Gold jewellery imports to Asian countries zoom

Singapore (Jun 21)  A dozen-odd importers are using the free trade agreement with member-countries of the Association of Southeast Asian Nations (ASEAN) with a vengeance. In May, import of such gold jewellery at 1% duty (against 10% duty on gold) has zoomed to six tonnes against just about 400 kgs in January.

 Analysts say this can pose a major threat for Indian jewellery fabricators and bullion dealers, if left unchecked. India has FTAs with several Asean countries including Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar (Burma), and Vietnam.

 According to GFMS Thomson Reuters, imports have been happening from Indonesia since July last year. The flow has begun from Malaysia as well from May. The imported jewellery is generally re-melted and sold to the local market. Even after including the financing cost and premium for gold in Indonesia, the total cost of importing is just 3%, thereby helping these importers net a differential of 7%.

 Usually jewellery is made of 22 carat gold but industry sources say even 24 carat gold jewellery is being imported in the form of pendants, bangles and chains. In India, these can be converted back to gold bars for further selling. The sources said jewellery imported through this route is exported and duty drawback is being claimed by generating an invoice supporting this sale. For some reasons, the consignments are getting cleared only at Hyderabad, Kolkata and Chennai ports.

The route of importing jewellery at one% duty gained traction a couple of years ago when gold import duty went up to 10% and there were stringent import rules for gold including the 80:20 scheme which mandated export of 20% gold with value addition for every consignment for selling remaining 80% in domestic market.

 Even the All India Gem and Jewellery Trade Federation, a body of Indian jewellery traders, had represented earlier to the government that import of finished goods, that is jewellery at 1% duty is a big anomaly and needs to be corrected in the interest of Indian artisans. Thereafter, the import duty on jewellery was raised to 15%. For imports from Asean countries under FTA, duty was retained at 1% but additional conditions such as they should have ceritificate of origin/20% value addition were imposed.

 Even after that, import of jewellery from Thailand continued at one% duty but 20% value addition condition was interpreted as an option due to the way it was mentioned in the notification. Later, the customs department imposed heavy penalty as jewellery importers had not adhered to value addition norms and the cheap import issue died down for a
 while.

 However, now these traders show value addition by showing certificate calculating the cost of mining of gold in dore (unrefined) form, cost of refining dore to gold bars and cost of manufacturing jewellery which comes to more than 20%. However, so far imports have been happening from Indonesia and Malaysia which have gold mines and hence the value addition in form of mining and dore refining cost can be shown along with certificate of origin.

 Sudheesh Nambiath, GFMS, Thomson Reuters, said, "it is an irony that while government wants to push forward with Made in India theme, such trade agreements overlooks the need to protect industry with some fine skills"

Source: BusinessStandard