ProcedureTIEP-I

TIEP Scheme

Temporary Import for Export Processing (TIEP) or in other words Inward Processing (IP) scheme permits businesses to obtain relief from Customs Duties and import VAT on goods that are imported to be used as inputs to manufacture/process/assemble produce for export from Sri Lanka. The scheme also allows the import of plant, machinery, equipment and parts necessary for such industry. The intention of introduction of the TIEP scheme was to place the Sri Lankan small and medium scale manufacturers/exporters equal footing with businesses outside Sri Lanka. Any incorporated entity, Proprietorship or Partnership established in Sri Lanka can register under Customs TIEP scheme subject to certain terms and conditions concerned with the regulation of the entire operation so registered from import to export.

The TIEP scheme is governed by the Government Gazette Notification no. 1053/11 of 11.11.1998 published under Sub Section (1) and (2) of the Section 22A of the Customs Ordinance (Chapter 235).

The Rules

The Government Gazette No. 1053/11 of 11.11.1998 defines the rules in which the terms and conditions for the operation of TIEP (IP) are incorporated.

Rule No. 1

These rules hereafter referred to as “The Rules” shall be cited as the rules for the operation of Inward Processing Scheme for Export, hereinafter referred to as “The Scheme”.

Rule No. 2

Export products, for which the imported inputs attributable thereto shall be permitted under the Scheme, shall be determined by the Director General of Customs in consultation with the Ministry of Industrial Development or any other Line Authority wherever necessary.

Rule No. 3

The Scheme shall be administered by the Director General of Customs.

Rule No. 4

Importation of the following may be permitted under the Scheme:- a) Raw-materials, Components and Parts which will be incorporated in the exported product; b) Parts for assembly of the product to be exported; c) Consumables such as Catalysts, Accelerators, Processing Chemicals, Lab Chemicals, Research Chemicals, and Retarders of chemical reaction to be used in the product to be exported; d) Packing material including labels, stickers and tags to be used for packing the export products, raw materials for the manufacture of such packaging material and export catalogues and brochures.

Rule No. 5

A Manufacturer cum Exporter who manufactures goods for export, and a Manufacturer cum Indirect Exporter who produces goods as inputs for other industries manufacturing goods for export, shall be permitted under the Scheme to import the inputs defined in Rule 4 without payment of Fiscal Levies but subject to Rules given herein.

Rule No. 6

A Manufacturer cum Exporter/Indirect Exporter, shall make an application for approval to operate under the Scheme, to the Director General of Customs.

Rule No. 7

A Manufacturer cum Exporter/Indirect Exporter utilizing the Scheme to manufacture any products for export shall not be entitled to operate the Scheme for Customs Duty Rebate, the Scheme for Manufacture-in-Bond for Export or any other Scheme for the Temporary Importation of Inputs for manufacture and export in respect of an identical product. Such persons shall make a declaration to that effect on the application from prescribed in Annex I under the Rules.

Rule No. 8

A Manufacturer cum Exporter/Indirect Exporter who is registered under the Scheme shall submit to the Director General of Customs: a) in the prescribed form in Annex I: i. The requirements of Inputs for a period not more than twelve months or for specific/single consignment; ii. Data required for evaluating conversion ratio; iii. Wastage factor, wherever applicable. b) A sample of the product, if required by the Director General of Customs for the processing of the application.

Rule No. 9

A Manufacturer cum Exporter/Indirect Exporter shall provide facilities for representatives of Director General o f Customs and/or Ministry of Industrial Development and/or Line Authority who may visit the factory or any other place of work or storage to ascertain the technical operations and/or obtain any information required by the Director General of Customs/Line Authority.

Rule No. 10

When a Certificate of Approval in respect of a product is granted by the Director General of Customs, the Manufacturer cum Exporter/Indirect Exporter shall furnish to the Director General of Customs a declaration of acceptance of the terms, conditions and the rules in respect of the operation of the Scheme in the form prescribed in Annex-I under the Rules.

Rule No. 11

A Manufacturer cum Exporter/Indirect Exporter shall submit to the Director General of Customs a Bank Guarantee and/or a Bond as required by the Director General of Customs equal to the value of duties and other taxes levyable on the input that may be in stock at any one time.

Rule No. 12

The validity of any Guarantee or Bond furnished in terms of Rule 11 above shall be for a period of not less than twelve months or for such period as determined by the Director General of Customs.

Rule No. 13

A Manufacturer cum Exporter/Indirect Exporter shall mark and stack the inputs, imported under the Scheme in such a manner for easy identification, checking and accounting.

Rule No. 14

The particulars of the inputs so marked as required in Rule 13 shall be entered in a stock register maintained under this Scheme.

Rule No. 15

A Manufacturer cum Exporter/Indirect Exporter shall present Goods Declaration Form (CUSDEC) for the clearance of goods. Such CUSDEC shall be endorsed on the face thereof in block letters with the legend “Under the Inward Processing Scheme” and authenticated by Director/Partner/Proprietor/any other persons duly authorized for the purpose and whose name and specimen signature are furnished

Rule No. 16

I) A Manufacturer cum Exporter/Indirect Exporter shall maintain in respect of each export product records of: (a) Quantities and value of each input imported; (b) The Conversion ratio for each input; (c) Quantities and values of product manufactured; (d) Quantities and value of product exported; (e) Quantities and values of goods supplied by a Manufacturer cum Indirect exporter to Direct Exporters; (f) Quantities and values of inputs given to sub-contractors and quantities and values of manufactured goods received from them.

II) Such records shall be made available for inspection by officers authorized by the Director General of Customs.

Rule No. 17

A Manufacturer cum Exporter who operates under this Scheme shall obtain supplies from a Manufacturer/cum Indirect Exporter operating under the scheme or under the Manufacture-in-Bond Scheme or on GRN or on Ex-Bond Goods Declaration (CUSDEC) and such documents should bear on the face of it, the legend ‘Under Inward Processing Scheme’.

Rule No. 18

A Manufacturer cum Exporter may be permitted to Sub-Contract with any other Manufacturer for the manufacture of any product under the Scheme and the Manufacturer cum Exporter shall be liable for any duties and other charges which may occur due to loss or damage of the material or finished products during such sub-contracting operation as at the time of importation and shall comply with any other terms and conditions stipulated by Director General of Customs.

Rule No. 19

A Manufacturer cum Exporter shall be held responsible for any act, or omission by the Sub-Contractor in contravention of the terms and conditions stipulated by the Director General of Customs under Rule 18.

Rule No. 20

A Manufacturer cum Exporter shall re-export unutilized imported inputs in respect of any unfulfilled contract in six months from the date of importation or extend period under such terms and conditions as determined by the Director General of Customs. If the Manufacturer cum Exporter is unable to re-export the imported inputs he shall seek the concurrence of the Director General of Customs for the disposal of the same in the domestic market under the terms and conditions stipulated by the Director General of Customs.

Rule No. 21

A Manufacturer cum Indirect Exporter who operates under the Scheme when supplying finished products to a Manufacturer cum Exporter who operates under the Scheme or under the Scheme for Manufacture-in-Bond Scheme for exports shall be required to obtain a certified Goods Received Note in the form prescribed in Annex II from the Manufacturer cum Exporter in order to obtain credit under the scheme.

Rule No. 22

A Manufacturer cum Exporter/Indirect Exporter who operates under the Scheme and supplies finished products to local enterprises which is permitted for duty exemption on such goods, shall be eligible to obtain credit under the scheme.

Rule No. 23

Where a Manufacturer cum Exporter/Indirect Exporter uses duty exempted goods under the Scheme for domestic market or for supply to a Direct Exporter operating under the Duty Rebate Scheme, he shall obtain approval from Director General of Customs any pay the appropriate duties and Taxes.

Rule No. 24

When a Manufacturer cum Indirect Exporter who operates under the Scheme supplies to a Manufacturer cum Exporter who operates under the Scheme for Customs Duty Rebate, the Manufacturer cum Indirect Exporter shall pay forthwith all Fiscal Levies on the quantity of raw materials used to produce the finished products so supplied, to the Director General of Customs on Goods Declaration (CUSDEC).

Rule No. 25

After Exportation/supply to an Exporter has taken place, a Manufacturer cum Exporter/Indirect Exporter for the purpose of obtaining credit against his Bank guarantee/Bond shall submit to the Director General of Customs the following documents within thirty (30) days from the date of exportation or supply:- (i) In the case of a Manufacturer cum Exporter: a. Final Bill of Lading/Air-Way Bill, certified by the Shipping Agent; b. c. d. e.

(ii) In the case of a Manufacturer cum Indirect Exporter who supplies goods to an Exporter under the Scheme or to a manufacturer under the Manufacture-in-Bond Scheme:- (iii) In the case of a Manufacturer cum Exporter/Indirect Exporter supplying goods to an Enterprise having Board of Investment Status: (iv) In the case of a Manufacturer cum Exporter, Indirect Exporter supplying goods to a local enterprise, permitted for duty exemption of such goods, shall produce the under mentioned documents: Rule No. 26

Any matter not specifically provided for in these Rules, shall be determined by the Director General of Customs and duly notified.

Rule No. 27

The Manufacturer cum Exporter/Manufacturer cum Indirect Exporter operating under the Scheme shall pay an annual fee, as determined by the Director General of Customs.

Rule No. 28

A Manufacturer cum Exporter/Indirect Exporter who acts in contravention of any of the rules or the terms and conditions of the Scheme or procedures/conditions stipulated by the Director General of Customs shall render himself liable for action under the provisions of the Customs Ordinance.

Rule No. 29

Where a Manufacturer cum Exporter/Indirect Exporter operating under the Scheme who wish to operate under the scheme is dissatisfied with a decision of the Director General of Customs or he will be entitled within 30 days of the communication of such decision to appeal to Secretary to the Treasury or an Appellate Body set up for this purpose.

Rule No. 30

Any approval granted under the Section published in Gazette No. 799/10 of 29/12/1993 shall be deemed to be approval under this Scheme and rules shall mutatis mutandis apply to such approvals.

Rule No. 31

For the purpose of the Rules:- “Export” Shall mean the supply of processed, assembled or manufactured goods to a destination outside Sri Lanka.

“Indirect Export” Shall mean the supply of processed or semi-processed or finished goods to a Manufacturer cum Exporter. “BOI” Shall mean Board of Investment of Sri Lanka.

“Deemed Export” Shall mean supply of semi-processed, processed or finished goods to Enterprises having BOI Status under Section 17 of BOI Act for Export and supply of approved semi-processed, processed or finished project related goods to Enterprises having BOI Status under Section 17 of BOI Act and entitled to import such goods free of Fiscal Levies.

“Manufacturer cum Exporter” Shall mean a person or company operating in Sri Lanka who manufactures and exports goods.

“Manufacturer cum Indirect Exporter” Shall mean a person or company operating in Sri Lanka who supplies goods to a Manufacturer cum Exporter for which payment is received in Sri Lanka Rupees.

“Conversion Ratio” Shall mean the quantity of an input, which is used to produce a unit of exportable product including permissible wastage.

“Bank Guarantee” Shall mean an Instrument of Agreement furnished by a Bank binding itself on behalf of a Manufacturer cum Exporter or Manufacturer cum Indirect Exporter to pay on demand to the Director General of Customs a sum of money equivalent to the sum specified in the guarantee as settlement of Fiscal Levies.

“Bond” Shall mean an undertaking given by a Manufacturer cum Exporter or Manufacturer cum Indirect Exporter to the Director General of Customs to pay a sum of money equivalent to all Fiscal Levies exempted at the time of importation of Goods, if the conditions for which exemption is granted are not fulfilled.

The Inputs permitted by TIEP-I

Raw Materials, Components and part which will be incorporated in export products Parts for assembly of the product to be exports Consumable Packing Materials in finished Raw Material for producing pack materials Exports Catalogs and brochures

enterprise

Who can use TIEP-I

Direct Exporters

A manufacturer who produces goods intended for export under inward processing scheme and ships the same to another country for export is considered a Direct Exporter. Indirect Exporters

A manufacturer who produces goods intended for export but only supplies them to another eligible party for further processing and finally export is considered an indirect exporter. Usually such goods so supplied to another party are considered to inputs to the final product manufactured for export.

According to Customs records the vast majority of goods so supplied to third parties under this category are packing and labeling materials. Since in the resent past however manufacturers of other intermediate products such as shoe soles as inputs to manufacture of shoes, buttons as inputs to garment industry are noticeable.

When the indirect exporters’ supplies goods to the direct Exporters, the following should be considerable Customs Approved Bondsman TIEP Certificate Holder BOI Enterprise approved under section 17 of the BOI Act Customs Approved Industry (operating under Investor Facilitation center)

Documents for registration of TIEP-I Duly completed prescribed form (TIEP-I) in Triplicate Project Report Certificate of VAT registration Business Registration Memorandum of Articles Data required for evaluating the conversion ratio and wastage factor Other necessary approvals

Responsibilities of Authorization Holders

Authorisation holders are responsible for the duties applicable to all goods entered under their authorisation, whether or not they own them. If you name other suppliers, customers or processors in your authorisation, you should make arrangements to indemnify yourself with them, in case there is an ineligible import or export/disposal of IP goods.