CIR. NO. 07/2003, DT. 16/06/2003

Export obligation fulfilment criteria in the case of bonding of an EPCG licence holder under the EOU scheme

The meeting of the Policy Review Committee on 18th August, 1999 had decided that in the case of a bonding of an EPCG licence holder under the Export Oriented Unit (EOU) scheme wherein the EPCG licence was issued on or after 5th June, 1995 , the Bank Guarantee ( BG) executed under the EPCG scheme would be redeemed only if the EPCG licence holder executed an Legal Undertaking (LUT) with the Development Commissioner of the EOU and there was no liability under the EPCG scheme under the blockwise period criteria of export obligation fulfilment.

The objective of this decision was to put a check on cases where the unit failing to fulfil its export obligation under the EPCG scheme would not take recourse to bonding under the EOU scheme.

In furtherance of this principle, it has also been decided that wherever any Customs notification under which an EPCG licence has been issued on or after 05.06.1995 grants any extension of the blockwise period (s) , the same would be kept in perspective while computing any proportionate export obligation shortfall at the time of bonding of the unit under the EOU scheme. However, a condition would be imposed that the export obligation as per the EPCG licence criteria would be fulfilled by the unit within the stipulated period (inclusive of any extensions).

For example in the case of EPCG licences issued under Customs Notification No 111/95, there is a provision for grant of EO extension of two years of any block(s) or the overall export obligation period. Hence at the time of bonding of the unit with an EPCG licence issued under this notification, say in the 5th-6th year block period, there is an export obligation shortfall . Technically speaking, since the applicant can apply for an EO extension for the 5th and 6th year, no liability would have accrued on date provided he has executed an LUT with the Development Commissioner of the zone of jurisdiction of the EOU. Additionally a condition would be imposed on the unit that the balance export obligation computed on the basis of total export obligation imposed on the EPCG licence would be completed by the unit in the stipulated period ( inclusive of any EO extensions granted under the notification wherein the EPCG licence was issued).

This issues with the approval of the Director General of Foreign Trade .

A.B. Menon
Deputy DGFT

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