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Temporary Importation for Export Processing (TIEP) Scheme allows manufactures who manufactures goods for export or indirect export to import inputs without payment of Fiscal Levies. By relieving manufactures cum exporters from domestic taxes it is expected to enhance the competitiveness of export production and encourage expansion of production capacities and exports. There are two main divisions in TIEP scheme, i.e. TIEP 1 and TIEP 4. The importation of inputs such as raw-materials, components, parts and packaging materials comes under TIEP 1 and importation of capital goods, appliances and spare parts comes under TIEP 4.
Under this scheme following items are eligible for duty and tax exemption
Raw-materials, Components and Parts which will be incorporated in the export product
Parts for assembly of the product to be exported
Consumable such as Catalysts, Accelerators, Processing Chemicals, Lab Chemicals, Research Chemicals and Retarders of chemical reaction to be used in the product to be exported
Packaging 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
Procedure to obtain approval
A manufacturer cum exporter/Indirect Exporter should make an application for approval to operate under the scheme, to the Director General of Customs on prescribed form TIEP 1 in duplicate. This form can be obtained from the Customs Export Facilitation Unit at Customs House, Bristol Street, Colombo 1.
Those who are already utilizing TIEP 1 scheme to manufacture any product for export shall not be entitled to operate under the Scheme for Customs Duty Rebate, the Scheme for Manufacturer-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 person shall make a declaration to that effect on the prescribed form TIEP 1.
In the prescribed form TIEP 1:
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.
An Exporter/Indirect Exporter is required to submit to the Director General of Customs:
Once the approval is granted it is valid for a period of one year. At the end of this period a new approval should be obtained.
Security for Fiscal Levies
The Exporter/Indirect Exporter should furnish a Personal/Company/Bank Guarantee to the Customs, as determined by the Director General
of Customs equal to the full (i.e. 100%) of the value of the duty and taxes payable for the period for which the approval is granted
(i.e. one year) as described below.
The Personal/Company/Bank Guarantee will be valid for a period of one year.
New exporter or indirect exporter who import for the first time under the Scheme should furnish a 100% Bank Guarantee for the value of duty and tax payable for a period of one year.
Existing Exporters/Indirect Exporters, who have over one year but less than 3 years of proven track record, may furnish a bank guarantee equal to 25% of the value of duty and tax payable for a period of one year and a Personal/Company guarantee for the balance 75% of the duties and taxes payable.
An Exporter/Indirect Exporter who operates under the Scheme with a proven track record of over 3 years, may submit a Personal/Company guarantee equal to the full value of the duties and taxes payable for a period of one year.
Procedures to be adopted at the time of Importation
Once the approval is granted it covers all the imports for a period of one year. The accumulating amount of duties and taxes on imported
inputs for this period should not exceed total value of Personal/Company/Bank Guarantees furnished. Import Cusdecs should be endorsed
on the face in block letters with the legend 'Under the Inward Processing Scheme.
Maintenance of Records
A manufacturer cum Exporter/Indirect Exporter shall maintain in respect of each export product records of:
Quantities and value of each input imported;
The Conversion ratio for each input;
Quantities and values of product manufactured;
Quantities and values of product exported;
Quantities and values of goods supplied by a Manufacturer cum Indirect exporter to Direct Exporters;
Quantities and values of inputs given to sub-contractors and quantities and values of manufactured goods received from them;
.Such records shall be made available for inspection by officers authorized by the Director General of Customs.
Rules regarding obtaining of inputs from local suppliers and Sub-Contracts
A manufacturer cum Exporter who operates under this scheme can obtain supplies from a manufacturer cum indirect exporter operating under the scheme or Manufacturer-in- Bond Scheme or on GRN or on Ex-Bond Goods Declaration.
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 Manufacturer-in-Bond Scheme for exports shall be required to obtain a certified Goods Received Note from the Manufacturer cum Exporter in order to obtain credit under the scheme.
A manufacturer cum Exporter may be permitted to Sub-Contract with any other Manufacturer for the manufacturer 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 materials or finished products during such sub-contracting operation as at the time of importation.
Where any Exporter/Indirect Exporter who operates under the Scheme or wish to operate under the Scheme is dissatisfied with a decision of the Director General of Customs he will be entitled within 30 days of the communication of such decision to appeal to the Secretary to the Treasury or to the Appellate Body appointed for the purpose.
Under this scheme following items are eligible for whole or partial exemption of customs imports duties, Export Development Board cess and Excise (Special Provisions) Tax.
Capital goods including machinery, equipment, accessories.
Appliances - Devices applied in the manufacturing process or supportive equipment such as air conditioners, computers, electricity generators and such other equipment, which are considered essential to the manufacturing process.
Spare parts of project plant, machinery or equipment.
Intermediate materials, directly used in the production process (excluding raw materials).
Transport equipment and handling equipment used exclusively in the factory premises or place of production, in the production process.
Breeding stock for agricultural projects.
The amount of duty and tax exemption granted will be as follows:
100% exemption in the case of exporters who export 50% or more of the output and indirect exporters who supply 50% or more of their output to direct exporters.
50% exemption for exporters who export 25% or more but less than 50% of their output and indirect exporters who supply 25% or more but less than 50% of their output to direct exporters.
Types of Approval to be granted
Approval will be two types - General and Specific and will be granted by the Director General of Customs.
Specific approval will be given when applications are made by exporters/indirect exporters for a single importation (each and every time).
Exporter/Indirect exporters who intend making several importations of items within a period of one year may apply for and be granted general approval.
Procedure to obtain approval
Manufacturer cum exporter/Indirect exporter should apply to the Director General of Customs on prescribed form TIEP 4 in duplicate. This form can be obtained from the Customs Export Facilitation Unit at Customs House, Bristol Street, Colombo 1.
In the case of new projects, applications should be supported with a project report giving evidence of export capability and/or supply capability for export purposes, as the case may be.
Applications under acknowledgement should be made well in advance to the above Unit, i.e. prior to the arrival of the shipment.
Security For Fiscal Levies
The Exporter/Indirect Exporter should furnish a Personal/Company/Bank Guarantee to the Customs, as determined by the Director General
of Customs equal to the full (i.e. 100%) of the value of the duty and taxes payable as described below.
The Personal/Company/Bank Guarantee will be valid for a period of one year.
New exporter or indirect exporter who import for the first time under the Scheme should furnish a 100% Bank Guarantee for the value of duty and tax payable.
Existing Exporters/Indirect Exporters, who have over one year but less than 3 years of proven track record, may furnish a bank guarantee equal to 25% of the value of duty and tax payable and a Personal/Company guarantee for the balance 75% of the duties and taxes payable.
An Exporter/Indirect Exporter who operates under the Scheme with a proven track record of over 3 years, may submit a Personal/Company guarantee equal to the full value of the duties and taxes payable (i.e. 100%)
Procedures to be adopted at the time of importation
At the time of each importation, the exporter/indirect exporter shall submit the following documents to the customs.
Approval obtained on form TIEP 4 granting Exemptions of Fiscal Levies (General or Specific).
Bank/Personal/Company Guarantee equal to the total Fiscal Levies.
Other import documents such as Cusdec, Invoice etc.
Discharge of Bank/Personal/Company Guarantee
At the end of one year from the date of importation exporter/indirect exporter shall submit to the Director General of Customs a statement of output and, export/supplies of such products to exporters respectively, duly certified by a recognized Auditor in Form - TIEP 5.
The Director General of Customs if satisfied that the export obligations have been met shall release the relevant guarantees. If for valid reasons the exporter/indirect exporter has not been able to fulfill his obligations, the Director General of Customs may grant an extension of the validity period of the approval, for a period of one year on acceptance of necessary guarantees. Further extension will be considered only under exceptional circumstances.
If at the end of the first year or the further period allowed, the export obligations have not been fulfilled, the guarantees shall be enforced.
In the case of Personal/Company Guarantees, if export obligations have not been fulfilled, the exporter/indirect exporter will be required to pay to the Customs the duty and taxes relating to the items imported and covered by the guarantees. Failure to pay such duty and taxes on demand by Customs, will make the exporter liable to penalties under the provisions of the Customs Ordinance (Chapter 235).
After discharge of the guarantee, the exporter/indirect exporter shall give a written undertaking to the Director General of Customs that the items imported under this scheme will not be sold, hired, leased, disposed of or used for any other purpose other than for which the items were allowed importation, without the prior approval of the Ministry of Finance or the Director General of Customs - within three years of such guarantee or any other lesser period approved by the Director General in considering the type or nature of the goods.
If an application for duty and tax exemption under this scheme is rejected, the reasons therefore shall be conveyed to the applicant by the Customs (within 10 working days). Any exporter/indirect exporter who operates under the Scheme is dissatisfied with a decision of the Director General of Customs he will be entitled within 30 days of the communication of such decision to appeal to the Secretary to the Treasury or the Appellate Body appointed for the purpose.