TaxTMI 
TaxTMI 
TaxTMI 
Your Export Oriented Unit is making money. Orders are flowing. Clients are happy. But your Quarterly Performance Report tells a different story. It shows negative Net Foreign Exchange. Suddenly, you look like a failing unit. The problem is not your business. It is your reporting.
Why Job Work EOUs Face This QPR Problem
The job work model for EOUs is straightforward. Your foreign buyer sends raw materials to India free of cost. You process or assemble these materials. You charge job work fees for your service. The finished goods go back to the buyer.
This is a legitimate business model. Chapter 6 of the Foreign Trade Policy specifically allows it. Thousands of EOUs in electronics, textiles, and engineering sectors operate this way. They earn genuine foreign exchange through their service charges.
But the QPR format creates confusion. When you import materials, even free of cost materials, the Bill of Entry shows a value. Customs needs this value for duty calculation and statistical purposes. Your QPR picks up this BOE value as an import.
On the export side, your shipping bill shows only the job work charges. This is your actual invoice value. The material belongs to your buyer, so you cannot claim it as your export.
Now look at what the QPR displays. Imports worth crores based on BOE valuation. Exports worth lakhs based on job work fees. The arithmetic shows massive negative NFE. Your unit appears to be bleeding foreign exchange when it is actually earning it.
How Customs and DC View Negative NFE Reports
Development Commissioners track EOU performance through NFE calculations. A unit consistently showing negative NFE raises red flags. It suggests the unit is importing more than it exports. This defeats the entire purpose of the EOU scheme.
Officers reviewing your QPR may not immediately understand your business model. They see the numbers first. Questions come later. In some cases, units have received show cause notices based on negative NFE. Others have faced delays in renewal of Letters of Permission.
The irony is painful. You are running a compliant operation. You are earning foreign exchange. But your own reporting makes you look suspicious.
The Correct Way to Report FOC Imports in QPR
The fix requires understanding what NFE actually measures. Net Foreign Exchange tracks real forex movement. Money coming into India versus money going out. It does not track customs valuation of goods crossing the border.
When your buyer sends FOC materials, no forex leaves India. You do not pay for these imports. There is no remittance. No dollars flow out of your bank account. The BOE value exists only for customs purposes.
Your QPR should reflect actual forex flows. Job work charges received from the buyer count as forex inflow. FOC imports involve zero forex outflow because you paid nothing.
When you report it correctly, the picture changes completely. Inflow from job work fees stands on one side. Zero outflow for FOC imports stands on the other. Your NFE turns positive. As it should be for a unit that genuinely earns foreign exchange.
Documentation You Need for This Reporting Approach
Keep your paperwork solid. Your agreement with the foreign buyer should clearly state the FOC arrangement. The purchase order must specify that materials are supplied free of cost and remain buyer property.
Your BOE should reflect the FOC nature of imports. Bank documents should show no outward remittance against these shipments. Job work invoices must clearly describe the service and charges.
When your DC office reviews the QPR, this documentation supports your reporting method. You are not hiding anything. You are reporting forex reality instead of customs valuation fiction.
What Job Work EOUs Should Do Now
Review your past QPRs. If you have been reporting BOE values as forex outflow for FOC imports, your NFE history looks worse than reality. Consider filing clarifications with your DC office explaining the correct position.