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Pharma exporters have raised serious concerns over the alleged practice by customs authorities of converting drawback shipping bills into free shipping bills in cases where the declared Free on Board (FOB)/Cost, Insurance, and Freight (CIF) value exceeds 150 per cent of the purchase value. Industry stakeholders say the issue affects genuine exporters despite their full compliance with valuation queries and submission of all supporting documents.
Exporters have urged the Commerce Ministry, Customs Department and the Central Board of Indirect Taxes and Customs (CBIC) to ensure that legitimate drawback claims are not denied without proper legal justification or a reasoned official order.
FOB means the seller handles export and loading, and the buyer takes over all shipping costs and risks once goods are on the vessel. CIF requires the seller to pay and arrange freight and insurance to the destination port.
According to pharma exporters, higher export values are often the result of genuine commercial factors such as value addition, branding, quality improvement, packaging, freight, insurance, compliance costs, and other export-related expenses. They say these factors naturally increase the final export value and should not automatically invite adverse action.
Whenever the declared FOB or CIF value exceeds 150 per cent of the purchase value, Customs officials generally raise valuation queries. Exporters said they respond by furnishing complete documentation, including purchase invoices, export invoices, costing details, export orders, and detailed explanations supporting the declared value.
However, exporters allege that despite submitting all the required documents and cooperating during the verification process, they are often instructed at the final stage to convert their drawback shipping bills into free shipping bills. They claim that such directions are issued without a speaking order or any detailed legal reasoning.
An exporter affected by the issue said, "We fully cooperate with Customs and provide every document sought during valuation verification. Despite this, we are asked to convert our drawback shipping bills into free shipping bills at the final stage. This deprives us of benefits that are legally available to genuine exporters."
Another industry representative said, "Higher export values do not necessarily indicate overvaluation. They often reflect legitimate value addition, branding, packaging, logistics, and other export costs. Every case should be decided on evidence and through a reasoned legal order."
Exporters said the conversion of shipping bills leads to the denial of legitimate duty drawback benefits and causes significant financial losses. They believe the practice also creates uncertainty for exporters who have complied with all documentary and procedural requirements.
Trade stakeholders have urged Customs authorities and CBIC to ensure that valuation concerns are addressed through transparent procedures and appropriate decisions. They have also sought safeguards to prevent the conversion of drawback shipping bills into free shipping bills without proper legal justification, stating that such measures would strengthen confidence among exporters and support fair and predictable trade practices.
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