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April 24, 2024
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Question :

We have imported the Machine from Taiwan and one of the parts has gone faulty. The original manufacturer of M/C has supported us immediately by sending a new part and now M/c is working, however, we need to send the faulty part back to Taiwan for repairs and get the same back after repairs. The repair will be carried out FOC by the supplier. Can you explain the process and what care to be taken to avoid challenges especially when the repair part is received back? PS: M/C imported was new and by paying full duty on merit (No EPCG or under any scheme)

Thanks for asking this question before the start of the process, I am sure with below detailed process and suggestions will help you to get these repairs done smoothly. 

Regulation 

Regulation Explanation 
FTP As per FTP -2023 para 2.28Re Import of goods repaired abroad Capital goods, equipment, components, parts, and accessories is allowed (except restricted under ITC HS) may be sent abroad for repairs and reimported without authorization 
Customs As per Notification No. 94/96( amended 47/2017 ) sr 2 complete Custom duty on material is exempt at the time of Re-Import but customs duty will be leviable if the value of re-imported goods after repairs were made up of the fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred for not), insurance and freight charges, both ways.
RBI  As per RBI Master circular you need to get GR approval (GR Waiver) for Export of Goods for re-imports

Important steps 

  1. Coordination with supplier 
  • A letter from the Supplier confirming that they are ready to accept the shipment for repair.
  • Even if repair is free of cost as per Customs appropriate repair cost is required, please inform this regulation to supplier.
  • Please align with supplier INCOTERMS, he may take all costs - freight both ways, insurance, customs clearance, etc. 
  • Select a freight forwarder and single Customs broker in India who can handle both export clearance and import after repairs.  
  • Obtain the price of defective parts from a supplier (it should be the same price mentioned in the import invoice against which you have already received) 
  • Please align with the supplier to condition After repairs “Do not dispatch till specific Dispatch clarence” (this will help you to check the re-export invoice draft from the supplier)
  • Export Invoice should have the following details.
  • Value of defective part.
    • A declaration that the “Defective goods being sent for repair “
    • Details of earlier imports like Supplier Import Invoice Number & Date and Bill of Entry number & Date.
    • Description, Part Number, Serial Number of products
    • Any visible identification marks/numbers over the product
  • Obtaining a “GR Waiver” from the Bank- 

A GR Waiver is to be obtained from the bank for the re-export of part. 

  • Physical Examination (at your factory) to verify make/ model/ serial numbers/ part numbers before dispatch. 

To handle shipments without any errors and to avoid delay in Customs clearance, physical verification of make/ model/ serial numbers /part numbers is necessary before dispatch. It is advisable to invite a custom broker’s representative to verify/correlate the make/ model/ serial numbers/ part numbers mentioned on documents and physically on the part before packing. Take a photo of the part where sr no is visible This will help smooth export clearance and import clearance after repairs.  

  • Export Clearance of goods at Customs

The Customs officer will conduct a physical examination and check all the marks and numbers on the export invoice/ packing list with a physical product.  Such examination report will help at the time of import clearance after repairs. 

  • Re-import of goods by Supplier after Repair

The Supplier must prepare the draft invoice as per the instructions given below.

  • Mentioning “Goods returned after Repair.”
  • Export Invoice (Invoice against which part is received for repairs) Number and date.
  • The make/ model/ serial number/ part number should be the same as the Export Invoice and must be the same physically on the equipment.
  • The repair cost must be shown separately on the Invoice even if it is FOC. 
  • The value of the part declared after Repair should be the same as the Export Invoice
  • Scrutiny of advance set of dispatch documents & Dispatch clearance  

Ensure that all details mentioned are correct and then give dispatch clearance to the supplier.  Share details /documents with the Customs broker.

  • Customs Clearance of re-import shipments

It takes a little more time than normal shipments as customs examination is involved. Please provide an Export S/B copy, export invoice, and examination report (If available) to the customs broker for clearance. Right from the first step of export care has been taken to ensure correctness and correlation to ensure smooth customs clearance. 

  • Closure of GR waiver 

After customs clearance ensure that you submit Bill of entry to the bank and close the GR Waiver Co

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