Public Notice No. 36 PN 1997-2002 dated 27th August, 1997

EOU/EPZ Scheme Amended
- EOUs/EPZ Scheme applicable to STP/EHTP units
- Application form for EOUs/EPZ Units changed
- Minimum exports turnover fixed as US $ 3.5 million
- Form for de-bonding of the EOU/EPZ unit
- Form for SIL to Sale in DTA

In exercise of powers conferred by paragraph 4.11 o the Export and Import Policy, 1997-2002, the Director General of Foreign Trade hereby makes following amendments in the Handbook of Procedures (Vol.1), 1997-2002.

1. In paragraphs 9.3, 9.5, 9.18, and 9.34, the word' STP/EHTP’ may be added after the word' EOU'.

2. In paragraph 9.11, 9.12, 9.13, 9.17, 9.19 (a), 9.25, 9.28 and 9.32, the expression ‘STP/EHTP' shall be added after the expression' EPZ' wherever appearing.

3. The following shall be added at the end of Chapter 9:

" Note: In the case of units under EHTP/STP schemes, necessary approvals/ permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Department of Electronics for the purpose instead of Development Commissioner of EPZ and by the Inter- Ministerial Standing Committee (IMSC) instead of BOA."

4. The following correction shall be incorporated in Appendix 16-A:
(a) The following shall be added after S.No. IlI [4]:
‘ (In case of conversion, attach fact sheet)'

(b) S.No. XI (i), shall be substituted by the following :
, Name and address of foreign collaborator'

(c) SI.No. XVIII shall be substituted by the fall


XVIII NET Foreign Exchange Earning

Average NFEP on FOB value of Exportsin 5 years Percentage
in terms of Paragraph 9.29 of the Policy

(e) The sentence' The minimum FOB value of exports during 5 years period should be as follows:-' appearing for the second time after SI.No. 1 of ‘SOME IMPORTANT GUIDEUNES' shall be deleted.

(f) The following shall be added as S.No. 1 (d) of' SOME IMPORTANT GUIDEUNES':
Us$ 3.5 Million for all other items

5. The Annexure-A to this Public Notice shall be inserted as Annexure to Appendix-16A'

6. In fifth paragraph of Appendix -16 B starting with words' AND WHEREAS as a condition of……..’, the words ‘minimum foreign exchange of’ shall be inserted after the words' Unit must earn'. Further, the words in bracket 'including the sales in the DTA as may be pern1ISSible under the Policy' appearing in the paragraph and also in the following paragraph shall be amended to read as '(Including the supplies in the DTA as may be permissible under the Policy)'

7. Appendix 16-B, paragraph number 4 appearing after 'NOW THIS AGREEMENT WITNESSETH AS FOLLOWS', the 5th line of the said paragraph number 4, the letter' a' appearing after the words 'on demand', shall be deleted and substituted by the word 'pay'.

8. In Appendix-16C, in sub paragraph ld) the ~rd 'units' appearing In the 61h line and the following sentence 'The debonding of regulations in force in DTA units.' shall be deleted.

9. Annexure to Appendix 16-C shall be substituted by the Annexure-B to this Public Notice.

10. Annexure-C to this Public Notice shall be inserted as Appendix-20F.

11. In Appendix 27 under SI.No. 33, the word \ Development Commissioner' shall be corrected to read as' Development Commissioner/Jt. Development Commissioner /Deputy Development Commissioner Asstt. Development Commissioner'.

12. Appendix 42 shall be substituted by the Annexure-D to this Public Notice.

13. In paragraph No.3 (i) of Appendix-43, the sentence 'A self attested copy of the register relevant to the claim shall be submitted alongwith the claim' shall be deleted.
This Issues in Public interest.

Sd/-
(S.B.Mohapatra)
Director General of Foreign Trade

Annexure-A to Public Notice No.36(PN) dated 27th Aug. 1997 Annexure to Appendix-16A
Proforma to be filled in by the existing DTA units seeking conversion into the EOU scheme fact Sheet

1. Whether conversion of DTA Unit into the EOU/EPZ units has been sought for
the full existing capacity of the unit or the proposal is for partial conversion.(Please give details of the existing Capacity etc.)

2. Whether any expansion of the DTA unit proposed to be converted In EOU/EPZ units has been envisaged, if so the extent thereof. (Please give details of the existing capacity and the enhanced capacity etc.)

3. What is the level of existing exports of the unit proposed to be converted into EOU.

(Please give details of export performance item wise for a minimum of three previous years)

4. Whether the DTA units is already under obligation to export, under:

i) Duty Exemption Scheme
ii) EPCG Scheme
iii) Any other Scheme

(Give all relevant details including total export obligation imposed, the export obligation discharged till date etc.)

5 Whether the unit is registered with the Customs or Excise authorities.

(Please give details namely Registration No., date etc.)

6. Are you manufacturing any non-excisable goods. (If yes, please give details)

7. Are you agreeable to have your whole unit customs bonded as required under the EOU Scheme?

8. Whether any sub-contracting is involved? Whether it results in change in form/nature/character of the goods, sent for sub- contracting. (if so, please give details including component to the sub-contracting, percentage of sub- contracting involved).

9. Whether you are merchant-exporter or a manufacturer-exporter (please give details.

10. Whether manufacturing activity involved in the unit is within the ambit of section 3 of the Central Excise and Salt Act, 1944.

11. What is the age (year of manufacture) and residual life of items of machinery already installed in your unit, whether they are imported or Indigenous (please attach separate sheets giving itemwise details with value of the new CG as well as existing value of machinery presently installed).

Date Signature Name :
Place : Address of Applicant

Annexure B to Public Notice No. 36(PN) dated 27th Aug. 1997
Annexure to Appendix 16-c

Form of legal undertaking for debonding of the EOU/EPZ

Note: Please see para 9.26 of Policy

M/s. ____________ were granted LOA/LOP No._________ dated_______ for setting
up a 100% Export Oriented Unit at ________ for the manufacture and export of ________ subject inter-alia to the condition that NFEP __________ would be achieved.

2. The following projections for exports were approved/undertaken for the first five years :-

Year Exports (Rs. in lakhs)
1st
2nd
3rd
411
511
Total

3. Projections of exports and NFEP were revised/ approved for further period of five years as detailed below :-

Year Exports (Rs. in lakhs)
6th
7th
8th
9th
10th
Total
NFEP

4. The unit filed a legal undertaking as per Appendlx-16B of Handbook of Procedures (Vol.l) on ……… with the President of India for achieving the following commitments.

Exports :
NFEP
5. As against the above projections, the unit's actual performance has been as under :-

Year Import Export
Capital Goods Raw Material 6. The unit applied for debonding of the unit which was approved vide letter No. …….. dated ……. subject to the condition that penalty imposed /to be imposed by the appropriate Authority under the F.T.(D&R) Act, 1992 for the non- fulfilment of the conditions of approval, would be paid.
7. In view of the approval for debonding, I/we……………….. hereby undertake as under :
i) That I/We ……….. shall pay whatsoever penalties are imposed by the Director General of Foreign Trade or any officer authorised in this behalf under FT(DR) Act, for non-fulfilment of the terms and conditions of LOA/LOP.
ii) That I/We shall adhere to the mode of payment of penalties, if any, and time frame In which penalties as required to be paid in one and single instalment to the Director General of Foreign Trade without any demur or protest.
Full and expanded description of the unit with full address
In witness whereof the unit hereto has duly executed this agreement on this day of 19……… signed, sealed and delivered by the unit in the presence of :
1.Witness
Name Full and expanded description of
Address the unit with full address

1.Witness
Name To be authenticatedf affirmed by
Address Ist class Magistrate/Notary Public

Accepted by me on behalf of the President of India
Asstt. DGFT/Foreign Trade Development Officer

Annexure-C to Public Notice No. 36(PN) dated 27th Aug., 1997
Appendix 20F
Application form for Special Import Licence by EOU/EPZ units achieving 25% more than the Stipulated Export Obligation

Note:
1. Please see paragraph 9.15 (e) of the Policy.
2. Please read the general instructions given at Appendix -1 before filling this application
3. In addition to this application form please also submit Appendix-1A (in duplicate) alongwith this application.

For Official UseFile No.:_____________________ Date:________________________

1. Name and address of the applicant' :

2. I.E.C Number

3. Application fee Rs.
Bank Receipt/ DD No
Date:
Issued by

4. LOI/LOA/LOP No. and date :

5. NFEP (i) Prescribed :
(ii) Achieved :

6. Details of Export Obligation / Export made during licensing year______________

FOB Value in Rupees
(a) FOB value of export obligation prescibed (b) 125% of export obligation prescribed (c) FOB value of export made (d) Export made in excess of 25% more than the export obligation prescribed (c-b=D) 7. Value of SIL entitlement @ 2% on excess exports as per : Rs. (in figure)
6(d) above.
: (in words)

Declaration/ Undertaking

1. I/We hereby declare that the particulars and the statements made In this application are true and correct to the best of my lour knowledge and belief and nothing has been concealed or held therefrom.
2. I/We fully understand that any information furnished in the application if proved incorrect or false will render me/us liable for any penal action or other consequences as may be prescribed in law or otherwise warranted.
3. I/We undertake to abide by the provisions of the Foreign Trade Development and Regulation) Act, 1992, the Rules and Orders framed thereunder, the Export and Import Policy and the Handbook of Procedures.
4. I hereby certify that I am authorised to verify and sign this declaration as per Paragraph 3.8 of the Policy.
Place: Signature of the Applicant:
Date: Name:
Designation:
Official Address:

Tel.No.:
Residential Address:

Certificate of Chartered Accountant/Cost and Work Accountant for Issue of Special Import Licence

I/We hereby confirm that I/We have examined the prescribed registers and also the relevant records of M/S _____________ for the period _____________ and hereby certify that:

(i) M/S.___________ (full name and address of the applicant) have made the exports during the year_______________
(ii) The following documents/ records have been furnished by the applicant and have been examined and verified by me/us namely :-
Export order/Contract, shipping bills, Bill of Lading (and/ or Airways Bills/ Receipts). Customs/ Bank attested Invoices, Bank Certificates of exports showing exports made in freely convertible currency In their own name and connected books of account
(iii) The relevant registers have been authenticated under my/our seal/signature

(iv) The financial information given in the above statement is in agreement with the relevant register and records; the same has been incorporated in the books of accounts maintained by the exporter; and Is' also true and correct
(v) It has been ensured that the information furnished Is true and correct in all respect; no part of it is false or misleading and no relevant information has been concealed or withheld;
(vi) Neither I, nor any of my partners is a partner, director, or an employee of the above-named entity or its associated concerns;
(vii) I/We fully understand that any statement made in this certificate, if proved incorrect or false, will render me/us liable for any penal or other consequences as may be prescribed in law or otherwise warranted.

Place: (Signature and Stamp/ Seal of the Signatory)
Date : (Chartered Accountant/ Cost & Works Accountant )
Name of the Signatory :
Address
membership No.
If any of the documents or record mentioned in item (ii) of the certificate have not been maintained/ furnished, examined or verified, they may please be specified below:-
1.
2.
3.

Documents to be enclosed with the application form :
1. Bank Receipt (in duplicate) /Demand Draft evidencing payment of application fee in terms of Appendix-34. ,
2. Self certified copy of RCMC issued by Development Commissioner.

Annexure D to Public Notice No. 36 dated 27th Aug. 1997

APPENDIX –42

Guidelines for Sale of Goods in the Domestic Tariff Area (DTA) by
EOU/EPZ/ EHTP/ STP units

I. DTA Sale Entitlement
Note: Please see Paragraphs 8.36,9.9 and 9.10 of the Policy and paragraphs and 9.22, 9.23, 9.24 and 9.25 of the Handbook of Procedures.

Paragraphs 8.36, 9.9(b) and 9.9(c) of the Export and Import Policy and 9.23- 9.24 of the Handbook of Procedures provide for sale in the DTA by EOU/EPZ/EHTP/STP Units .Such sales in the DTA will be governed by the following guidelines:

a) The sate of goods in the DTA will be subject to the payment of the applicable duties as notified from time to time by the Department of Revenue Ministry of Finance, Government of India.

b) DTA sale entitlement will be applicable only to those goods that are approved for manufacture and export in the Letter of Permission/ Letter of Intent. No DTA sale will be permissible if such sale is specifically prohibited in the Exim Policy or the Letter of Permission/ Letter of Intent.

c) DTA sale of non-Basmati rice will not be allowed. Disposal of by-products will, however, be permitted as per guidelines in para V below.

d) Units may opt for DTA sales on a quarterly, half yearly or annual basis by intimation to the Development Commissioner of the EPZ concerned.

e) The DTA sales entitlement shall be availed of within one year of the accrual of entitlement. The Development Commissioner of the EPZ concerned may, if he deems fit, extend this period by six months. The Board of Approvals concerned may, however, extend the time limit upto three years in exceptional cases.

f) An application for DTA sale shall be accompanied by a statement indicating the ex-factory value of the goods produced (excluding rejects) and ex-factory value of goods actually exported. The statement shall be certified by an independent Cost! Chartered/Cost and Works Accountant and endorsed by the Customs/Central Excise Officer having jurisdiction over the unit. The Development Commissioner of the EPZ concerned will determine the extent of the DTA sale admissible in value terms and issue a goods removal authorisation
in terms of value and quantity for sale in DTA.

g) If the goods sought to be sold in the DTA require any quality control certificate under any Act/Rule Regulation, the DTA sale will be allowed only after the production of such a certificate.

h) DTA sale entitlement shall accrue only after the goods are exported during the relevant period as indicated under sub-para (d) above except as provided in para II(ii). However, this requirement may be waived in the case of such goods which, in the opinion of the Development Commissioner of the EPZ concerned, require trial production in order to produce goods of exportable quality.

i) Advance DTA sale permission in respect of trial production shall not exceed the entitlement accruable on the exports envisaged in the first year and such sale shall be adjusted against the subsequent entitlements. The Unit shall
be required to execute a bond with the Development Commissioner of the EPZ concerned to cover the difference between the amount of duties paid on the advance DTA sate and the full duties applicable on such goods.

j) Advance DTA Sales permission would also be admissible in respect of trial production In cases of capacity expansion/ product diversification. In such cases, the unit would be entitled to advance DTA sales linked to the expanded capacity created by establishment of new production streams or installation of balancing equipment or through product diversification.

k) The DTA sale entitlement is permissible if the Net Foreign Exchange as percentage of exports achieved by the unit is not less than the minimum stipulated percentage in the Appendix-I of the Policy.

II. SALE OF AGRO PRODUCTS:

Eligibility for 50% sale in the DTA will be determined as follows:-

a) Agro-based units involved in the primary production of fresh fruits, vegetables, floriculture, horticulture, pisciculture and live-stock rearing shall be eligible for 50% DTA sale.

b) EOUs engaged in the manufacture of perishable items like floriculture, horticulture, pisiculture can also avail the facility of simultaneous sale in DTA of such perishable items on quarterly basis, while earning DTA entitlement on exports made during the said quarter. Such permission can be granted in advance by the DC concerned subject to the condition that the unit has achieved positive NFE upto the previous quarter.

c) Food Processing Industries connected with the agriculture, acquaculture, animal husbandry and poultry where the manufactured product is of edible In nature shall be eligible for the facility of 50% DTA sale. Food processing Industries like fruit and vegetable processing, milk products, poultry and meat products, fisheries and package food industry shall also fall under this category;

d) The eligibility for 50% DTA sale of items relating to sericulture and other agro based industries in which the end-product is not of edible in nature including tissue culture, shall be decided on a case to case basis by the Board, of Approvals. In such cases 50% DTA sales shall be allowed only if primary processing Is involved (i.e. where there is only one change in the state of production). Accordingly, the items like cotton textiles, cigarettes etc., shall stand excluded from the purview of this benefit;

e) The provisions of Para (j) above relating to achievement of NFEP will not apply to units in agriculture, aqua-culture, animal husbandry, floriculture, horticulture, poultry, viticulture, and sericu1ture, which will be entitled to 50%
of DTA sale subject to positive NFE.

f) The eligibility for 50% DTA sale of items like clove oil etc. shall also be decided on a case to case basis by the Board of Approvals;

g) The items originating from plantation crops i.e. tea coffee, rubber and cardamom shall not be eligible for g)% DTA sales; and

h) DTA sale of Basmati rice shall be limited to 25% of production in value terms.

II.A SALE OF GEM & JEWELLERY PRODUCTS:

DTA sale of Gem & Jewellery items wilt be permitted on annual basis by the
Development Commissioners concerned upto 10% of value of exports during the preceding year subject to following conditions:-

a) The application will be submitted to DC of EPZ concerned on yearly basis (licensing-year) giving the details of production and exports made during the preceding licensing year duly certified by a Chartered Accountant and endorsed by the jurisdictional Custom Authority. A self attested copy of Bank certificate of export and realisation shall be enclosed with the application.

b) The application shall be accompanied with a statement showing NFEP achieved during the period as well as since inception duly verified by a Chartered Accountant and endorsed by the jurisdictional Custom Authority .

c) The DTA sale shall be permitted against freely transferable SIL for clearance of such items from EOU/EPZ units and payment of the applicable duties in free foreign exchange from EEFC account.

d) The Custom and Central Excise Authority shall endorse the original SIL making the same invalid for further import/ procurement from EOU/EPZ unit to the extent of supplies permitted.

IlI-A OTHER SALES IN DTA:

The following guidelines shall apply to the sate of goods in the DTA in respect of supplies specified in paragraph 9.10 of the Export and Import Policy and paragraph 9.25 of the Handbook of procedures:

a) The unit shall, at the time -of application, indicate the quantity and value of goods sought to be supplied in the DTA. If the sale is effected against an import licence held by the DTA purchaser, the Customs/Central Excise Officer concerned will allow such sales after making a suitable entry on the licence of the quantity and value of such sales. The Import licence shall cease to be valid for further imports to the extent of such supplies effected by EOU/EPZ units.

b) If the goods proposed to be sold by the EOU/EPZ units do not require an import licence, the Customs/Central Excise Officer concerned will allow such supplies from the unit to the DTA .

c) Goods supplied under (a) and (b) above will be taken into account for the purposes of discharging export obligation and achievement of NFEP. The unit will file a monthly statement to the Development Commissioner giving details of the goods cleared in the DTA category wise.

111-8 : Items which are freely importable under the policy may be sold in DTA over and above the entitlement under para 9.9(b) and (c) of the Exim Policy against payment of full duties provided the unit has achieved the stipulated export obligation and NFEP, cumulatively upto the relevant quarter

III-c: EOU/EPZ/EHTP units in the Electronic hardware opting under Para 9.9(f) of the Policy may sell one-half of the value of their production on annual basis in DTA and export the other half of production in value terms without any minimum foreign exchange earning stipulation on payment of applicable duty. Availment may be permitted by DC concerned on quarterly/ half-yearly/yearly basis as per option of the unit.

IV. SALE OF REJECTS:

Sale of rejects will be allowed in the DTA, as provided for in para 9.9(a) of the Export and Import Policy and para 9.22 of the Handbook of Procedures.
v. SALE OF 8Y-PRODUCTS:

The aforementioned guidelines do not apply to the sale of by-products generated by an EOU/EPZ unit during the process of manufacture. The sale of such by- products in the DTA may be made :-
i) if such sate is permitted In the Letter of Permission/ Letter of Intent; or
ii) in any other case with the prior permission of the Board of Approvals.

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