Export Obligation under EPCG License

[Raja krishnan]

Dear Experts,

One manufacturing unit import of paper cutting machine under EPCG procedure. Now they will be decide to complete their export obligation from their sister concern of drilling machinery manufacturing & export unit. my doubt is whether it is correct one. Please given your reply along with related notification, circular and public notice if any.

[Ganeshan Kalyani]

If you do not have exports and your sister concern is having exports then your export obligation can be fulfilled by endorsing your EPCG number in their export Shipping Bills. The proof should be collected from them which will be required later.

[MUKUND THAKKAR]

Export obligation under the EPCG scheme your sister concern or group of company may full fill only 50% and rest of obligation should be completed by your unit.

[Raja krishnan]

Dear All,

Thanks for all your immediate action in this regard. but my doubt is based on the commodity, because both are different commodities. Import machinery is Paper cutting but the export obligation competed by drilling machinery export. whether it is correct one.

[MUKUND THAKKAR]

You can export any product to meet your obligation thru your group of company or sister concern up to 50% only. it is understable that your group of company manufacturing the diff product. so donot worry first completed your 50% thru your other concern. and balance try to completed thru your company.

[Ganeshan Kalyani]

Sir, if that company does not have any export then how it can fulfill the balance half of the export obligation. I have observed that company get full export obligation done through sister concern. However if you can share the provision which depicts that only half of the export obligation done by sister concerns will be accepted. Thanks.

[YAGAY andSUN]

Please check para 5.04 of FTP 2015-2020 and para 5.10 of HBP Vol.1 in this regard.

[MUKUND THAKKAR]

if old EPCG refer FTP-2009-2014 para 5.5(1)

[Ganeshan Kalyani]

I have perused the given reference but could not locate the 50% conditions mentioned in FTP. It would be beneficial to me to enrich my knowledge if could reproduce the relevant para in the reply itself. Thanks.

[MUKUND THAKKAR]

Export obligation 5.5 Following conditions shall apply to the fulfillment of the

export obligation:-

(i) Export Obligation shall be fulfilled by export of goods

manufactured/services rendered by the applicant.

Export obligation under the scheme shall be, over

and above, the average level of exports achieved by

him in the preceding three licensing years for the

same and similar products within the overall export

obligation period including extended period, if any;

except for categories mentioned in paragraph 5 .7.6

of HBP v1. Such average would be the arithmetic

mean of export performance in the last three years

for the same and similar products provided that

Premier Trading House (PTH) shall have option of

fixing average level of exports based on arithmetic

mean of export performance in the last five years

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instead of three years.

Upto 50% Export Obligation may also be fulfilled by

exports of other good(s) manufactured or service(s)

provided by the same firm / company, or group

company / managed hotel, which has the EPCG

authorization. However, EPCG authorization issued

prior to 1 .4.2008 will be governed by earlier policy

provisions.

However, in such cases, additional export obligation

imposed shall be over and above average exports

achieved by the unit / company / group company /

managed hotel in preceding three years for both the

original and the substitute product(s) / service(s),

despite exemptions in Para 5.7.6 of HBP v1.

[Ganeshan Kalyani]

Thanks for information.

AI Summary

EPCG export obligation: partial fulfillment by sister concerns permitted, with remaining obligation required to be met by the licensee. EPCG export obligation must be fulfilled over and above the applicant's average exports in preceding licensing years. Up to a limited portion of the obligation may be fulfilled by exports of other goods or services supplied by the same firm, group company or sister concern, but such substitute exports are counted against the additional obligation which remains measured over the applicant's historical average; documentary proof such as endorsement of the EPCG number on shipping bills is required.