(1) Goods or parts thereof on being imported and found defective or otherwise unfit for use or which have been damaged after import may be exported without a licence, and goods in replacement thereof may be supplied free of charge by the foreign suppliers or imported against a marine insurance or marine-cum-erection insurance claim settled by an insurance company. Such goods shall be allowed clearance by the customs authorities without an import licence provided that:

(a) The shipment of replacement goods is made within 24 months from the date of clearance of the previously imported goods through the Customs or within the guarantee period in the case of machines or parts thereof where such period is more than 24 months and

(b) No remittance shall be allowed except for payment of insurance and freight charges where the replacement of goods by foreign suppliers is subject to payment of insurance and / or freight by the importer and documentary evidence to this effect is produced at the time of making the remittance.

The importer shall also have the option to claim refund of payment, if any, already made to the foreign supplier, instead of obtaining replacement of goods referred to above.

(2) In such cases where the goods have been found short-shipped, short- landed or lost in transit prior to actual import and / or detected as such at the time of customs clearance ,import of replacement goods will be permitted on the strength of the certificate issued by the customs authorities without an import licence. This procedure shall also apply to cases in which short-shipment of goods is certified by the foreign supplier and he has agreed to replace the goods free of cost.

(3) Cases not covered by the above provisions will be considered on merits by the licensing authority for grant of licences for replacement of goods for which an application may be made in the form given in Appendix-8.