Under the Export Facilitation Scheme, which category does a textile manufacturer fall in, and what security and time limits apply?

The Export Facilitation Scheme, 2021 in Chapter XL of the Customs Rules, 2001 lets exporters acquire inputs without duty and taxes. How much security a textile mill gives, how long its authorization runs and how long it has to use the inputs all follow from one thing: the category rule 874 places it in. The corpus holds the Customs Rules only as updated to 30 June 2023, so later amendments to Chapter XL are not reflected here.

Who can use the scheme?

Rule 872(1) makes the scheme available, subject to authorization and registration in WeBOC or PSW, to:

• (a) persons registered under the Sales Tax Act, 1990 as manufacturer-cum-exporters who add at least ten percent value in manufacturing and exporting,
• (b) manufacturers acting as contracted vendors of a foreign principal as toll manufacturers,
• (c) commercial exporters,
• (d) persons registered as manufacturers and operating as indirect exporters,
• (e) manufacturers supplying against international tenders, and
• (f) Common Export Houses.

Rule 871(i) defines a direct exporter as a manufacturer-cum-exporter exporting in the name of its own firm or company.

Which category does a textile mill fall in?

Rule 874(1) sets the categories:

Category	Who
A	Manufacturers-cum-exporters exporting 60% or more of total annual production, or exports of at least USD 20 million, in the last two years
B1	Other manufacturers-cum-exporters with more than 3 years of export history
B2	Other manufacturers-cum-exporters with less than 3 years of export history
C1	Indirect exporters, commercial exporters and toll manufacturers with more than 3 years of history
C2	The same, with less than 3 years of history

Rule 874(4) places a new exporter with a firm export contract in A or B according to the claimed share of production to be exported, reviewed after one year.

What security does each category give?

Rule 876(1) requires a security instrument equal to the duty and taxes deferred or remitted on the approximate value of input goods:

Category	Self-owned facility	Rented facility
A	Indemnity bond (Appendix III) and post-dated cheque	Same
B1	Indemnity bond and post-dated cheque	Revolving insurance guarantee
B2	Revolving insurance guarantee	Revolving bank guarantee
C1	Indemnity bond and post-dated cheque	Revolving insurance guarantee (also commercial exporters)
C2	Revolving insurance guarantee	Revolving bank guarantee (also commercial exporters)

Rule 871(n) requires an insurance guarantee to come from an insurer registered with the Ministry of Commerce with a minimum PACRA rating of AA.

How long do authorizations and utilization periods run?

Category	Authorization period (rule 878)	Utilization period (rule 883)
A	Five years	60 months
B1	Four years	48 months
B2	Two years	24 months
C1	Four years	48 months
C2	Two years	24 months

Rule 878(3) uploads the authorized value year by year, and the next year’s authorization triggers on submission of the annual reconciliation report.

What about plant and machinery?

Rule 881 allows a user to acquire plant, machinery, equipment and spares for making output goods, with the Regulatory Collector’s authorization. Plant, machinery and equipment must be kept five years from import, and spares two years. Earlier disposal pays duty and taxes leviable at import at reduced rates:

Plant and machinery disposed of	Duty and taxes
Before three full years	Full
After three, before four years	75%
After four, before five years	50%
After five years	0%

For spares: full before one year, 50 percent between one and two years, nil after two years. Rule 881(3), as amended, lets machinery be transferred to another EFS user with the Regulatory Authority’s approval.

Worked example (illustrative figures)

A home-textile mill in Faisalabad with its own factory exported 70 percent of its annual production in each of the last two years and has a clean compliance record.

1. 70 percent is at or above 60 percent, so rule 874(1)(i) places it in Category A.
2. Security under rule 876(1)(a): indemnity bond and post-dated cheque.
3. Authorization period under rule 878: up to five years. Utilization period under rule 883: 60 months from import or local purchase of the inputs.
4. It imports a weaving machine under rule 881 on 1 March 2024 and sells it on 1 September 2027, three and a half years later. Suppose the duty and taxes leviable at import were Rs. 8,000,000. The disposal falls after three and before four years, so 75 percent applies: Rs. 8,000,000 x 75 percent = Rs. 6,000,000.

What if the mill is moving from DTRE or another earlier scheme?

Rule 877(2) lets an existing user of earlier schemes, including DTRE, be authorized under EFS subject to the Regulatory Collector’s satisfaction and compliance history. Stocks of inputs imported under the earlier scheme must be declared by description, PCT, quantity and value. Rule 874(2) lets existing users with a good compliance record be classified in the matching category. Rule 898(2) bars operating under EFS and the earlier schemes at the same time.

Common mistakes

• Counting only the percentage. Since the amendment to rule 874, exports of at least USD 20 million also qualify for Category A.
• Confusing the two periods. The authorization period in rule 878 and the utilization period in rule 883 are separate limits.
• Selling machinery early without counting years. Rule 881 charges full duty and taxes on disposal before three full years.

What to check in the official text

• Rules 871 to 883 and 898 of the Customs Rules, 2001, Chapter XL, as updated to 30 June 2023.
• Appendix III (indemnity bond) and the application format in Appendix I.
• Any SRO amending Chapter XL after 30 June 2023. None is held in this corpus.