which created 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. Keeping in view of exporters' problem, the FBR has resolved a major issue of the exporters through amendment in the customs rules 2001. The duty drawback calculation formula has been revised through SRO.612(I)/2009 in view of exporters suggestions.