Q.41. State the objectives and major aspects of the Exim Policy.
Ans.
In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992), the Central Government hereby notifies the Export and Import Policy for the period 2002-2007. This Policy shall come into force with effect from 1st April, 2002 and shall remain in force upto 31st March, 2007 and will be co-terminus with the Tenth Five Year Plan (2002-2007). However, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.
Objectives and aspects of Exim Policies.
The principal objectives of this Policy are:
I. To facilitate sustained growth in exports to attain a share of at least 1% of global merchandise trade.
II. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.
III. To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality.
IV. To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers.
Procedures
The Director General of Foreign Trade may, in any case or class of cases, specify the procedure to be followed by an exporter or importer or by any licensing or any other competent authority for the purpose of implementing the provisions of the Act, the Rules and the Orders made thereunder and this Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook (Vol.2), Schedule of DEPB Rate and in ITC(HS) and published by means of a Public Notice. Such procedures may, in like manner, be amended from time to time.
Q.41 Explain details the benefits available to the suppliers under Deemed Exports Scheme.
Ans.
Deemed Exports
"Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange.
Categories of Supply
The following categories of supply of goods by the main/ sub-contractors shall be regarded as "Deemed Exports" under this Policy, provided the goods are manufactured in India
a) Supply of goods against Advance License/Advance License for annual requirement/DFRC under the Duty Exemption /Remission Scheme;
b) Supply of goods to Export Oriented Units (EOUs) or units located in Special Economic Zone (SEZs) or Software Technology Parks Electronic Hardware Technology Parks
c) Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG) scheme;
d) Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/ funds, where the legal agreements provide for tender evaluation without including the customs duty;
e) Supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants.
f) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty coupled with the extension of benefits under this chapter to domestic supplies;
g) Supply of goods to the power projects and refineries not covered in (f) above.
h) Supply of marine freight containers by 100% EOU (Domestic freight containers–manufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the Customs; and
i) Supply to projects funded by UN agencies.
j) Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding.
The benefits of deemed exports shall be available under paragraph (d), (e), (f) and (g) only if the supply is made under the procedure of International Competitive Bidding (ICB).
Benefits for Deemed Exports
Deemed exports shall be eligible for any/all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol.1):-
(a) Advance License for intermediate supply/ deemed export/DFRC.
(b) Deemed Exports Drawback.
(c) Refund of Terminal Excise duty.
Q.19 Explain EPCG Scheme in brief.
Ans.
EPCG Scheme
The scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of license.
However, in respect of EPCG licenses with a CIF value of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years.
The capital goods shall include spares, jigs, fixtures, dies and moulds. EPCG license may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the license holder.
Second hand capital goods upto 10 years old may also be imported under the EPCG scheme.
Spares for the existing plant and machinery may also be imported under the EPCG scheme subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of license.
Eligibility
The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.
Conditions for import of Capital Goods
Import of capital goods shall be subject to Actual User condition till the export obligation is completed.
Export obligation
The following conditions shall apply to the fulfillment of the export obligation:-
I. The export obligation shall be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme. The export obligation may also be fulfilled by the export of same goods, for which EPCG license has been obtained, manufactured or produced in different manufacturing units of the license holder/specified supporting manufacturer (s)/ vendor(s). The export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for same and similar products except for categories mentioned in Handbook (Vol.1). Alternatively, export obligation may also be fulfilled by exports of other goods manufactured or service provided by the same firm/company which has the EPCG license. However, in such cases, the additional export obligation imposed under EPCG scheme shall be over and above the average exports achieved by the unit in preceding three years for the substitute products/services. This facility shall only be available to manufacturer exporters/ service provider.
II. The export obligation under the scheme shall be, in addition to any other export obligation undertaken by the importer, except the export obligation for the same product under Advance License, DFRC, DEPB or Drawback scheme.
Any firm/company registered with BIFR or any firm/ company acquiring a unit, which is under BIFR shall be allowed EO extension as per the rehabilitation package prepared by the operating agency subject to subsequent approval of BIFR. However, in cases where the rehabilitation package does not specify the EO extension period, a time period upto 12 years reckoned from the date of issue of license would be permitted on merits of the case for fulfillment of export obligation.
Similarly, small-scale SSI units shall also be entitled for similar facility as per the rehabilitation scheme of the concerned State government. However, in cases where the State rehabilitation scheme does not specify the EO extension period, a time period upto 12 years reckoned from the date of issue of license would be permitted on merits of the case for fulfillment of export obligation
In the case of EPCG licenses issued to agro units in the agri export zones, a period of 12 years reckoned from the date of issue of the license would be permitted for the fulfillment of export obligation.
Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier
A person holding an EPCG license may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG license holders shall be eligible for deemed export benefit under paragraph 8.3 of the Policy.
Benefits to Domestic Supplier
In the event of a firm contract between the EPCG license holder and domestic manufacturer for such sourcing, the domestic manufacturer may apply for the issuance of Advance License for deemed exports for the import of inputs including components required for the manufacturer of said capital goods.
The domestic manufacturer may also replenish the inputs including components after supply of capital goods to the EPCG license holders.
Fixation of Export Obligation
In case of direct imports, the export obligation relating to the EPCG license shall be reckoned with reference to the duty saved value on the CIF value of capital goods (including spares, jigs, fixtures, dies and moulds) actually imported. In case of domestic sourcing, the export obligation relating to EPCG shall be reckoned with reference to the notional Customs duties saved on the FOR of capital goods (including spares, jigs, fixtures, dies and moulds).
Service provider in Agri export zone shall have the facility to move or shift the capital goods within the zone provided he maintains accurate record of such movements. However, such equipments shall not be sold or leased by the license holder.
Q.4. Write short Notes on Advance License, DEPB, DFRC.
Ans.
1. Advance License
Advance License is issued for duty free import of inputs, as defined in paragraph 7.2, subject to actual user condition. Such licenses (other than Advance License for deemed exports) are exempted from payment of basic customs duty, additional customs duty, anti dumping duty and safeguard duty, if any. However, Advance License for deemed export shall be exempted from basic customs duty and additional customs duty only. Such licenses are issued to:-
I. Manufacturer exporter or Main contractor in case of deemed exports.
II. Merchant exporter where the merchant exporter agrees to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant DEEC Book and in the case of deemed exports, sub contractor(s) whose name(s) appear in the main contract.
III. Such licenses and/or materials imported thereunder shall not be transferable even after completion of export obligation.
Such licenses shall be issued with a positive value addition. However, for exports for which payments are not received in freely convertible currency, the same shall be subject to value addition as specified in Appendix- 39 of Handbook (Vol.1), 1997-2002
Advance License shall be issued in accordance with the Policy and procedure in force on the date of issue of license and shall be subject to the fulfillment of a time bound export obligation as may be specified.
The facility of Advance License shall also be available where some of the inputs are supplied free of cost to the exporter. In such cases, for calculation of value addition, the notional value of free of cost inputs along with value of other duty-free inputs shall be taken into consideration.
Advance License for Intermediate Supply
Advance License may be issued for intermediate supply to a manufacturer-exporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter/deemed exporter holding another Advance License.
Advance License for Deemed Export
Advance License can be issued for deemed export to the main contractor for import of inputs required in the manufacture of goods to be supplied to the categories mentioned in `paragraph 10.2(b), (c), (d), (e), (f) and (g) of the Policy. In addition, in respect of supply of goods to specified projects mentioned in paragraph 10.2 (d), (e), (f) & (g) of the Policy, an Advance License for deemed export can also be availed by the sub-contractor of the main contractor to such project. Such license for deemed export can also be issued for supplies made to United Nations Organisations or under the Aid Programme of the United Nations or other multilateral agencies and paid for in foreign exchange.
2. DEPB (Duty Entitlement Passbook Scheme)
For exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of Duty Entitlement Passbook Scheme is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product.
Under the Duty Entitlement Passbook Scheme (DEPB), an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade by way of public notice issued in this behalf, for import of raw materials, intermediates, components, parts, packaging material etc.
The holder of Duty Entitlement Passbook Scheme (DEPB) shall have the option to pay additional customs duty, if any, in cash as well.
Validity
The DEPB shall be valid for a period of 12 months from the date of issue.
Transferability
The DEPB and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made. Imports from a port other than the port of export shall be allowed under TRA facility as per the terms and conditions of the notification issued by Department of Revenue.
Applicability of Drawback
The exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty paid in cash on inputs under DEPB shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. In cases, where the Additional Customs Duty is adjusted from DEPB, no benefit of CENVAT/Drawback shall be admissible.
3. DFRC (Duty Free Replenishment Certificate)
Duty Free Replenishment Certificate is issued to a merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty, and special additional duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import.
Duty Free Replenishment Certificate shall be issued only in respect of export products covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of acetic anhydride, ephedrine and pseudo ephedrine in the Handbook (Vol-II).
Duty Free Replenishment Certificate shall be issued only in respect of export products covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of acetic anhydride, ephedrine and pseudo ephedrine in the Handbook (Vol-II).
Duty Free Replenishment Certificate shall be issued for import of inputs, as per SION, having same quality, technical characteristics and specifications as those used in the end product and as indicated in the shipping bills. The validity of such licenses shall be 18 months. DFRC and or the material(s) imported against it shall be freely transferable.
The Duty Free Replenishment Certificate shall be subject to a minimum value addition of 33%.
The export products, which are eligible for modified VAT, shall be eligible for CENVAT credit. However, non excisable, non dutiable or non centrally Vatable products, shall be eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the time of imports under the scheme.
The exporter shall be entitled for drawback benefits in respect of any of the duty paid materials, whether imported or indigenous, used in the export product as per the drawback rate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however be restricted to the duty paid materials not covered under SION.
Duty Free Replenishment Certificate may be issued in respect of exports for which payments are received in non-convertible currency. Such exports shall, however, be subject to value addition as specified in Appendix-39 of Handbook (Vol.1).
Q.5. Benefits recovered by an EOU and SEZ.
Ans. Benefits received by EOU and SEZ
The Policy relating to Export Oriented Units (EOUs), units in Export Processing Zones (EPZs), Electronic Hardware Technology Parks (EHTP) and Software Technology Parks (STP) is given in chapter 9 of the Policy.
Export Processing Zones can also be set up by State Governments or in private/joint sector as per guidelines issued vide notification No. 42(RE)/92-97 dated 31st May, 1994 (Appendix-16G).
Software units may undertake exports using data communication links or in the form of physical exports (which may be through courier service also), including export of professional services.
Items Permitted For Import
An EOU/EPZ/EHTP/STP unit may import without payment of duty all types of goods, required by it for activities indicated in paragraph 9.1 of the Policy or in connection therewith, provided they are not prohibited items in the ITC (HS). These inter-alia include:
Capital goods, as defined in the Policy including the following and their spares:
1.
i. DG sets, captive power plants, transformers and accessories,
ii. Pollution control equipment,
iii. Quality assurance equipment,
iv. Material handling equipment, like fork lifts and overhead cranes,
v. Un-interrupted Power Supply System (UPS), Special racks for storage, storage systems, modular furniture, computer furniture, anti-static carpet, tele-conference equipment, Servo Control System, Air-conditioners, panel for electricals.
vi. Security Systems
vii. Tools, jigs, fixtures, gauges, moulds, dyes, instruments and accessories;
2. Raw materials, components, consumables, intermediates, spares and packing materials
3. Prototypes and technical samples for product diversification, development or evaluation;
4. Drawings, blue prints, charts, microfilms and technical data;
5. Office equipment, including PABX, Fax machines, video projection system,
6. Spares and consumables for the above
Note:- The above items may be new or second hand. In case of doubt as to whether the item is required by the unit for its activities or in connection therewith, the decision of the concerned Development Commissioner shall be final.
PART B
Q.1. What are the preliminary registrations required to commence an export business.
Ans. Basic registrations required for exports are as follows:
Importer-Exporter Code Number
No export or import shall be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted. An Importer-Exporter Code (IEC) number shall be granted on application by the competent authority in accordance with the procedure specified in the Handbook
Registration -cum-Membership Certificate
Any person, applying for (i) a license to import/ export, [except items listed as restricted items in ITC(HS)] or (ii) any other benefit or concession under this Policy shall be required to furnish Registration-cum-Membership Certificate (RCMC) granted by the competent authority in accordance with the procedure specified in the Handbook (Vol.1) unless specifically exempted under the Policy.
Sales Tax Registration
In case of merchant exporters for purchasing goods for export without the payment of sales tax, Form N14/Form H is required to be issued. Such forms can be issued only if the Merchant exporter is holding a registration certificate under relevant Sales Tax Act.
Central Excise Registration:
If a exporter is engaged in the manufacture of trading through warehousing of Excisable goods, such exporter is required to obtain registration certificate under Central Excise Act.
Q.3. Write a short note on initiatives taken for promoting “thrust Sectors”
Ans. Thrust Sector
With a view to achieve the share of 1% of global trade and accelerated growth in exports, the following shall be the thrust sectors:
Electronic hardware
Textile including garments
Auto components /ancillary
Gem & Jewellery
Agriculture
Service sector.
Department of Commerce shall take concerted efforts to promote exports of these sectors by specific sectoral strategy.
Q.5. Write a short note on initiatives taken for export promotion.
Ans.
PROMOTIONAL MEASURES
Central Assistance to States
In furtherance to the methodology outlined in Paragraph 1.5 the State Governments shall be encouraged to fully participate in encouraging exports from their respective states. For this purpose, suitable provisions has been made in the Annual Plan of the Department of Commerce for allocation of funds to the states on the twin criteria of gross exports and the rate of growth of exports from different states. The States shall utilise this amount for developing complementary and critical infrastructure such as roads connecting production centers with the ports, setting up of Inland Container Depots and Container Freight Stations, creation of new State level export promotion industrial parks/zones, augmenting common facilities in the existing zones, equity participation in infrastructure projects and any other activities as may be notified by DGFT from time to time.
Market Access Initiative
Financial assistance shall be available under the scheme to the export promotion councils, industry and trade associations and other eligible entities, as may be notified from time to time, on the basis of the competitive merits of proposals received in this regard for the following purposes which inter-alia includes:-
Marketing studies on country product focus approach basis.
Setting up of common showrooms under one roof and warehousing facility in the identified centres on the basis of marketing studies in important cities abroad.
Participation in sales promotion campaigns through international departmental stores.
Publicity campaign for launching identified products in selected markets.
Participation in international trade fairs, seminars, buyers sellers meet.
Promotion of select brands.
Transport subsidies for select agriculture products.
Registration charges for product registration abroad for pharmaceuticals, bio-technology and agro chemicals and testing charges for engineering products
Inland freight subsidies for units located in North East, Sikkim
Setting up of "business centre" in Indian missions abroad for visiting Indian exporters/ businessmen. .
Towns of Export Excellence
A number of towns in specific geographical locations have emerged as dynamic industrial locations handsomely contributing to India
A number of such industrial cluster towns are exporting a substantial portion of their products, which are world class. For example, Tirupur is exporting 80% of its production of hosiery. A beginning has been made to consider industrial cluster towns such as Tirupur for hosiery, woollen blanket in Panipat, woollen knitwear in Ludhiana
Common service providers in these areas shall be entitled for facility of EPCG scheme. The recognised associations of units will be able to access the funds under the Market Access Initiative scheme in Paragraph 3.2 for creating focused technological services. Further such areas will receive priority for assistance for identified critical infrastructure gaps from the scheme on Central Assistance to States mentioned in paragraph 3.1. The units in these notified areas would be eligible for availing all the EXIM policy schemes as per their choice and the provisions of those schemes shall stand relaxed to the extent provided in this paragraph in respect of such units.
Existing industrial clusters need upgradation of services and simplification of procedures. To achieve that purpose, it is proposed to bring about synergy and convergence of various schemes for development of cluster to improve the competitiveness of the units located there.
Selected towns producing goods of Rs. 1000 crore or more will be notified as Towns of Exports Excellence on the basis of potential for growth in exports. Proposal for strengthening infrastructure, simplifying rules & procedures and developing production infrastructure relating to design, R&D packaging , logistic support as well as to provide awareness and information about international marketing will be considered under the scheme.
Special Focus on Cottage and Handicraft Sector
The small scale sector along with the cottage and handicraft sector has been contributing to more than half of the total exports of the country. The cottage and handicrafts sector, which mostly employs artisan and rural people, contributes significantly to this effort. In recognition of the export performance of this sector and to further increase its competitiveness, the following facilities shall be extended to this sector.
i) The unit in this sector shall be eligible for funds from Market Access Initiative (MAI) scheme as given in paragraph 3.2 of this Policy. Funds shall be earmarked for this sector in the MAI scheme. The funds shall be utilised for developing their website for virtual exhibition, among other activities,
ii) Under the EPCG scheme, these units will not be required to maintain average level of exports as given in paragraph 5.5(ii) of this Policy;
iii) These units shall be entitled to the benefit of export house status on achieving lower total export/deemed export performance of Rs.15.crore during the preceding three licensing years. However, for new entrants, having exports of less than three years, such status may be granted on achieving the total exports of Rs. 15 crore in the current or preceding one/two licensing years as given in paragraph 3.7.2 of this Policy; and
iv) The units in handicraft sector shall be entitled to duty free imports of specified items upto 3% of FOB value of their exports.
Agri Export Zones (AEZ)
With a view to promoting agricultural export from the country and remunerative returns to the farming community in a sustained manner, AEZ as announced earlier would be set up for end to end development for export of specific products from a geographically contiguous area.
AEZ would be identified by the State Government, who may evolve a comprehensive package of services provided by all State Government agencies, State agriculture universities and all institutions and agencies of the Union Government for intensive delivery in these zones. Corporate sector with proven credentials will be encouraged to sponsor new agri export zone or take over already notified agri export zone or part of such zones for boosting agri exports from the zones.
Services which would be managed and coordinated by State Government/corporate sector would include provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related research & development etc. APEDA will supplement, within its schemes and provisions, efforts of State Governments for facilitating such exports.
Units in AEZ would be entitled for all the facilities available for exports of goods in terms of provisions of the respective schemes.
Brand Promotion and Quality
The Central Government aims to encourage manufacturers and exporters to attain internationally accepted standards of quality for their products. The Central Government will extend support and assistance to trade and industry to launch a nationwide Programme on quality awareness and to promote the concept of total quality management.
State Programmes
The Central Government will encourage and assist State Governments in launching similar Programmes in their respective States, particularly for the small scale and handicraft sectors.
Test Houses
The Central Government will assist in the modernisation and upgradation of test houses and laboratories in order to bring them at par with international standards.
Quality Complaints/ Disputes
The Regional Sub-Committee on Quality Complaints (RSCQC) set up at the Regional Offices of the Directorate General of Foreign Trade shall investigate quality complaints received from foreign buyers. The guidelines for settlement of quality complaints, in particular, and such other complaints, in general, is given in Appendix- 37 of Handbook (Vol.1).
Trade disputes affecting trade relations
If it comes to the notice of the Director General of Foreign Trade or he has reason to believe that an export or import has been made in a manner gravely prejudicial
(i) to the trade relations of India
(ii) to the interest of other persons engaged in exports or imports;
(iii) has brought disrepute to the credit or the goods of the country;
The Director General Foreign Trade may take action against the exporter or importer concerned in accordance with the provisions of the Act, the Rules and Orders made thereunder and this Policy.
Status Certificate
Merchant As Well As Manufacturer Exporters, Service Providers, Export Oriented Units (EOU’s)/ Units Located in Special Economic Zones (SEZ’s) / Agri Export Zone (AEZ’s)/ Electronic Hardware Technology Parks (EHTPs)/ Software Technology Parks (STPs) shall be eligible for such recognition.
Q.7. Explain briefly the procedure for redemption of EPCG License.
Ans. Export Promotion Capital Goods Scheme
Policy
The Policy relating to Export Promotion Capital Goods (EPCG) Scheme is given in chapter 6 of the Policy.
Application Form
An application for the grant of a license may be made to the licensing authority concerned in the form given in Appendix-10A along with documents prescribed therein.
Validity for Import of Spares.
Notwithstanding the provisions contained in paragraph 4.15 for the import of spares, the validity of the EPCG license shall be co-terminus with the validity of the export obligation period under paragraph 6.2 of the Policy and the same shall be endorsed on the license.
Leasing Of Capital Goods
An EPCG license holder may, on the basis of firm contract between the parties, source the capital goods from a domestic leasing company in accordance with paragraph 5.6. In such cases, the Bill of Entry of imported capital goods or the commercial invoice of indigenously procured capital goods, as the case may be, shall be signed jointly by the EPCG license holder and the leasing company at the time of import/ local supply respectively. However, the EPCG license holder shall alone be fully responsible for fulfillment of export obligation.
Indigenous Sourcing Of Capital Goods
a. The EPCG license holder intending to source capital goods indigenously, shall make a request to the licensing authority for invalidation of the EPCG license for direct import. The EPCG license holder shall also give the name and address of the person from whom he intends to source the capital goods.
b. On receipt of such request, either at the time of issuance of license or subsequently, the licensing authority shall make the license invalid for direct import and issue an invalidation letter, in duplicate, to the EPCG license holder. The licensing authority shall simultaneously grant permission to the EPCG license holder to procure the capital goods indigenously in lieu of direct import.
c. The indigenous manufacturer intending to supply capital goods to the EPCG license holder, may apply to the licensing authority in the form given in Appendix-10B along with the documents prescribed therein for import of components required for the manufacture of such capital goods. The indigenous manufacturer may alternatively apply for Advance License for deemed export in terms of paragraph 6.9 of the Policy for import of such inputs as required for the manufacture of capital goods for supply to the EPCG license holder .
EOU/EPZ Units Under EPCG Scheme
i. i) An EOU/ EPZ unit may apply for an EPCG license in terms of paragraph 9.27 of the Policy. Such application shall be made in the form given in Appendix-10A along with the documents prescribed therein. In addition, the applicant shall also furnish a copy of the `No Objection Certificate’ from the Development Commissioner showing the details of the capital goods imported/indigenously procured by the applicant, its value at the time of import/sourcing and the depreciated value for the purpose of assessment of duty under the scheme. Such cases shall not be required to be forwarded to Headquarters EPCG Committee. The concerned licensing authority shall issue EPCG licenses based on the no objection certificate produced from the concerned Development Commissioner.
ii. Deleted
Consideration Of Applications
The applicant may apply for EPCG license to the competent authority on the basis of self declaration subject to final fixation of nexus by Headquarters. EPCG Committee as per the financial power given in the table below. The applicant shall give an undertaking that in case the Headquarters EPCG Committee disallows the Capital Goods including Jigs, fixtures, dies, moulds and spares, the license holder shall pay Customs duty together with 24% interest on such goods.
The Regional Licensing authority, after issuance of the license, shall forward a copy of the application along with a copy of the license to the Headquarters EPCG Committee for its approval within 7 days of the issuance of the license except in such cases where the nexus norms have already been communicated by the Headquarters in any case or the same is already established on the basis of the EPCG licenses , issued in the past by the port office.
CIF VALUE | COMPETENT AUTHORITY |
Upto Rs. 50 Crore. | Regional Licensing Authority concerned |
Above Rs. 50 Crore | Headquarters EPCG Committee |
Benefits To Indigenous Supplier Of Capital Goods
For the purpose of claiming benefit of deemed exports, the indigenous supplier of capital goods shall furnish:
a. Certificate from the respective Assistant Commissioner of Customs and Central Excise Authorities having jurisdiction over the factory as evidence of having supplied/ received the manufactured capital goods and in case of service provider, a certificate from independent Chartered Engineer confirming the supplies/ receipt of the Capital Goods.
b. Evidence of payments received through normal banking channel from the EPCG license holder.
by excluding exports made to such countries.
Questoin20:- Write a short note on Fulfillment of Export Obligation under EPCG Scheme
Answer:-
Introduction: -
Fulfillment Of Export Obligation
a. The license holder under the EPCG scheme shall fulfill the export obligation over the specified period in the following proportions:
Period from the date of issue of license | Proportion of total export obligation |
Block of 1st and 2nd year | NIL |
Block of 3rd and 4th year | 15% |
Block of 5th and 6th year | 35% |
Block of 7th and 8th year | 50% |
However, the export obligation of a particular block of year may be set off by the excess exports made in the preceding block of year. Where export obligation of any particular block of year is not fulfilled in terms of the above proportions, except in such cases where the export obligation prescribed for a particular block of years is extended by the competent authority, such license holder shall, within 3 months from the expiry of the block of years, pay duties of customs plus 24% interest of an amount equal to that proportion of the duty leviable on the goods which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation.
The license holder shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive blocks under EPCG scheme, be liable to pay forthwith, the whole of duties of customs plus 24% interest leviable on the goods imported except in such cases where the export obligation prescribed for a particular year or block of year is extended by the competent authority,
The license holder shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive blocks under EPCG scheme, be liable to pay forthwith, the whole of duties of customs plus 24% interest leviable on the goods imported except in such cases where the export obligation prescribed for a particular year or block of year is extended by the competent authority,
However, the licenses issued under the scheme upto 31.3.2000 shall be governed by provisions laid down in paragraph 6.11 as given in Handbook (Vol.1) (RE-99).
Monitoring of Export Obligation
The license holder, upon installation of capital goods in the factory, shall produce to the concerned Licensing Authority, a certificate to this effect by the jurisdictional Excise Authorities within 6 months of clearance of such goods from Customs. The license holder shall submit to the licensing authority, report on the progress made in fulfillment of export obligation against the license issued to him. The report shall be submitted in the form given in Appendix -10C. The periodicity of the report shall be year wise.
6.12A Re-Export of Capital Goods Imported Under EPCG Scheme
Capital Goods imported under the EPCG scheme which are found defective or unsuitable for use may be re-exported with the permission of the Licensing Authority. In cases where the Capital Goods have been cleared without payment of basic Customs duty, no duty otherwise leviable on imports shall be paid on such re-export and the EPCG license holder shall not be eligible for any drawback benefits. However, in cases where the Capital Goods have been cleared on payment of concessional customs duty, no duty otherwise leviable on imports shall be paid on such re-export and the EPCG license holder shall be entitled for drawback in lieu of concessional duty paid at the time of re-export. The export obligation imposed on such capital goods will be extinguished
6.12B Replacement of Capital Goods
The Capital Goods imported under the scheme and found defective or otherwise unfit for use may be re-exported and Capital Goods in replacement thereof be imported under the scheme. In such cases, while
As evidence of fulfillment of export obligation, the license holder shall furnish the following documents;
a. For Physical Exports:
i. A consolidated statement of exports made in the form given in Appendix-10C, duly certified by a Chartered Accountant;
ii. A certificate from the bank evidencing exports and realisation in freely convertible currency.
b. For Deemed Exports;
i. Copy of ARO/ Back to Back Inland letter of Credit.;
OR
Supply invoices duly certified by the Bond Office of EOU/EPZ concerned showing that supplies have been received;
OR
Supply invoices duly certified by the Bond Office of EOU/EPZ concerned showing that supplies have been received;
OR
Invoices certified by the Project Authority concerned.
Invoices certified by the Project Authority concerned.
ii. The licensee shall also furnish the evidence of having received the payment through normal banking channel or a self certified copy of payment certificate issued by the Project authority concerned in the form given in Appendix-14B.
c. For Services rendered:
i. Consolidated statement of services rendered in the form given in Appendix-10C, duly certified by a Chartered Accountant;
ii. A certificate from the bank evidencing foreign exchange earning received through normal banking channel.
d. For supply of capital goods to EPCG license holders, where the indigenous manufacturer imports components under EPCG:
in case of import of components by indigenous manufacturer, he shall furnish;
in case of import of components by indigenous manufacturer, he shall furnish;
i. Certificate from the jurisdictional Excise authorities as evidence of having supplied/ received the manufactured capital goods;
ii. Evidence of payment received through the normal banking channel, from the EPCG license holder.
On being satisfied, the licensing authority shall issue a certificate of discharge of export obligation to the EPCG License holder and send a copy of the same to the customs authorities with whom BG/LUT has been executed.
Pro Rata Reduction/ Extension In Export Obligation
If the EPCG license holder has not utilised the full or utilised in excess, the CIF value of the license for import/ indigenous procurement of capital goods allowed therein, his export obligation shall stand reduced/ enhanced on prorata basis with reference to the actual utilisation of the license. In such cases where the CIF value actually utilised is more than the CIF value covered by the license, the license holder shall furnish additional fee to cover the excess CIF value of imports effected subsequently.
Extension of Export Obligation Period
The competent authority, as mentioned in paragraph 6.8, may consider, on merits, request for extension in export obligation period, including extension for any one year or any one block of years, for fulfillment of export obligation subject to the condition that extension of export obligation shall not exceed a total period of one year from the date of expiry of the export obligation period. The extension in export obligation period shall be subject to such terms and conditions as may be prescribed by the competent authority.
Penal Action
In case of failure to fulfil the export obligation or any other condition of the license, the license holder shall be liable for action under the Foreign Trade (Development & Regulation) Act, 1992, the Orders and Rules made thereunder, the provisions of the Policy and the Customs Act, 1962.
Export Obligation Shortfall
The competent authority as mentioned in paragraph 6.8 may also consider condonation of shortfall upto 5% in the export obligation subject to such terms and conditions as may be prescribed by them.
Maintenance of Records
Maintenance of Records
Every EPCG license holder shall maintain for a period of 3 years from the date of redemption, a true and proper account of the exports/supplies made and services rendered towards fulfillment of export obligation under the scheme.
Regularisation of Bonafide Default
In case, EPCG license holder fails to fulfill the prescribed export obligation, he shall pay duties of Customs plus 24% interest per annum to the Customs authority as per paragraph 6.11. In addition, the license holder shall surrender to the licensing authority SIL of a value equivalent to 5 times the CIF value of actual imports on prorata basis.
Re-fixation of average export obligation
Wherever average level of export obligation was fixed taking into account the exports made to former USSR
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