Inward Processing

In processing/manufacturing export goods, sourcing of various inputs from many origins is a common practice in the industry today. Therefore ability of availing these inputs at a minimum cost without the overhead of fiscal levies at import is a primary contributing factor in placing our exporters on an equal footing with other international suppliers of equivalent goods, and thereby promoting exports from Sri Lanka.

TIEP-I SCHEME

The scheme for Temporary Import for Export Processing, or popularly knows as the TIEP-I Scheme provides for the import of inputs for processing, assembly or manufacture of goods for export after value addition.

TIEP-IV/V SCHEMES

Facilitates the import of plant, machinery, equipment and spares exempting Customs duty and differing VAT for the use in the processing/production of export products.

INFAC SCHEME

The Scheme dedicated to facilitate textile and apparel industry by providing import duty concessions subject to conditions laid down by the Secretary to the Treasury.

  • TIEP-I
    Scheme
  • TIEP-IV
    Scheme
  • Completing
    TIEP-I Form
  • Completing
    TIEP-IV Form
  • Frequent
    Questions
  • Downloads

TIEP-I Scheme is one of a number of Customs Relief Procedures provided for in legislation of Sri Lanka.

It permits the import, of materials as inputs, relieved from payment of fiscal levies on the condition that such materials are used for the processing of products for export.

The processing may include from simple sorting, assembly, packaging to complicated manufacturing.

OBJECTIVES

  • Lowering the cost of production of export products
  • Improve the productivity of the small and medium entrepreneurs
  • Facilitation of storage of inputs and manufactured articles in the exporters own warehouse without placing them in a Customs bonded warehouse
  • Facilitation of supporting industries

WHO IS ELIGIBLE

Direct Exporters - Manufacturers who produce goods intended for export under inward processing scheme and ship the same to another country for export.

Indirect Exporters - Manufacturers who produce goods intended for export but only supply them to another eligible party for further processing and finally exports.

Note: 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.

PERMITTED 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.

STEPS TO OBTAIN THE FACILITY

  • Compile a comprehensive report on the project.
  • Obtain a copy of the APPLICATION FORM FOR INWARD PROCESSING (TIEP-I form) and duly complete the same.
  • Obtain necessary approvals from line authorities [Tea Board, Coconut Development Board etc….] wherever applicable.
  • Obtain approval from the Ministry of Industry and Commerce on the Consumption Ratio and Wastage on the TIEP-I application form.
  • Submit following documents to Customs for registration Letter of request for registration Duly completed prescribed form [TIEP- I] in triplicate.
  • Project Report
  • Certificate of VAT registration.
  • If incorporated under the Companies Act No. 7 of 2007
  • Certificate of Incorporation (Form 2A/Form 41 - The Companies Act No. 7 of 2007)
  • Change of Director/Secretary and Particulars of Director/Secretary (Form 20 - The Companies Act No. 7 of 2007)
  • Articles of Association (First Schedule - The Companies Act No. 7 of 2007)
  • If registered under Business Names Statutes of respective provinces
  • Certificate of Registration of an Individual Business
  • Certificate of Registration of a Firm.
  • Necessary permits/ approvals Registration with Export Development Board as an Exporter.
  • Certified Copies of national identity cards of two directors Enter into agreement with Custom.
  • Collect approved copies of the TIEP-I form (two copies.
  • Furnish securities as required by Custom.

SECURITY FOR THE LIABILITIES (DUTY AND LEVIES)

In the case of an exporter with good track record, a personal/corporate guarantee may be accepted to cover the full value of duties and taxes leviable on the imported goods that may be in stock at any given time.

However, the Director General of Customs reserves the right to call for a Bank Guarantee up to 100% as security limit in the case of any default/unsatisfactory performance etc.

DISCHARGE OF LIABILITIES

Import liabilities are written off as an when exports are taken place, on the production of proof of export.

Direct Exporters are required to produce Export Customs Declaration together, shipping documents, confirmation on inward remittance together with Material Utilization Declaration (MUD).

Indirect Exporters are required to produce Goods Received Notes (GRN) duly certified by the enterprise receiving the goods, together with Invoice, in the case of supplies to another TIEP holder or BOI enterprises located within zones.

In the case of supplies to BOI enterprises located outside zones and INFAC operators, GRN and a VAT invoice have to be produced.

This Scheme permits exemption of the Fiscal Levies on imported Capital and Intermediate Goods used for the manufacture of products and services for export

OBJECTIVES

Capital and Intermediate Goods eligible for exemption.
Capital goods directly Involved in production process :

  • Machinery
  • Equipment
  • Accessories etc. 

Intermediate Goods which are considered essential to the manufacturing process [excluding raw material] :

  • Appliances
  • Devices
  • Supporting equipment such as Air conditioners, computers, electricity generators etc.

Other essential equipments.

  • Spare parts of project plants.
  • Transport equipment and handling equipment which are used in the production process exclusively in the factory premises or place of production.
  • Breeding stocks for agricultural projects.

WHO IS ELIGIBLE

  • Direct Exporters - Manufacturers who produce goods intended for export under inward processing scheme and ship the same to another country for export.
  • Indirect Exporters - Manufacturers who produce goods intended for export but only supply them to another eligible party for further processing and finally exports.

FACILITIES AVAILABLE

Duty and tax exemption granted under the scheme are:

100% exemption of Customs Duty in the case of exporters who export 50% or more or their output and indirect exporters who supply 50% or more of their output to direct exporters.

* Supplies of products to BOI enterprises who are entitled for duty free import of such goods are considered as deemed exports.

APPROVAL PROCEDURE

  • Direct exporters or indirect exporters should apply to the Director General of Customs,  in prescribed form [TIEP IV] for approval.
  • Forms could be obtained from Export Facilitation Unit of the Industries and Services Directorate of the Customs Department.

DOCUMENTS NEEDED

  • Request letter
  • Duly completed prescribed form [TIEP- IV] in triplicate.
  • Project Report
  • Certificate of VAT registration.
  • If incorporated under the Companies Act No. 7 of 2007
    • Certificate of Incorporation (Form 2A/Form 41 - The Companies Act No. 7 of 2007)
    • Change of Director/Secretary and Particulars of Director/Secretary (Form 20 - The Companies Act No. 7 of 2007)
    • Articles of Association (First Schedule - The Companies Act No. 7 of 2007)
  • If registered under Business Names Statutes respective provinces
    • Certificate of Registration of an Individual Business
    • Certificate of Registration of a Firm
  • Other necessary approvals [ Tea Board, Coconut Development Board etc….] wherever applicable.
  • EDB Registration
  • I.D copies of two director

TYPES OF APPROVAL

  • General approval for a period of one year from date of approval.
  • Specific approval will be given when applications are made for single importation. [each and every time]

SECURITIES

  • The security/bank guarantee equal to the full value of the Customs Duty and VAT
  • TIEP holder should furnish a Personal/Corporate Guarantee to the Customs as determined by the DGC after one year of operation.
  • New TIEP holders who import for the first time should furnish a 100% Bank Guarantee.
  • TIEP holder who has a good track record of less than 03 years may furnish a 25% Bank Guarantee and a 75% Personal Guarantee.
  • TIEP holder who has good track record of more than 05 years may apply 100% personal guarantee or corporate guarantee.

    *   All guarantees are valid for a period of one year.

DISCHARGE OF GUARANTEES

At the end of one year from the date of commencement of the production, TIEP holder should submit to the Director General of Customs a statement on production and exports and or supplies or such product to exporters respectively, duly certified by a recognized auditor in Form TIEP -V [In Triplicate]

After discharge of the guarantee, the TIEP holder should 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 Director General of the Customs.

Name & Address of Applicant

Name and the registered address of the exporter company/business who wish to obtain facilities available under Inward Processing Scheme for export of goods. An exporter can be a company duly incorporated in Sri Lanka, a business registered with the Registrar of Businesses.

Telephone number and the fax number of the registered address to be entered at the relevant space allocated.

Date (YY/MM/DD)

Date of the application. On which the application was signed by the applicant.

TIN No.

Tax Payer Identification Number (TIN) obtained from the Department of Inland Revenue.

Approval Number

This box is filled by Customs with the serial number assigned to the application when the approval is granted.  Therefore there could be several approval numbers for a given exporter within an year, if more than one application is made for approval.

Customs Ref. Number

A Customs Reference Number is allocated when an exporter is first registered with Customs and the reference number uniquely identifies the exporter and has perpetual succession.

Address of Workshop/Factory

The address of the location where goods are stored for processing and the production is carried out.
Telephone number and the fax number of the workshop/factory to be entered at the relevant space allocated.

Type of Operation

Manufacturer cum Exporter

Click this box if the manufacturer is also the exporter of the goods.

Manufacturer cum Indirect Exporter

Click this box if the manufacturer is not the final exporter of the goods.


EXPORT

Export/Manufactured Product

The commercial description of the product(s) exported.

H.S. Number

Commodity code(s) of the export/manufactured product according the Harmonized System for Commodity Classification.

Unit of Productions

Unit of quantity in which the production is usually manufactured and accounted for. For example if the export product is coconut oil, the Unit is kilogram and if the product is brushes then the Unit is units/pieces.

Unit Price FOB

The estimated export price of one Unit of Product without the freight and insurance charges.

Annual Output

Total estimated volume of production within the year of approval in the unit of production entered above. For  example if the Unit of Production is Liter, then the Annual Output is something like 1,000,000 Liters.

Annual Output Value (Rs)

The total estimated value of the annual output in Sri Lankan Rupees
Annual Output Value = Unit Price FOB * Annual Output


IMPORT

Item No.

Serial number of the item to be imported, such as 01, 02, ... etc.

Description of import items
Commercial description of the items intended to be imported for the manufacture the export product. Each item has to be listed against the respective Item No. If the space is not sufficient, then a separate sheet of paper has to be used.

Conversion Ratio

Conversion Ratio is the quantity required for the manufacture of a unit of the export product.

For example: in the case of manufacturing carton boxes from 31"x43" box boards and one such board yields 6 cartons, then the conversion ratio is 1:6.

These conversion ratios need approval from the Ministry of Industry and Commerce and thereby the determination of the resultant wastage factor.

H.S Number

Commodity code of the item intended to be imported according the Harmonized System for Commodity Classification.

Annual Quantity Kg/Units

Estimated quantity of each item required for the production in the year of approval. The quantity is to be entered either in Kilograms or Units.

Total value per year(Rs.)

Estimated value of each item required for the production in the year of approval. The value is to be entered in Sri Lankan Rupees.

Total value per year

Total value of all the items required for the production in the year of approval in Sri Lankan Rupees.

UNDERTAKING

1.    I/we under signed apply for duty and tax free clearance of above mentioned items and declare that I/we do not operate under any other scheme for duty and tax free clearance of items for the same product.
2. If approval is granted to import the above mentioned item duty free and tax free, I /We agree to abide by the items and conditions and the Rule governing the scheme.
3. I/We declare that the particulars given herein are true & correct.
I/We request clearance on

100% Bank Guarantee

25% Bank & 75% Exporter Guarantee Exporter Guarantee Name of Authorized Signature    …………………………………………………………….
Designation    ………………………………………………………...
Signature    ………………………………………………………….

CERTIFICATE

Approval is hereby granted to operate under the scheme in terms of the terms conditions and the rules governing the scheme.
We approve duty free clearance of the ………………………. above items.
………………………………..Items amended overleaf, subject to conditions governing the scheme. We recommended clearances under

100% Bank Guarantee

25% Bank &75% Exporter Guarantee 

Exporter Guarantee

…………………………………     …………………………
Designation Signature
For Director General
Date………………………… Of Customs

Export Facilitation Unit,
1st Floor, Sri Lanka Customs,
Colombo 11.

Name & Address of Applicant

Name and the registered address of the exporter company/business who wish to obtain facilities available under Inward Processing Scheme for export of goods. An exporter can be a company duly incorporated in Sri Lanka, a business registered with the Registrar of Businesses.

Telephone number and the fax number of the registered address to be entered at the relevant space allocated

Date (YY/MM/DD)

Date of the application. On which the application was signed by the applicant

TIN No.

Tax Payer Identification Number (TIN) obtained from the Department of Inland Revenue

Approval Number

This box is filled by Customs with the serial number assigned to the application when the approval is granted.  Therefore there could be several approval numbers for a given exporter within a year, if more than one application is made for approval.

Customs Ref. Number

A Customs Reference Number is allocated when an exporter is first registered with Customs and the reference number uniquely identifies the exporter and has perpetual succession.

Address of Workshop/Factory

The address of the location where goods are stored for processing and the production is carried out.
Telephone number and the fax number of the workshop/factory to be entered at the relevant space allocated.

Type of Operation

Manufacturer cum Exporter
Cross this box if the manufacturer is also the exporter of the goods.

Manufacturer cum Indirect Exporter
Cross this box if the manufacturer is not the final exporter of the goods

*Type of Approval

General Approval
Cross this box if the application is general in nature. For example if the same part for repair is to be imported regularly in several consignments during a period of one year from the date of approval.

Specific Approval
Cross this box if the application is specific in nature. For example if a plant or particular machine is to be imported once in a single consignment.

Purpose of Importing the Items and their Relation to Production

As the heading is very clear, the purpose of importing the plant, machinery, equipment or parts and its relation to the production has to be clearly entered here.

For example a part may be to replace a worn part of an existing plant or a machine used in the manufacturing of fruit juice for export. A plant may be for the purpose of canning or bottling fruit drinks for export.

Names and Address of Exporters (to be filled only by indirect Exporters use overleaf if necessary)

Exporters who supplies their products to third parties who finally carries out the export are required to enter the names and address of those final exporters here.


EXPORT

 

Export/Manufactured Product

The commercial description of the product(s) exported.

Production volume (Next 12 months), and Value %

Total estimated volume of production of the industry during the next 12 months. This has to be expressed in the relevant unit of production of the particular industry. This could be in Kilo grams, grams, liters, or units etc.
In the cage for Value%, enter the percentage of the value of the production during the next 12 months.

 

Export volume (Next 12 months), and Value %

Total volume of products of the said industry exported during the next 12 months. This also has to be expressed in the relevant unit of production of the particular industry as in the case of Production volume (Next 12 months) above.

In the cage for Value%, enter the estimated percentage of the value of the production to be exported during the next 12 months.


IMPORT

Item No.

Sequence number of the items listed in the application.

Description of Import Item(s)

Description of the item (plant, machinery, equipment, tool or part) applied to be imported under the scheme. It is important here to include full description of the item together with make and models.
 

Quantity

Quantity applied for each and every item to be imported

Approximate CIF Value

Approximate total of cost, insurance and freight of each and every item applied under the scheme.
 
UNDERTAKING
 

The applicant enters his/her name and designation and places his/her signature,  applying for duty fee a clearance of items and agrees to the terms and conditions governing the scheme and declares that all particulars are true and correct.

The applicant here requests the preferred manner in which the applicable Customs duties are secured on clearance i.e. whether it is by bank/exporter

CERTIFICATE
 
Recommends clearance of the above item(s) under exemption of duty subject to conditions governing the scheme:
The certificate authorizes the type of the approval, i.e. whether the approval is general/specific, and manner in which the Customs duties payable if any are secured i.e. Bank/Exporter guarantees.
When the certificate is signed by the Superintendent of Customs on duty at Export Facilitation Unit with signature and date, the applicant is authorized to import the item subject to the terms and conditions applicable to the scheme.
What are the Customs procedures with economic impact available in Sri Lanka?
  • Bonded Warehousing
  • Inward Processing
  • Entrepôt Trade
  • Temporary Admission
Who is eligible to apply for facilities under TIEP-I?
  • Direct exporters
    • Exporters who export products directly by themselves
  • Indirect exporters
    • Suppliers of products to other exporters to export
  • Deemed exporters
    • Suppliers of products to those who are entitled for duty free import of such products (e.g. Projects approved BOI)
Who is eligible to apply for facilities under TIEP-IV?
  • Direct/indirect/deemed exporters who are exporting over 50% of the volume of their annual production
Who is eligible to apply for facilities under Temporary Admissions?
  • Exporters until necessary formalities are fulfilled, as a temporary measure,
  • Goods intended to be inputs to other economic procedures,
  • On 100% bank guarantee.
Can the inputs imported under one procedure be transferred to another?
  • Unless there is a compelling reason, inputs (raw materials) are not permitted to be transferred.
Can the inputs imported under TIEP scheme be disposed for home use?
  • Unless there is a compelling reason, to the satisfaction of the Director General of Customs, no inputs are permitted to be disposed for home use.
What is the customs duty and other levies payable when the inputs (raw materials) imported under TIEP are disposed for home use (sold in the local market?
  • Customs duty and other levies what was payable at the time of first import to the country is payable. Usually this is the amount secured by way of bonds/guarantees on the import customs declaration. The opinion that the fiscal levies are payable at rates and values applicable at the time of disposal is not correct.
What is the customs duty and other levies payable when the finished/processed items/goods made out of inputs (raw materials) imported under TIEP are disposed for home use (sold in the local market?
  • Customs duty and other levies what was payable on the inputs (raw materials) at the time of first import to the country is payable. Usually this is the amount secured by way of bonds/guarantees on the import customs declaration. The opinion that the fiscal levies are payable on the finished/ processed items goods at rates and values applicable at the time of disposal is not correct.
What is the customs duty and other levies payable when the plant, machinery, parts imported under TIEP-IV are disposed for home use (sold in the local market?
  • Customs duty and other levies what is payable at the time of disposal on the Customs appraised value.