Amendment in the Customs Rules, 2001 (Chapter-XV Warehousing)

GOVERNMENT OF PAKISTAN

(REVENUE DIVISION)

FEDERAL BOARD OF REVENUE

****

Islamabad, the 2"d September, 2021

NOTIFICATION

(CUSTOMS)

S.R.O. III% (0/2021.- The following draft of certain further amendments in the

Customs Rules, 2001, which the Federal Board of Revenue proposes to make in exercise of

the powers conferred by section 219 of the Customs Act, 1969 (IV of 1969), section 50 of the

Sales Tax Act, 1990, section 40 of the Federal Excise Act, 2005 and section 237 of the

Income Tax Ordinance, 2001 (XLIX of 2001), is hereby published for information of all

persons likely to be affected thereby and, as required under sub-section (3A) of section 219 of

the Customs Act, 1969 (IV of 1969), notice is hereby given that objections or suggestions

thereon, if any, may for consideration of the Board be sent within fifteen days of publication

of the draft amendments in the official Gazette. Any objections or suggeslions which may be

received from any person, before the expiry of the aforesaid period, shall be taken into

consideration by the Federal Board of Revenue, namely:-

DRAFT AMENDMENTS

In the aforesaid Rules, for Chapter XV the following shall be substituted, namely:-

"CHAPTER XV

WAREHOUSING

Sub-Chapter I

1. Definitions. - In this chapter, unless there is anything repugnant in the subject or

context,-

"Acts" means the Customs Acts, 1969 (IV of 1969), the Federal Excise Act,

2005, the Sales Tax Act, 1990 and the Income Tax Ordinance 2001;

"Analysis Certificate"

means a certificate issued by the Regulatory Authority

under rule 350.

"bond" means a bond in the form set out in Appendix-II;

"export" includes supply of goods: -

by an indirect exporter to a direct exporter;

against international tenders either to supply locally or to export

abroad;

to projects or sectors entitled to import or purchase such goods free of

duties and taxes; and

to export processing zones;

"indirect exporter" means a manufacturer or supplier of goods or articles

which are to be used as input for export;

"input goods" including coal, coke of coal, carbon blocks, diesel, gas and

furnace oil" means all goods, required for the manufacture of goods meant for

export, such as raw materials, accessories, sub components, components, sub-

assemblies, assemblies as approved by the Regulatory Authority in the

Analysis Certificate;

(g) "licensee" means a person or firm to whom a license is granted under rule 343

and 362B;

(h) "manufacture" means any process incidental or ancillary undertaken in the

manufacturing of finished goods under this chapter;

(I) "manufacturing bond" means a premises having a proper boundary wall,

with clearly defined areas of: -

(a) bonded warehouse for storing of input goods, procured under clauses

(i) and (ii) of sub-rule (1) of rule 351 and goods manufactured there

from for exports;

manufacturing facility; and

other stores, licensed by the Regulatory Authority under rule 343.

"manufacturer-cum-exporter" means any person or firm registered under

(i)

the Sales Tax Act, 1990 as a manufacturer-cum-exporter;

"private-bonded-warehouseneans_a_warehouse_ licensed by the Collector

under section 13 of the Customs Act, 1969(IV of 1969);

"public bonded warehouse" means a warehouse licensed by the Collector

(I)

under section 12 of the Customs Act, 1969 (IV of 1969);

(m) "common bonded warehouse" means a warehouse licensed by the Collector

under section 12A of the Customs Act, 1969 (IV of 1969);

(n) "Regulatory Authority" in relation to manufacturing bond means the

Additional Collector of Customs designated as the Regulatory Authority by

the Collector of Customs in whose jurisdiction the place of business or

manufacturing unit of the Manufacturing Bond Licensee, duly registered under

the Sales Tax Act, 1990, is located;

means an export unit having export

"Small and Medium Enterprises"

(0)

quantum upto two and half millions US dollars per annum;

"vendor" means a person who is registered under the Sales Tax Act, 1990,

(13)

and to whom goods are provided by the licensee for further manufacture of

goods; and

means a common bonded warehouse, a manufacturing bond, a

"warehouse"

(q)

private bonded warehouse or a public bonded warehouse licensed by the

Collector or the Regulatory Authority designated by the Collector as the case

may be.

Sub-Chapter II

Public bonded warehouse, Private bonded warehouse, manufacturing bond

Any person or firm desirous of operating a warehouse shall

1. Licensing.- (1)

apply to the Collector or the Regulatory Authority designated by the Collector, as the case

may be in the form set out in Appendix-I to this chapter along with the following

documents, namely:-

the site plan of the proposed warehouse indicating the location of the premises

and the details of the total area, covered area and the area proposed to be utilized

for the manufacturing area or facility and for storing the bonded warehoused

input goods and manufactured goods therefrom for exports, and separate other

storage areas for duty paid input goods, manufactured goods there from, factory

rejects and wastages, for domestic local sales, in case of a manufacturing bond;

national tax number certificate;

banker's certificate directly forwarded by the bank to the regulatory authority

under sealed envelope regarding financial transactions of the applicant during the

last two years while in case of newly incorporated companies bank certificate

directly forwarded by the bank to the regulatory authority under sealed envelope

along-with the statement showing sufficient funds in the bank account to cover

the amount of duty and taxes leviable on the purported imports under these rules;

memorandum and Articles of Association in the case where the applicant is

registered under the Companies Ordinance, 1984 (XLV1I of 1984), or partnership

deed if it is a partnership firm;

copy of the national identity card of owner and directors of the company;

a general bond in the form set out in Appendix-II;

lease or tenancy agreement with the written permission from the landlord to use

the premises as a warehouse for a period of at least three years;

certificate from supplier of firefighting equipment installed in the premises

regarding its validity date;

pay order in favour of the Collector or the Regulatory Authority designated by

the Collector, as the case may be equal to the establishment charges, if leviable

under rule 348;

recommendations of the relevant representative Trade Association or Chamber of

Commerce and Industry or Trade Development Authority of Pakistan; and

details of the type of machinery installed, in case of manufacturing bond.

On receipt of an application along with the documents prescribed in sub-rule

(1), the Collector or the Regulatory Authority designated by the Collector, as the case may be

after such verification as he deems necessary, may issue a license within fifteen days of such

verification, to the applicant to operate a warehouse.

The verification and premises survey under sub-rule (2) shall be carried out

within fifteen working days of the receipt of complete application along with all required

documents except where the applicant is himself responsible for the delay.

In case of manufacturing bond, the applicant shall apply to the Regulatory

Authority designated by the Collector of Customs having jurisdiction in which the unit is

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registered under the Sales Tax Act, 1990, and in case there are more than one unit of a

proprietor, he shall apply to the Regulatory Authority designated by the Collector of Customs

where the head office of the applicant is registered under Sales Tax Act, 1990.

1. Cancellation of License. - The license may be cancelled by the Collector or

the Regulatory Authority designated by the Collector as the case may be, on conviction of the

licensee for any offense under any of the Acts or non-utilization of the license during the last

twelve months, or for violation of any of the conditions specified in the license or on the

request, in writing, by the licensee.

1. Suspension of License.- (1) Pending consideration whether a license be

cancelled under rule 344, the Collector or the Regulatory Authority designated by the

Collector as the case may be, may suspend the license if he is of the opinion that it is

expedient to do so and for the reasons to be recorded, in writing, thereof by him.

In a case referred to in sub-rule (1) the reasons to show cause shall be

communicated to the licensee within a week of such suspension.

Any licensee aggrieved by any decision or order pertaining to Manufacturing

Bond may prefer an appeal to the Chief Collector of Customs within sixty days of the passing

of such decision or order.

1. Revalidation or revival of license.- The license shall be issued for a period of

three years and the same shall stand revalidated for a further period of three years before

every expiry date by the Collector or the Regulatory Authority designated by the Collector as

the case may be, on the request of the licensee provided the Collector or the Regulatory

Authority designated by the Collector as the case may be, is satisfied that no action under the

Acts is pending against the licensee, and the changes, if any, in the documents furnished

under rule 343.

Transfer of ownership or title.-The licensee shall not be allowed to transfer

the ownership or title of the warehouse unless all outstanding customs duty, Federal excise

464( duty, sales tax and income tax are paid and all other liabilities are discharged.

Premises of the warehouse.- (I) The licensee shall either own the premises

of the warehouse (hereinafter called the premises) or have a lease thereof in his name for the

period for which the license is sought to be issued.

The premises shall have clearly ear-marked the area for storage of imported

goods.

In case of a manufacturing bond, the manufacturing area and separate stores of

locally procured input goods, finished goods, rejects and waste, shall be clearly ear-marked in

the premises.

The premises shall be on an independent area having an independent entry or

exit from a public area, having no other entry or exit (except for emergency evacuation) and

independent of such premises which is not bonded under this chapter.

Provided that in exceptional circumstances, to be explained by the licensee, in

writing, the Collector or the Regulatory Authority designated by the Collector as the case

may be, may approve the premises otherwise with or without any conditions or restrictions as

he may deem fit to impose.

1. Warehousing Period.-

(1) The warehousing period for a public or a private

warehouse shall be the same as provided in section 98 of the Customs Act, 1969 (IV of

1969):

Provided that Soyabean oil falling under PCT No.15.07 of the First Schedule to the

Customs Act, 1969 (IV of 1969) can be kept in the warehouse for one hundred and eighty

days:

Provided further that ships store and aircrafts store may be kept in the bonded

warehouse for a period of two years without payment of surcharge chargeable under section

98 of the Customs Act, 1969 (IV of 1969).

The goods imported by diplomatic bonded warehouses and duty free shops

licensed under the Customs Act, 1969 (IV of 1969) for sale to passengers against their

baggage allowances and to other entitled persons can be kept in the bonded warehouse for a

period of two years from the date of in-bonding thereof without payment of penal surcharge

leviable under section 98 of the Customs Act, 1969 (IV of 1969).

(3)

The warehousing period for a private or a public bonded warehouse shall start

from the date of admission of goods into the warehouse and not from the date of filing of bill

of entry.

Input goods imported or procured locally by a manufacturing bond licensee

shall be consumed within a period which shall run from the date on which the imported goods

are placed under the manufacturing bond procedure. The period will be established by the

Collectorate concerned on the basis of the time required to carry out the processing

operations and dispose of the compensating products, as established in the Analysis

Certificate. The period will not in any event exceed two years from the date of in-bonding or

procurement of locally purchased goods. For duly justified reasons, extension may be granted

for another one year by special written approval of an officer not below the rank of

Additional Collector of Customs:

Provided that palm oil or olein shall be consumed in the manufacture of goods meant

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4---/ 'for export within six months from the date of filing of Goods Declaration or procurement of

locally purchased goods.

No refund of duty and taxes shall be payable to importer if duty paid goods are

damaged, deteriorated or destroyed during the period of storage after payment of duty and

taxes.

The calculation of surcharge, if chargeable under section 98 of the Customs

Act, 1969 (IV of 1969), shall be made on the basis of duty and taxes on the into bond bill of

entry, when goods are entered into the warehouse, without taking into account any

concessionary rate of duty applicable at the time of ex-bonding of the goods and the fact that

goods will be re-exported under a bill of export.

1. Analysis Certificate for goods to be manufactured in a manufacturing

bond.-

(1) The licensee shall apply to the Regulatory Authority, within fifteen days of

issuance of manufacturing bond license, or sixty days before the first export of finished

goods, for issuance of an Analysis Certificate as set out in

Appendix-III showing the input

and output ratio of input goods vi—a vis finished goods along with wastages. The licensee

shall also submit samples of product and its input material.

5

The Regulatory Authority or the officer authorized by him, in his behalf, shall,

(2)

after getting input from the Input Output Coefficient Organization (LOCO) or Engineering

Development Board (EDB), or any other agency, in this regard, issue an Analysis Certificate

as applied by the licensee within thirty days on receipt of such application, showing the actual

quantity of input goods used and wastage occurred in manufacture of one unit of output

goods.

Provided that the Regulatory Authority may issue a provisional analysis certificate till

the determination of Input to Output Ratio and wastage by LOCO or EDB, as the case may be:

Provided further that if there is no change in previously determined input and output

ratio, then the Regulatory Authority may uphold the previously determined input-output

ratios without sending it to 1000 or EDB as the case may be.

One copy of the Analysis Certificate shall be given to the licensee and one

copy shall be retained in the Custom House.

Analysis Certificate shall not be required for every consignment or input

goods if the finished goods are the same for which Analysis Certificate has already been

issued. However, a separate Analysis Certificate shall be applied for and issued for every

new finished goods.

In case of expensive samples such as leather jackets or garments, etc. instead

of complete finished goods, 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 Collector for the purpose of

issuance of Analysis Certificate.

Improved efficiency of the manufacturing operations may lead to

improvement in consumption of input or output ratios, the licensee shall declare the excess

material at the end of the relevant year to the Customs authorities. The concerned Deputy

Collector can allow, in writing, the consumption for export of such excess input material

during the subsequent period or allow for removal for home consumption, provided that the

warehousing period is complied with. In case of removal for home consumption, the licensee

shall file ex-bond Goods Declaration for payment of duties and taxes leviable thereon.

However, the warehousing charges and penal surcharge as prescribed under section 98 of the

Customs Act, 1969 for ex-bonding of such input material offered due to improved plant

efficiency shall not apply.

In case of improve efficiency, the input or output ratio for the period thereafter

shall be amended in accordance with the newly established input or output ratio provided that

the improvement is beyond one percent. If the change in input or output ratio is within one

percent the input or output ratios shall remain unchanged but the excess materials shall be

declared by the licensee to the Customs every year in accordance with sub-para (6). The input

or output ratio shall in any event be revised every three years.

In the case of lower efficiency, and the lower efficient ratio is beyond three

per cent, the unit may apply for redetermination of IORs. If the change in input or output

ratio is within three per cent, the input or output ratios shall remain unchanged. The input or

output ratio shall in any event be revised every three years. The licensee will have no right of

refund.

1. Procurement, manufacture, export and removal of goods by a licensee of

(1)The input goods for production of finished goods according to

a manufacturing bond.-

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the specification approved in the Analysis Certificate shall be procured by the licensee of a

manufacturing bond in any of the following manners, namely:-

the input goods may be imported by the licensee without payment of custom

(i)

duty, federal excise duty and sales tax after declaring on the bill of entry that

input goods are being imported under manufacturing bond for manufacture of

export goods;

the input goods produced from the local exciseable unit may be procured by

the licensee without payment of central excise duty against AR-3 or any other

rule for the time being in force;

the sales taxable goods meant for further processing shall be supplied to the

licensee of the manufacturing bond against a tax invoice after payment of

sales tax and the licensee shall be entitled for refund of input tax credit in

accordance with the Sales Tax Refund Rules, 2000; and

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 notifications,

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.

(2) Item-wise record of input goods received, manufactured and exported shall be

maintained in the format as set out in Appendix-IV to this chapter, which shall be examined,

stamped and signed by the supervising Customs official every month:

Provided that one copy in the form of quarterly return in the same format as

Appendix IV shall be submitted to the Regulatory Authority before the tenth day of the

following quarter. Such quarterly return should show the item-wise opening balances,

accumulated inwards during the quarter, accumulated issued for manufacturing facility,

accumulated production of finished goods, factory rejects, wastes or losses, accumulated

exports and or removals and remaining balances at the end of the quarter.

(3) The export of finished goods shall be made against,—

the bill of export prepared by the licensee of manufacturing bond or his

representative and endorsed as " Export from Manufacturing Bond";

a consumption sheet showing the imported inputs consumed for relative

finished goods, providing for import consignments reference numbers.

The Customs official examining the goods for release before export shall strictly check and

verify the records of inputs consumed for the export goods.

(4) The licensee of manufacturing bond may exercise his option to get the finished

goods meant for export examined by an official of customs either in the manufacturing bond

or at the Port and quadruplicate copy of the bill of export shall bear the examination report of

the official of custom