SETTING UP 100% EOUs.
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The Government amended in November
1983 a concession scheme to facilitate the setting up of export-oriented
units (EOUs) in order to enable them to meet requirements of foreign
demand in terms of pricing, quality, precision etc.
EOUs can be set up anywhere in the country and may be engaged in the
manufacture and production of software, floriculture, horticulture,
agriculture, aquaculture, animal husbandry, pisciculture, poultry and
sericulture or other similar activities.
A 100 per cent export-oriented unit is an industrial unit offering for
export its entire production, excluding the permitted levels of domestic
tariff area sales. EOUs may be set up with a foreign equity
participation of up to 100 per cent. For setting up a 100 per cent EOU
the following conditions are applicable :
(i) the entire production and operation of 100 per cent EOUs must be in
a customs bonded factory, unless specifically exempt from physical
bonding; Goods will be imported into the customs bonded factory.
(ii) the unit shall undertake to manufacture in the bonded area and to
export its entire production for a period of 10 years ordinarily and 5
years in case of products liable to rapid technological change;
Regarding the export obligations of 100 per cent EOUs, the following
conditions apply :
- EOUs need not export their manufactured goods themselves but may use
an export house/trading house/star trading house or other EOUs subject
to certain conditions;
- EOUs may execute export orders also through third parties given that
the goods will be directly transferred from the customs bonded factory
to the port of shipment and all export benefits will be to EOUs only.
(iii) an approved EOU will execute a bond/legal undertaking with the
Development Commissioner concerned; Failure to fulfil the obligations
stipulated in the letter of approval or intent will render the unit
liable to penalty.
(vi) EOUs have to adhere to the minimum value addition conditions
incorporated in the letter of permission/letter of intent/industrial
license issued to them; In general, such minimum value addition will be
35 per cent for automatic approvals and 20 per cent for other cases.
(v) EOUs have to maintain a proper account of the imports, consumption
and utilization of all imported materials and exports made by the unit;
These accounts will be submitted periodically to the Development
Commissioner. Wherever an existing industrial unit is operating both as
a domestic unit as well as an approved 100 per cent EOU, it should have
two distinct identities with separate accounts.
(vi) EOUs are permited to sell part of the production in the domestic
tariff area subject to certain limits
(viii) the f.o.b. value of exports of an EOU can be clubbed with the
f.o.b. value of exports of its parent company in the domestic tariff
area to attain export house, trading house or star trading house status
for the parent company;
(ix) supplies produced in the domestic tariff area under global tender
conditions, against payment in foreign exchange, against advance
licenses and other import licenses, and to other EOUs with the
permission of the Development Commissioner, will be counted towards the
fulfillment of export obligations.
On completion of the bonding period, it shall be open to the unit to
continue under the scheme or to opt out of the scheme. Debonding will,
however, be subject to the industrial policy in force at the time the
option is exercised.
Where debonding is sought before the stipulated export obligation
period of 5 to 10 years, or where EOUs are unable to fulfill their
export commitments out of various reasons, it is considered premature
debonding. This is subject to payment of all leviable duties without the
benefit of depreciation, and also subject to penalties and other
conditions as decided by the Board of Approvals for 100 per cent EOUs.
Customs duties on capital goods as well as customs dutes on unused raw
materials, components, consumables and spares are leviable on debonding
after the export period |
