POL CIR NO. 21/(RE-98)/1997-2002 Dated 10-07-1998

1. Counting of third party exports under EPCG scheme
2. Clarification on paragraph 6.5(i) of EXIM Policy where further processing is done to add value.

1. Attention is invited to paragraph 6.5 (vi) of the Exim Policy (RE-98), 1997-2002 which reads as follows:

"Where the manufacturer exporter has obtained licences for the manufacture of the same export product both under EPCG and the Duty Exemption Scheme, the physical exports made under the Duty Exemption Scheme including the Duty Entitlement Passbook scheme shall also be counted towards the discharge of the export obligation under this scheme"

It has been pointed out that some of the EPCG licence holders who have exported the goods manufactured by them through a third party and wherein the third party has claimed the benefit of DEPB scheme, the same was disallowed in view of the above provision.

The provision under paragraph 6.5(vi) of the Exim Policy (RE-98), 1997-2002 count only such exports for the discharge of EPCG scheme where the manufacturer of the goods is EPCG licence holder. However, if EPCG licence holder is exporting through the third party which is already covered under paragraph 6.5(ii) of the Exim Policy (RE-98), 1997-2002, the DEPB benefit can be claimed by either of the two depending upon the agreement which the manufacturer holding the EPCG license has with the third party.

However, in such cases, the claimant shall submit a 'No Objection Certificate' from the other party that DEPB benefit has not been claimed or shall not be claimed by the latter and the latter is also not disqualified for claiming the DEPB benefit.

2. Representation have been received with regard to interpretation regarding second sentence of paragraph 6.5(i) which reads as follows:

"However, if exporter is processing further to add value on the goods so manufactured, the export obligation shall stand enhanced by 50%".

Clarifications have been sought as to whether the further processing to add value has to be done by the manufacturer holding the EPCG licenses or it can be done outside.

The issue has been examined and it is hereby clarified that in terms of paragraph 6.5 (i), the final product exported under the EPCG scheme may be manufactured by a manufacturer other than the EPCG licence holder but the processing upto the intermediate stage has to be done by the EPCG licence holder by he use of capital goods under EPCG scheme.

The EPCG licence holder shall, in such cases, be making a request to the concerned licensing authority requesting for change in the export product mentioning the name and address of the manufacturer who shall be converting the intermediate product into final product. The licensing authority shall allow the aforesaid change after enhancing the export obligation by 50%.

This issues with the approval of DGFT.

(Ajay Sahai)
Dy.DGFT,

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