Understanding Sri Lanka Customs' TIEP Scheme for Export Processing

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The TIEP (Temporary Import for Export Processing) scheme offered by Sri Lanka Customs provides various benefits for enterprises involved in export production. It includes different schemes like TIEP-I and TIEP-IV, offering duty exemption and facilities for processing, assembly, and manufacturing. The scheme targets both direct exporters and indirect exporters, fostering increased competitiveness, reduced production costs, and enhanced trade flow in the international market.

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THE TIEP SCHEME THE TIEP SCHEME At Ceylon Chamber Of Commerce For Spice & Allied Products Producers & Traders Association THILAK ARUMAPPERUMA ARACHCHI Superintendent of Customs Export Facilitation Unit Industries and Services Directorate Sri Lanka Customs

TIEP SCHEME TIEP SCHEME One of the several Inward Processing Schemes (IP) offered by Sri Lanka Customs

IP IP - - SCHEMES OFFERED BY CUSTOMS SCHEMES OFFERED BY CUSTOMS TIEP-I (Temporary Import for Export Processing-I) The Government Extraordinary Gazette No. 1053/11 of 11/11/1998 Raw materials, parts, consumables, packaging materils TIEP-IV (Temporary Import for Export Processing-IV) Section 22A of the Customs Ordinance Plant, machinery, equipment and parts etc to be used in the export processing To encourage expansion of production capacities and exports INFAC Section 22A of the Customs Ordinance Apparel Industry Fabric, accessories, ancillaries, Machinery Entrep t Section 22A of the Customs Ordinance Import of goods for re-export to a third party

TIEP TIEP - - FACILITIES FACILITIES ENTERPRISES Permitted for duty exemption Finished Goods DEEMED EXPORT Imported EXPORTER AUTHORISED UNDER IP Processing Assembly Manufacture Raw materials/Consumables /Packing materials Plant/Machinery/Parts DIRECT EXPORT Local Finished Goods Semi Finished Goods Packing materials FINAL EXPORT INDIRECT EXPORT EXPORTER AUTHORISED UNDER IP EXPORT ORIENTED BOI VENTURE

TIEP BENEFITS TIEP BENEFITS Reduced cost of production of the export products Re-export with value addition Increased competitiveness in the international market Exploit the country s potential in international maritime network Enhanced trade flow between countries

TIEP TIEP- -I FOR WHOM? I FOR WHOM? Direct Exporters Who manufactures and exports Indirect Exporters Who manufactures and supply for others to further process and export Customs approved manufacute-in-bond TIEP operator BOI enterprise under Section 17 of BOI Act INFAC operator A Manufacturer in the Scheme is not entitled to operate under Customs Duty Rebate, Manufacture- in-Bond or any other such scheme in respect of an identical product

TIEP TIEP- -I PROCEDURE I PROCEDURE At IMPORT Fiscal Levies are suspended and Debited against security in the form of Bank Guarantees or Corporate Bonds to cover the unpaid (suspended import duty. suspended) At EXPORT, Credits granted on Security VAT is differed at import for those registered under the VAT Deferred Payment Facility and the same is settled against exports on VAT Credit Vouchers issued by the Department of Inland Revenue.

PERMITTED IMPORTS OF INPUTS PERMITTED IMPORTS OF INPUTS Raw-materials, Components and Parts which will be incorporated in the exported product; Parts for assembly of the product to be exported; 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; 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

APPLICATION FOR REGISTRATION APPLICATION FOR REGISTRATION An application shall be made to the Director General of Customs Applicant is required to justify the need for registration under the IP scheme giving particulars: About the applicant Nature of business Kinds of inputs intended of import for manufacture of the export product(s) With documents in support of the same

DOCUMENTS REQUIRED DOCUMENTS REQUIRED Duly completed prescribed form (TIEP-I) in triplicate with MIC approval Project report Certificate of VAT Registration Business Registration /Certificate of Incorporation Memorandum of Article Data required for evaluating conversion ratio and wastage factor Other necessary approvals (Tea Board, Coconut Development Board etc.)

TIEP TIEP- -I APPLICATION FOR INPUTS I APPLICATION FOR INPUTS The operator shall apply in the Application form for Inward Processing (form TIEP-I) The requirements of Inputs for a period not more than twelve months or for specific/single consignment; Data required for evaluating conversion ratio; Wastage factor, wherever applicable A sample of the product, if required by the Director General of Customs for the processing of the application

CONVERSION RATIO AND WASTAGE CONVERSION RATIO AND WASTAGE Determined by the Director General of Customs in consultation with the Ministry of Industry and Commerce or any other Line Authority wherever necessary. Therefore the duly filled application forms shall be submitted to the Development Division of the MIC for approval prior to submitting the same to Customs

NEW APPROVAL NEW APPROVAL Verification by Customs Premises where the processing will be carried out Accounting procedures used Obligations which must be fulfilled by anyone availing of IP The applicant 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

GRANTING APPROVAL GRANTING APPROVAL If the application is acceptable to the Director General of Customs, a determination will be made as to the type of security required for the inputs to be imported (BG/CG/PG) The application is then registered, with a Customs Reference number (Warehouse Number) Approval is valid for one year

SECURITY SECURITY Once an Approval is granted operator shall furnish Bank Guarantee equal to the value of duties and other taxes levyable on the input that may be in stock at any one time. The validity of any Guarantee or Bond is not less than twelve months or for such period as determined by the DGC

RENEWAL OF AN APPROVAL RENEWAL OF AN APPROVAL Renewal at the end of the year Process and stock verifications Performance verifications

ENTRY OF RAW MATERIALS ENTRY OF RAW MATERIALS Import Declaration (CUSDEC) Authenticated by Director/ Partner/ Proprietor/ any other persons duly authorized for the purpose and whose name and specimen signature are furnished

PROHIBITIONS AND RESTRICTIONS PROHIBITIONS AND RESTRICTIONS Imports subject to the prohibitions and restrictions Operators must ensure that necessary import licenses, approvals and permits are obtained prior to arrival of the goods (inputs) Examples: Import Control Regulations Ministry of Defense Approvals Department of Agriculture National Plant Quarantine Service Department of Animal Production and Health Cashew Corporation etc.

ENTRY ON IMPORT CUSDEC ENTRY ON IMPORT CUSDEC Relevant Customs Office Code CBBD1 Customs Industries and Services Directorate Relevant Customs Procedure Code 7700 TRD: Direct import of raw materials VAT differed 7700 TRU: Direct import of raw materials VAT paid upfront Relevant Warehouse Reference Code 5700011 E.g. For exporter ABC Authenticated by Director/ Partner/ Proprietor/ any other persons duly authorized for the purpose and whose name and specimen signature are furnished

DISCHARGE OF GOODS DISCHARGE OF GOODS Export Declaration (CUSDEC) Authenticated by Director/ Partner/ Proprietor/ any other persons duly authorized for the purpose and whose name and specimen signature are furnished

DISCHARGE ON EXPORT CUSDEC DISCHARGE ON EXPORT CUSDEC Relevant Customs Office Code CBBD1 Customs Industries and Services Directorate Relevant Customs Procedure Code 3277 T1E: Re-Export under TIEP-1 scheme Relevant Warehouse Reference Code 5700011 E.g. For exporter ABC Authenticated by Director/ Partner/ Proprietor/ any other persons duly authorized for the purpose and whose name and specimen signature are furnished

TRANSFER ON GRN TRANSFER ON GRN Supply of semi-processed, processed or finished goods to: Other authorized exporters Enterprises having BOI Status under Section 17 of BOI Act for Export For Project Related Goods (if entitled to import free of Fiscal Levies) Recipient has to certify the receipt Receipt of payment in LKR (NON BOI) in USD (BOI)

DISCHARGE OF LIABILITIES: Direct Export DISCHARGE OF LIABILITIES: Direct Export Within 30 days from re-export Final bill of lading/airway bill certified by the Shipping Agent Parties Copy of the CusDec Export invoice with bank confirmation on inward remittance Customs Warehouse Keeping Unit (WHK) Outward entries are made in the Bond Register Issue write-off-note (THINETH) Endorse Cancellation Allowed on the Export CusDec

DISCHARGE OF LIABILITIES: Indirect Export DISCHARGE OF LIABILITIES: Indirect Export Within 30 days from re-export Duly acknowledged GRN Invoice Customs Warehouse Keeping Unit (WHK) Outward entries are made in the Bond Register Issue write-off-note (THINETH) Endorse Cancellation Allowed on the GRN

DISCHARGE OF LIABILITIES: Deemed Export DISCHARGE OF LIABILITIES: Deemed Export Within 30 days from re-export Duly acknowledged GRN With endorsement by the BOI that goods have been duly received If non-BOI, letter of authority for duty free import/local purchase Invoice Customs Warehouse Keeping Unit (WHK) Outward entries are made in the Bond Register Issue write-off-note (THINETH) Endorse Cancellation Allowed on the GRN

RELEASE FOR HOME USE RELEASE FOR HOME USE Not permitted Only on exceptional circumstances Customs Duty and levies are payable Waste is permitted on payment of Customs Duty and levies if any

CUSTOMS PROCEDURES WITH CUSTOMS PROCEDURES WITH ECONOMIC IMPACT ECONOMIC IMPACT Offered in GOOD FAITH Implemented in TRUST Relaxed for PRODUCTIVITY Aimed at PROGRESS