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POLICY CIRCULAR NO 7 (RE 2003) /2002-2007 Dated:
16th June , 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