POLICY FOR EOUs AND EPZs

Eligibility
Units undertaking to export their entire production of goods and services may be set up under the Export Oriented Unit (EOU) Scheme, Export Processing Zone (EPZ) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme. Such units may be engaged in manufacture, production of software, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture. Units engaged in service activities may qalso be considered.

Existing DTA units having an export obligation under the EPCG scheme, may also apply for conversion into an EOU. On such a conversion, the export obligation under the EPCG scheme will be met concurrently from the exportsby the unitsas an EOU. The entire operations of the EOU/STP/EHTP will be in a custom bonded factory, unless otherwise specifically exempted from physical bonding.

In accordance with the policy to give a special thrust to export of computer software, such units would be encouraged to be set up under any of the aforementioned export oriented schemes. Software units may undertake exports using data communication links or in the form of physical exports (which may be through courier service also), including export of professional services.

Importability of goods
An EOU/EPZ/EHTP/STP unit may import free of duty all types of goods, including capital goods, required by it for manufacture, production , processing, or in connection therewith, provided they are not prohibited items in the Negative List of Imports. However, import of Basmati paddy/brown rice shall be prohibited. The units shall also be permitted to import capital goods on loan from clients for specified periods for executing specified projects. STP/EHTP/EPZ may import free of duty all types of goods for creating a central facility for use by software development units in STP/EHTP/EPZ.

An EOU engaged in agriculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may import free of duty only such goods as are permitted to be imported duty free under a Customs Notification issued in this behalf.

Second hand Capital goods
All second hand goods, other than capital goods, shall be restricted for imports and may be imported only in accordance with a Public Notice or a license issued in this behalf.

Leasing of Capital goods
An EOU/EPZ/EHTP/STP unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case, the EOU/EPZ/EHTP/STP unit and the domestic/foreign leasing company shall jointly file the import documents to enable import of the capital goods free of duty

Net Foreign Exchange Earning as a percentage of exports (NFEP) and minimum export performance
The Unit shall be a net foreign exchange earner. The minimum level of foreign exchange earning as a percentage of exports(NFEP) as defined below and the minimum export performance shall be as specified in Appendix 1 of the Policy. Items of manufacture for export specified in the Letter of Permission/Letter of Intent alone shall be taken into account for calculation of net foreign exchange earning as a percentage of exports and export performance. However, for STP units export obligation norms alone, as notified, would apply. Notwithstanding the above, electronic hardware units shall be allowed to be set up without stipulation of a minimum net foreign exchange earning as a percentage of exports.

Legal Undertaking
The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to fulfil the obligations, as stipulated in Appendix I of the Policy, it would be liable to penalty in terms of the legal undertaking and/or under any other law for the time being in force.

Automatic Approvals
Project applications for EOU/EPZ units satisfying the conditions mentioned in the appropriate press note of the Ministry of Industry may be given automatic approval within fifteen days by the concerned Development Commissioner of the EPZ.

Other cases
In other cases, approval may be granted by the Board(s) of Approval (BOA) set up for this purpose or Secretariat for Industrial Assistance , as the case may be.