The 100% EOU scheme is, at present, governed by the provisions set forth under Chapter 9 of the Export and Import (EXIM) Policy, 1997-2002. The scheme facilitates the approved units in export of their entire production, subject to certain relaxation, indicating inter alia the conditions of approval of units, their operational framework, and the legal obligations cast upon them. 

The 100% EOU scheme offers to the EPZ units identical incentives and adopts the same production regime. Whereas the EOUs can be located at any place, the EPZs have been set up as enclaves separated from the domestic tariff area by fiscal barriers, which are intended to provide an internationally competitive duty free environment for export production at low costs. 

Under the 100% EOU scheme, even goods appearing in the restricted list of the EXIM Policy (1997-02) are permitted to be imported. However goods appearing in the prohibited list of the Policy are not permitted. It even allows duty free import of capital goods on loan basis. 

Eligibility of units under the scheme : 

Paragraph 9.1 of the EXIM Policy, 1997-2002 states that the units undertaking to export their entire production of goods may be set up under the Export Oriented Units (EOU) scheme, Export Processing Zone (EPZ) scheme, Electronic Hardware Technology Park (EHTP) scheme, or Software Technology Park (STP) scheme. These units may be engaged in the manufacture, services, development of software, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, and sericulture. Units engaged in manufacture of computer software may also be set up under any of the aforementioned schemes. 

Legal Undertaking/Bonds under the customs provisions : 

Apart from the legal undertaking prescribed for an EOU/EPZ unit as per Paragraph 9.6 of the EXIM Policy, the unit is required to execute bonds/legal undertakings with the customs/central excise authorities, as follows: 

i. Bond for availing the duty exemption in terms of the relevant customs and central excise duty exemption notification. 

ii. Warehousing bond under section 59 of the Customs Act, 1962. 

iii. Bond under section 65 of the Customs Act, 1962 for obtaining sanction of the Assistant Commissioner of Customs for manufacture in bond. 

iv. Transit bond under section 67 of the Customs Act, 1962 for the carriage of the goods from the place of import to the unit.

Vide Notification no.6/98 CE (NT) dated 2.3.1998 a bond titled B17 (General Surety/Security) has been notified. The bond covers all liabilities of the EOU/EPZ/EHTP/STP unit both under the customs and central excise Acts, as indicated in the Circular no. 14/98 dated 10.3.98 and related Circulars no.66/98 dated 15.9.98 and no.42/98 dated 19.6.98. Essentially, it is provided that: 

i. The bond amount will be equivalent to the duty leviable on the sanctioned requirement of imported and indigenous capital goods plus the duty on the raw materials to be held in stock for six months only. 

ii. The units would be required to give either surety for the duty amount or furnish 5% of the bond amount as bank guarantee or any other approved government security.

Monitoring and administrative control : 

The EOU/EPZ units are administratively under the control of the Development Commissioner of the EPZ concerned, whose jurisdiction is indicated vide Ministry of Commerce Public Notice no.10/17/94 EPZ dated 11.5.1994.

On the policy front, all decisions relating to the EOU/EPZ units are taken by the Board of Approvals (BOA), set up under the Ministry of Commerce. The BOA is chaired by the Secretary, Ministry of Commerce and includes the Chairman, C.B.E.C. or his nominee as a member. In the case of units engaged in manufacture of electronic hardware and software the policy decisions are taken by the Inter Ministerial Standing Committee (IMSC) set up under the Department of Electronics and the same are implemented through its Designated Officers. Chairman, C.B.E.C. or his nominee is a member of the IMSC. 

The administration of the provisions of the customs and central excise law in respect of the EOU/EPZ units is done by the Commissioners of Customs and Central Excise who work under the C.B.E.C. In this regard Circulars no. 126/95 dated 12/12/95 and no. 27/96 dated 10.5.96 mention the jurisdiction of the Commissioners of Customs and Central Excise. 

As regards the EPZ units, an Assistant Commissioner of Customs is posted at the EPZ on deputation to the Ministry of Commerce. Accordingly, Circular no. 32/97 dated 1.9.97 lays down the responsibility of the Assistant Commissioner as well as the jurisdictional Commissioners of Customs in matters regarding the EPZ units.