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Export Oriented Units Rules, 1998    

 15th  April, 1998  

 

In exercise of the powers conferred by section 219 of the Customs Act, 1969 (IV of 1969), section 37 of the Central Excises Act, 1944 (I of 1944) and section 50 of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to make the following rules, namely : —

 

1.    Short title and application : — (1)    These rules may be called the Export Oriented Units Rules, 1998.

 

(2)    They shall apply to the imported goods as specified in the First Schedule to the Customs Act, 1969 (IV of 1969), excisable goods as set forth in the First Schedule to the Central Excises Act, 1944 (I of 1944), and goods/supplies chargeable to sales tax as specified in the Sales Tax Act, 1990, without payment of customs duty, central excise duty and sales tax, as the case may be, for the manufacture of goods primarily meant for export.

 

2.      Definitions : —  In these rules, unless there is anything repugnant in the subject or context,-

(a)    “Act” means the Customs Act, 1969 (IV of 1969), the Central Excises Act. 1944 (I of 1944), and the Sales Tax Act, 1990;

 

(b)    “Analysis Certificate” means a certificate issued by the Collector of Customs under rule 6;

 

(c)    “bond” means a bond in the prescribed form executed by the licensee, binding himself for abiding by the required conditions and payment of government dues and penalties, if any, in case of default;

 

(d)    “export oriented unit” means a bonded warehouse licensed by the Collector of Customs under rule 3.

 

(e)    'input goods” means all goods and crimped polyester staple fibre, 51mm to 64mm staple length, above five denier, hollow and solid, for use in filling (quilting) purposes only and not suitable for spinning, except any other polyester staple fibre required for the manufacture of finished goods meant for export, such as raw materials, accessories, sub-components, components, sub-assemblies, assemblies and includes unrecorded media for development of software and recorded software used as tools for development of software as approved by the Collector of Customs in the Analysis Certificate;

 

(f)    “licensee” means a person or firm which is registered under the Sales Tax Act, 1990, and has been granted by the Collector of Customs a licence to operate an export oriented unit under these rules;

 

(g)    “manufacture” means any process incidental or ancillary undertaken in the manufacture of finished goods under these rules and includes re-cycling, re-conditioning, repairs, re-engineering, re-packing and labelling; and

 

(h)    “vendor” means a person who is registered under the Sales Tax Act, 1990, and to whom goods are provided by the licensee for further manufacture of goods.

 

3.    Licensing : — (1)    Any person desirous of operating an export oriented unit shall apply to the concerned Collector of Customs in the form as set out in Appendix I along with the following documents, namely : —

 

(a)    the site plan of the proposed export oriented unit;

 

(b)    details of the type of machinery installed in the export oriented unit;

 

(c)    total value of the exported goods by the applicant in the previous one financial or calendar year (if applicable) and value of goods intended to be manufactured in the export oriented unit;

 

(d)    national tax number card or certificate issued by the concerned Income Tax Authority;

 

(e)    banker's certificate regarding financial transactions of the applicant in the last two years;

 

(f)    memorandum and articles of association in case where the applicant is registered under the Companies Ordinance, 1984 (XLVII of 1984), or partnership deed if it is a partnership firm;

 

(g)    copy of the national identity card of owner/directors of the export oriented unit;

 

(h)    lease/tenancy agreement with written permission from the landlord to use the premises as export oriented unit;

 

(i)     certificate from supplier of fire fighting equipment installed in the premises regarding its validity date;

 

(j)     comprehensive insurance policy covering all risks such as fire, burglary, etc., issued by an insurance company registered with the Controller of Insurance, Ministry of Commerce, in the sum equal to the amount of customs duties, central excise duty and sales tax involved on the imported as well as locally procured customs duty, central excise duty and sales tax free input goods intended to be stored in the export oriented unit;

 

(k)    an undertaking by an insurance company duly approved by the Controller of Insurance, Ministry of Commerce, on the stamp paper undertaking that-

 

(i)     no change whatsoever shall be made in the insurance policy issued without prior intimation to the  concerned Collector of Customs;

 

(ii)     full premium under the aforesaid insurance policy has been duly received;

 

(iii)    in case the licensee does not make the required stock declaration in time the company shall immediately inform the concerned Collector of Customs;

 

(iv)   breach of warranty by the licensee or non-compliance or omission of any nature by the licensee shall not prejudice any claim lodged by the concerned Collector of Customs; and

 

(l)     recommendations of the relevant representative Trade Association or Chamber of Commerce and industry to Export Promotion Bureau.

 

(2)    On receipt of an application alongwith the documents prescribed in sub-rule (1), the concerned Collector of Customs, after such verification as he deems necessary, may issue a non-transferable licence valid for three years without any fee or establishment charges within seven days of such verification to the applicant to operate an export oriented unit.

 

4.    Premises of export oriented unit : — (1)    The licensee shall either own the premises of export oriented unit (hereinafter called the premises) or have a lease thereof in his name for the period for which the licence is sought to be issued.

 

(2)    The premises shall be on an independent area having an independent entry or exit from a public area and having no other entry or exit.

 

5.      Insurance of export oriented unit : —  The licensee shall obtain the insurance policy in the sum equal to the amounts of customs duty, central excise duty and sales tax leviable on the input goods imported or locally procured from insurance company duly approved by the Controller of Insurance, Ministry of Commerce.

 

6.    Analysis Certificate : — (1)    The licensee shall apply to the concerned Collector of Customs in the form set out in Appendix II for issuance of an Analysis Certificate showing the input and output ratio of input goods viz., finished goods and wastage.

 

(2)    The concerned Collector of Customs, or an officer of customs authorised by him in this behalf, shall after such verification as he deems necessary, issue an Analysis Certificate within seven days showing the actual quantity of input goods used and wastage occurred in the manufacture of one unit of finished goods.

 

(3)    The Analysis Certificate shall not be required for every consignment of input goods if the finished goods are the same for which the Analysis Certificate has already been issued.

 

(4)    A separate Analysis Certificate shall be applied for and issued for every new finished goods.

 

(5)    In case of expensive samples such as leather jackets or garments, etc., instead of complete finished goods e.g., a 6” x 6” piece of leather or lining material, a button or a piece of thread, or a three inches long zipper, etc., may be retained by the concerned Collector of Customs for the purpose of issuance of the Analysis Certificate.

 

7.      Procurement of input goods for production of finished goods meant for export : — The input goods for production of finished goods according to the specifications approved in the Analysis Certificate shall be procured by the licensee in any of the following manners:

 

(a)    Duty-free import of input goods:

 

(i)     The input goods may be imported by the licensee without payment of customs duty, central excise duty and sales tax;

 

(ii)     the licensee shall file a bill of entry for the input goods imported and shall specifically declare that input goods are being imported under export oriented unit scheme for manufacture of export goods;

 

(iii)    the licensee shall maintain record as set out in Appendix III and one copy thereof in the form of a return shall be endorsed to the concerned Collector of Customs under signatures and seal of the owner/director of the company owning the export oriented unit duly verified by the customs officer in charge of the export oriented unit;

 

(iv)   the input goods received in export oriented unit shall be entered in the record as provided in sub-clause (iii) and the input goods removed shall be debited therefrom and the export goods made therefrom shall be credited in the record of export goods;

 

(v)    the quantity of factory rejects shall be accounted for separately; and

 

(vi)   the quantity of input goods equivalent to the waste shall be accounted for separately.

 

(b)    Procurement of input goods without central excise duty against AR-3:

 

(i)     The input goods produced in the local excisable unit shall be procured by the licensee without payment of central excise duty against AR-3 or any other rule for the time being in force;

 

(ii)     the licensee shall maintain record as set out in Appendix IV and one copy thereof in the form of a return shall be endorsed to the concerned Collector of Customs under signature and seal of the owner/director of export oriented unit duly verified by the customs officer in charge of the export oriented unit;

 

(iii)    the goods received in export oriented unit shall be entered in the record as provided in sub-clause (ii) and the input goods removed shall be, debited therefrom and the export goods made therefrom shall be credited in the record meant for export goods;

 

(iv)   the quantity of factory rejects shall be accounted for separately; and

 

(v)    the quantity of input goods equivalent to the wastage shall be accounted for separately.

 

 

(c)    Procurement of sales taxable input goods:

 

(i)     The taxable goods meant for further processing shall be supplied to the licensee of the export oriented unit against a tax invoice after payment of sales tax; and

 

(ii)    the licensee shall be entitled for refund of input tax credit in accordance with the Sales Tax Refund Rules, 1996.

 

(d)    Local procurement of duty paid input goods:

 

(i)     The licensee may procure duty paid input goods manufactured locally for production of finished goods alongwith the input goods procured under clause (a) or clause (b);

 

(ii)     repayment and rebate of customs-duty and central excise duty shall be made for the input goods procured under this rule in accordance with the procedure set out in rule 8; and

 

(iii)    the records of input goods procured under sub-clause (i) shall be maintained as set out in Appendix V to these rules.

 

8.       Admissibility of repayment of customs-duty and rebate of central excise duty on the goods manufactured and exported : — (1)    In case duty paid input goods are procured by the licensee from the local market in addition to duty free input goods imported or procured locally and such input goods are used in the manufacture of finished goods, and repayment and rebate of customs-duty and central excise duty is otherwise admissible through a standard notification on export of such input goods, had they been so exported as such, independently, without manufacturing them further in the export oriented unit repayment and rebate of customs-duty and central excise duty shall be admissible to the licensee on such input goods subsequent to exportation of finished goods manufactured therefrom.

 

(2)    The extent of customs-duty and central excise duty paid inputs goods under sub-rule (1), procured by the licensee shall be declared and repayment and rebate of customs-duty and central excise duty shall be claimed by the licensee in the manner these are claimed on filing of bill of export with the declaration thereon as prescribed in rule 10 for export of such goods in addition to the documents required for the purpose.

 

(3)    The licensee, while claiming repayment of customs-duty and rebate of central excise duty, under sub-rule (1), shall submit a certificate alongwith his claim to the concerned Collector of Customs stating that the input goods have been procured against an invoice and not against bill of export.

 

(4)    In case the supplier of duty paid input goods to the licensee desires to claim repayment of customs-duty and rebate of central excise duty on the goods manufactured by him and supplied to the licensee, he shall be entitled for such repayment or rebate, as the case may be, if he has supplied such input goods against bill of export:

Provided that in such case the licensee shall not be entitled for such repayment of customs-duty or rebate of central excise duty under sub-rule (1).

 

9.      Transfer from one Export oriented unit to another Export oriented unit : — (1)    The transfer of input goods from one export oriented unit or another export oriented unit may be allowed by the concerned Collector of Customs on submission of an application as set out in Appendix VI to these rules.

 

(2)    The transfer of input goods for getting the same processed in another export oriented unit or in any other unit located in the Export Processing Zone may be allowed by the concerned Collector of Customs against an indemnity bond as set out in Appendix VII to these rules, equivalent to customs-duty, central excise duty and sales tax involved on such input goods.

 

(3)    An export oriented unit may be allowed by the concerned Collector of Customs to sell the input goods to another export oriented unit.

 

(4)    The sale, referred to in sub-rule (3) shall be made within three years of the date of importation.

 

(5)    The export oriented unit purchasing the input goods shall declare the same in the form set out in Appendix III or Appendix V, as the case may be.

 

(6)    The export oriented unit purchasing the input goods shall consume the same within a period of three years from the date of original importation or purchase, as the case may be.

 

10.   Manufacture and export of finished goods : — (1)    The licensee shall maintain the record of the finished goods manufactured in the form set out in Appendix VIII to these rules and one copy by way of a return thereof shall be endorsed to the concerned Collector of Customs under signatures and seal of the owner/director of the company owning the export oriented unit duly verified by an officer of customs in charge of the export oriented unit.

 

(2)    The licensee shall maintain the record for the goods exported in the form set out in Appendix IX and one copy in the form a return thereof shall be endorsed the concerned Collector of Customs under signatures and seal of the owner/director of the company owning the export oriented unit duly verified by an officer of customs in charge of the export oriented unit.

 

(3)    The export of finished goods shall be made against the bill of export prepared by the licensee.

 

(4)    The bill of export filed under sub-rule (3) shall be endorsed “Export from Export Oriented Unit.”

 

(5)    The licensee may exercise his option to get the finished goods meant for export examined by an official of customs either in the export oriented unit or at the port and quadruplicate copy of the bill of export shall bear the examination report of the official of customs accordingly.

 

(6)    Export of goods manufactured under these rules shall not be permissible to any country by land routes.

 

11.   Clearance of manufactured goods for home consumption : —  (1)    Removal of finished goods for home consumption on filing of bill of entry may be allowed up to twenty per cent of the annual production of the export oriented unit.

 

(2)    Removal of goods under this rule may be allowed subject to the limitations and restrictions provided in the Import Policy Order for the time being in force on payment of customs-duties and any other taxes leviable thereon.

 

(3)    Normal value for the purpose of assessment of customs duty shall be the  value as determined under section 25 or section 25B of the Customs Act, 1969 (IV of 1969), as the case may be.

 

(4)    Value of supply for the purpose of assessment of sales tax shall be taken in accordance with clause (46) of section 2 of the Sales Tax Act, 1990.

 

12.   Vendors : — (1)    The licensee may remove input goods or semi-finished goods out of his premises for partial manufacture or processing by the vendors

 

(2)    The licensee, before removing the input goods or semi-finished goods under sub-rule (1) shall intimate the concerned Assistant Collector of Customs in the form set out in Appendix X and obtain the acknowledgment thereof.

 

(3)    In case the manufacturing process performed by the vendor is liable to central excise duty, the processed goods shall be returned to the manufacturer in such manner as if these are exported without payment of central excise duty.

 

(4)    In case the export oriented unit is located at a distance from the customs-port of exit meant for the export of finished goods and such semi-finished goods are removed by the licensee for further manufacturing to assume the shape of finished goods or final packing, etc., by the vendor and such vendor is located near the customs-port of exit, the finished goods may be removed directly for export from the vendor to the customs-port of exit.

 

(5)    The licensee may receive any input goods in his premises, with the prior approval of the concerned Assistant Collector of Customs for carrying out any process incidental or ancillary to the manufacture of finished goods and return to the supplier of such input goods.

 

(6)    Separate record of receipt of input goods and return of finished goods under sub-rule (5) shall be maintained as may be required by the concerned Assistant Collector of Customs.

 

13.   Re-export of imported input goods : — (1)    On an application in the form set out in Appendix XI, the licensee may be allowed to re-export input goods imported for manufacture of export goods under these rules in their original and unprocessed form within three years of their import subject to the limitations and restrictions of import Policy Order and Export Trade Control Order for the time being in force.

 

14.   Retention period for the procured input goods : — (1)    The licensee shall consume the input goods imported or procured locally within a period of three years from the date of importation or procurement.

 

(2)    Warehousing surcharge payable under section 98 of the Customs Act, 1969 IV of 1969, shall be remitted for a period of three years in respect of input goods referred to in sub-section (1).

 

15.   Transfer of ownership or title : — The licensee shall not be allowed to transfer the ownership or title of the export oriented until unless all outstanding customs-duty, central excise duty and sales tax are paid and any other liabilities are discharged.

 

16.   General bond : — The licensee under these rules shall enter into a general bond to observe all rules, procedures and instructions that may be required in respect of such license.

 

17.   Wastage : — (1)    No wastage of input goods in terms of quantity, volume, weight or number, as the case may be, shall be allowed except as determined in the Analysis certificate and no duty and taxes shall be charged on such wastage of the warehoused input goods:

Provided that such wastage is either destroyed in the presence of an officer of customs, not below the rank of an Assistant Collector, or leviable central excise duty and sales tax is paid on such wastage before removal.

 

(2)    Destruction of wastage shall be allowed by an officer of customs not below the rank of an Assistant Collector, on an application made by the licensee of the export oriented unit in the form set out in Appendix XII to these rules.

 

18.   Factory rejects : — (1)    The factory rejects or finished goods not conforming to the export standards shall be allowed disposal in the local market as per provisions of the Import Policy Order for the time being in force.

 

(2)    The licensee shall file a bill of entry for home consumption for removal of factory rejects referred to in sub-section (1).

 

(3)    The factory rejects shall be allowed removal by an officer of customs not below the rank of an Assistant Collector, at the appraised value and customs-duty, central excise duty and sales tax shall be levied as if it had been imported into Pakistan in that condition.

 

 

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