Model Standard Operating Procedure (SOP) for Internal EPCG Compliance

Model Standard Operating Procedure (SOP) for Internal EPCG Compliance.

MODEL SOP - Internal EPCG Compliance Management

Below is a Model Standard Operating Procedure (SOP) for Internal EPCG Compliance, designed for companies using the EPCG Scheme. This SOP is drafted in a formal, implement-ready format, suitable for adoption as part of an internal compliance manual or ISO documentation.

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Document Title: Standard Operating Procedure (SOP) – EPCG Compliance
Department: Export – Import / Finance / Plant Operations
Version: 1.0
Effective Date: _________
Approved By: _________

1. Purpose

To establish uniform procedures to ensure full compliance with the Export Promotion Capital Goods (EPCG) Scheme under the Foreign Trade Policy (FTP) and Handbook of Procedures (HBP) and to prevent:

• Penalties
• Duty/interest recovery
• Confiscation proceedings
• Non-fulfilment of Export Obligation (EO)

2. Scope

This SOP applies to all departments involved in:

• EPCG Authorization application
• Import of capital goods
• Installation and commissioning
• Export operations
• Finance & documentation
• DGFT & customs liaison
• EODC/Redemption activities

Applicable to all manufacturing and service units of the company.

3. Definitions

3.1 EPCG Authorization

Permit issued by DGFT allowing zero-duty import of capital goods subject to export obligation.

3.2 Export Obligation (EO)

The export value to be completed within 6 years from the date of issue of EPCG authorization.

3.3 Nexus Certificate

Certificate from DGFT confirming that capital goods are related to the export product.

3.4 Installation Certificate (IC)

Certificate confirming installation of the capital goods within the prescribed timeline.

4. Responsibilities

4.1 EPCG Compliance Officer (ECO)

• Overall responsible for EPCG compliance
• Maintains EPCG file and monitoring system
• Coordinates with DGFT, customs & internal departments

4.2 Import/Procurement Team

• Handles EPCG application inputs
• Ensures correct vendor data, specifications, and documentation

4.3 Plant/Engineering Team

• Supervises installation
• Coordinates with Chartered Engineer
• Maintains operation records

4.4 Finance Team

• Maintains export documentation
• Tracks e-BRCs and foreign remittances
• Supports redemption filing

4.5 Management

• Approves EPCG applications
• Ensures resource allocation for compliance

5. EPCG Operational Workflow

5.1 Pre-Application Stage

ECO shall ensure:

• Obtain technical details and process flow from Plant Team.
• Confirm the capital goods are required for export product/service.
• Obtain Nexus Certificate from DGFT.
• Verify HS codes of export product and capital goods.
• Prepare EPCG application including:
  • Technical specs
  • Brochures
  • Proforma invoices
  • CA-certified average export performance

Approvals:

• Internal management approval
• Department heads sign-off on the application

5.2 After EPCG Authorization is Issued

ECO shall:

• Verify the authorization details (value, EO, CG list, HS codes).
• Circulate the EPCG authorization to:
  • Import team
  • Finance team
  • Plant team
• Create an EPCG Compliance File (physical & digital) containing:
  • EPCG Authorization copy
  • Nexus Certificate
  • Application documents
  • Approval notes
• Enter all key data in EPCG Monitoring Register:
  • EO value
  • Duty saved
  • Install-by-date
  • EO block deadlines

5.3 Import Stage

Import Team must:

• Declare EPCG Authorization number in the Bill of Entry.
• Ensure capital goods match EPCG authorization specification.
• Forward all import documents to ECO:
  • Bill of Entry
  • Invoice & packing list
  • Freight/insurance details

ECO updates EPCG records accordingly.

5.4 Installation & Commissioning

Plant/Engineering Team must:

• Install the capital goods within:
  • 6 months from import (extendable to 12 months with approval)
• Inform ECO upon commissioning.

ECO must:

• Arrange for Chartered Engineer (CE) inspection.
• Obtain Installation Certificate (IC) with:
  • Model & serial number
  • Location
  • Installation date
• Submit IC to DGFT online within the prescribed timeframe.
• Keep photographic and video evidence of installation.

5.5 Export Obligation (EO) Tracking

Finance Team + ECO:

• Update export records monthly.
• Download e-BRCs and reconcile with shipping bills.
• Track block-wise EO:
  • 1st block: 50%
  • 2nd block: Remaining 50%
• ECO to file annual EO statement to DGFT if required.

5.6 Shifting/Relocation of Machinery (If required)

If shifting of machinery is needed:

• ECO must obtain prior DGFT permission.
• Plant Team provides relocation plan and new address.
• After relocation, fresh IC may be required.

5.7 Amendment & Corrections

ECO must apply to DGFT for:

• Correction in CG details
• Authorization revalidation
• EO extension
• IC delay condonation
• Block-wise extension (if required)

5.8 Record Keeping

Maintain all EPCG records for minimum 10 years:

• Bills of Entry
• IC & Nexus Certificate
• Shipping bills
• e-BRCs
• DGFT correspondence
• CA certificates
• Production & usage records
• Photographs of machinery

5.9 Redemption / EODC

Upon completion of EO:

ECO must compile:

• Export summary (shipping bills + e-BRCs)
• Installation Certificate
• Nexus Certificate
• Production records
• Chartered Accountant certificate

Steps:

1. File online EODC application in DGFT portal.
2. Respond to queries promptly.
3. Once approved, obtain:
   • EODC letter
   • Redemption letter
4. Forward copy to customs to close the bond.

6. Internal Review & Audit

6.1 Half-Yearly EPCG Audit

The internal audit team shall:

• Review EO fulfilment
• Check installation and usage records
• Validate export documentation
• Verify EPCG register entries

Audit findings to be discussed with:

• Management
• EPCG Compliance Officer
• Relevant departments

6.2 Corrective & Preventive Action (CAPA)

If non-compliance is found:

• ECO to prepare CAPA report
• Management to approve timeline for correction
• Follow-up audit after closure

7. Penalty Avoidance Measures

• Never install machinery at a location not declared to DGFT.
• Never sell or dispose machinery without prior DGFT approval.
• Submit IC within prescribed time to avoid suspicions of misuse.
• Plan exports early to achieve EO comfortably before deadlines.
• Apply for extensions well before due dates.

8. Escalation Matrix

9. Annexures

Annexure A: EPCG File Checklist
Annexure B: EPCG Monitoring Register Format
Annexure C: Installation Certificate Format
Annexure D: Export Obligation Tracking Sheet
Annexure E: CAPA Format

(Available on request)

This SOP ensures:

• Timely installation & documentation.
• Proper EO monitoring.
• Avoidance of penalties, duty & interest.
• Smooth EODC/redemption.
• Strong internal control system.