Recently, Pankaj Parekh, Regional Chairman – Eastern Region, GJEPC also said on; Procedural problems in clearing gold supplied in advance by foreign buyers! He was focussing on, Potential policy measures to facilitate exports!
Expressing on Policy-related/operational issues Pankaj Parekh said, Foreign Trade Policy should also allow the import of gold by an exporter if it is supplied by an overseas buyer post export of jewellery The UAE is one of the biggest importers of Indian gold jewellery. The normal trade practice in the UAE is to settle gold jewellery payments plus value addition in cash.
However, to settle the bills of Indian suppliers, the UAE dealer has to first sell his stock of gold bullion (which he receives from his buyers) and then convert the local currency into USD to wire transfer the invoice amount to India. Due to this, the UAE dealer, at times, has to sell gold at a discount and also suffers a loss due to conversion currency charges, thereby increasing his transaction costs.
Dealers in the UAE therefore insist on settling the bill by export of equivalent gold in fine terms and wire transferring dollars for value addition and freight and insurance. However, India’s FTP does not permit such transactions. The FTP should allow the import of gold supplied by an overseas buyer in advance as well as post receipt of shipments from India. The GJEPC recommended this about two years ago.
Procedural problems in clearing gold supplied in advance by foreign buyers!
Customs rules permit the import of gold by an exporter if the metal is being supplied by an overseas buyer as an advance against the export of jewellery of equivalent quantity in terms of fine gold. At the time of import, the importer has to furnish a bond backed by a Letter of Undertaking (LUT) or Bank Guarantee (BG) equivalent to the value of the imported gold and the import duty.
The LUT/BG can be redeemed after submitting proof that the jewellery has been exported. Mumbai customs routinely clear such consignments, but the Kolkata customs refuse to do so on a subjective interpretation that the gold has been imported on a loan basis. Given the above-mentioned issues, it is recommended that uniform procedures are implemented at all customs ports to support exporters.
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