CHAPTER -1 INTRODUCTION

Duration

1.1

In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992), the Central Government hereby notifies the Export and Import Policy for the period 2002-2007. This Policy shall come into force with effect from 1st April, 2002 and shall remain in force upto 31st March, 2007 and will be co-terminus with the Tenth Five Year Plan (2002-2007). However, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.

Transitional Arrangements

1.2

Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy. Licence/ certificate/permissions issued before the commencement of this Policy shall continue to be valid for the purpose for which such licence/ certificate/ permission was issued unless otherwise stipulated.

1.3

In case an export or import that is permitted freely under this Policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export or import is made within the original validity of the irrevocable letter of credit established before the date of imposition of such restriction.

Objectives

1.4

The principal objectives of this Policy are:

(i) To facilitate sustained growth in exports to attain a share of atleast 1% of global merchandise trade.

(ii) To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.

(iii) To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality.

(iv) To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers.

1.5 The objectives will be met through the coordinated efforts of the State Governments and all the departments of the Government of India in general and the Ministry of Commerce and Industry and the Directorate General of Foreign Trade and its network of Regional Offices in particular, with a shared vision and commitment and in the best spirit of facilitation, in the interest of promotion of trade in goods and services.

CHAPTER-2 GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS

Exports and Imports free unless regulated

2.1

Exports and Imports shall be free, except in cases where they are regulated by the provisions of this Policy or any other law for the time being in force. The itemwise export and import policy shall be, as specified in ITC(HS) published and notified by Director General of Foreign Trade, as amended from time to time.

Compliance with Laws

2.2

Every exporter or importer shall comply with the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Rules and Orders made thereunder, the provisions of this Policy and the terms and conditions of any licence/certificate/permission granted to him, as well as provisions of any other law for the time being in force. All imported goods shall also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods. No import or export of rough diamonds shall be permitted unless the shipment parcel is accompanied by Kimberley Process (KP) Certificate required under the procedure specified by the Gem & Jewellery Export Promotion Council (GJEPC). Interpretation of Policy 2.3

If any question or doubt arises in respect of the interpretation of any provision contained in this Policy, or regarding the classification of any item in the ITC(HS) or Handbook (Vol.1) or Handbook (Vol.2), or Schedule Of DEPB Rate the said question or doubt shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. If any question or doubt arises whether a licence/ certificate/permission has been issued in accordance with this Policy or if any question or doubt arises touching upon the scope and content of such documents, the same shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding.

Procedure 2.4

The Director General of Foreign Trade may, in any case or class of cases, specify the procedure to be followed by an exporter or importer or by any licensing or any other competent authority for the purpose of implementing the provisions of the Act, the Rules and the Orders made thereunder and this Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook (Vol.2), Schedule of DEPB Rate and in ITC(HS) and published by means of a Public Notice. Such procedures may, in like manner, be amended from time to time. The Handbook (Vol.1) is a supplement to the EXIM Policy and contains relevant procedures and other details. The procedure of availing benefits under various schemes of the Policy are given in the Handbook (Vol.1).

Exemption from Policy/ Procedure 2.5

Any request for relaxation of the provisions of this Policy or of any procedure, on the ground that there is genuine hardship to the applicant or that a strict application of the Policy or the procedure is likely to have an adverse impact on trade, may be made to the Director General of Foreign Trade for such relief as may be necessary. The Director General of Foreign Trade may pass such orders or grant such relaxation or relief, as he may deem fit and proper. The Director General of Foreign Trade may, in public interest, exempt any person or class or category of persons from any provision of this Policy or any procedure and may, while granting such exemption, impose such conditions as he may deem fit. Such request may be considered only after consulting ALC if the request is in respect of a provision of Chapter-4 (excluding any provision relating to Gem & Jewellery sector) of the Policy/ Procedure. However, any such request in respect of a provision other than Chapter-4 and Gem & Jewellery sector as given above may be considered only after consulting Policy Relaxation Committee.

Principles of Restriction 2.6 DGFT may, through a notification, adopt and enforce any measure necessary for:-

i. Protection of public morals. ii. Protection of human, animal or plant life or health. iii. Protection of patents, trademarks and copyrights and the prevention of deceptive practices. iv. Prevention of prison labour. v. Protection of national treasures of artistic, historic or archaeological value. vi. Conservation of exhaustible natural resources. vii. Protection of trade of fissionable material or material from which they are derived; and viii. Prevention of traffic in arms, ammunition and implements of war.

Restricted Goods 2.7 Any goods, the export or import of which is restricted under ITC(HS) may be exported or imported only in accordance with a licence/ certificate/ permission or a public notice issued in this behalf.

Terms and Conditions of a Licence/ Certificate/ Permission 2.8 Every licence/certificate/permission shall be valid for the period of validity specified in the licence/ certificate/ permission and shall contain such terms and conditions as may be specified by the licensing authority which may include:

(a) The quantity, description and value of the goods;

(b) Actual User condition;

(c ) Export obligation;

(d) The value addition to be achieved; and

(e) The minimum export price.

Licence/ Certificate/ Permission not a Right 2.9 No person may claim a licence/certificate/ permission as a right and the Director General of Foreign Trade or the licensing authority shall have the power to refuse to grant or renew a licence/certificate/permission in accordance with the provisions of the Act and the Rules made thereunder. Penalty 2.10 If a licence/certificate/permission holder violates any condition of the licence/certificate/ permission or fails to fulfil the export obligation, he shall be liable for action in accordance with the Act, the Rules and Orders made there under, the Policy and any other law for the time being in force. State Trading 2.11 Any goods, the import or export of which is governed through exclusive or special privileges granted to State Trading Enterprise(s), may be imported or exported by the State Trading Enterprise(s) as specified in the ITC(HS) Book subject to the conditions specified therein. The Director General of Foreign Trade may, however, grant a licence/certificate/permission to any other person to import or export any of these goods. In respect of goods the import or export of which is governed through exclusive or special privileges granted to State Trading Enterprise(s), the State Trading Enterprise(s) shall make any such purchases or sales involving imports or exports solely in accordance with commercial considerations, including price, quality, availability, marketability, transportation and other conditions of purchase or sale. These enterprises shall act in a non discriminatory manner and shall afford the enterprises of other countries adequate opportunity, in accordance with customary business practices, to compete for participation in such purchases or sales.

Importer-Exporter Code Number 2.12 No export or import shall be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted. An Importer-Exporter Code (IEC) number shall be granted on application by the competent authority in accordance with the procedure specified in the Handbook (Vol.1). However, if an IEC holder has not imported or exported in the preceding licensing year, such IEC shall be made inoperative by DGFT. Trade with Neighbouring Countries 2.13 The Director General of Foreign Trade may issue, from time to time, such instructions or frame such schemes as may be required to promote trade and strengthen economic ties with neighbouring countries. Transit Facility 2.14 Transit of goods through India from or to countries adjacent to India shall be regulated in accordance with the bilateral treaties between India and those countries. Trade with Russia under Debt- Repayment Agreement 2.15 In the case of trade with Russia under the Debt Repayment Agreement, the Director General of Foreign Trade may issue, from time to time, such instructions or frame such schemes as may be required, and anything contained in this Policy, in so far as it is inconsistent with such instructions or schemes, shall not apply. Actual User Condition 2.16 Capital goods, raw materials, intermediates, components, consumables, spares, parts, accessories, instruments and other goods, which are importable without any restriction, may be imported by any person. However, if such imports require a licence/ certificate/permission, the actual user alone may import such goods unless the actual user condition is specifically dispensed with by the licensing authority. Second Hand Goods 2.17 All second hand goods shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, ITC(HS), Handbook (Vol.1), Public Notice or a licence/certificate/permission issued in this behalf. Import of samples 2.18 Import of samples shall be governed by the provisions given in Handbook (Vol.1). Import of Gifts 2.19 Import of gifts shall be permitted where such goods are otherwise freely importable under this Policy. In other cases, a Customs Clearance Permit (CCP) shall be required from the DGFT. Passenger Baggage 2.20 Bonafide household goods and personal effects may be imported as part of passenger baggage. Samples of such items that are otherwise freely importable under this Policy may also be imported as part of passenger baggage without a licence/certificate/permission. Exporters coming from abroad are also allowed to import drawings, patterns, labels, price tags, buttons, belts, trimming and embellishments required for export, as part of their passenger baggage without a licence/certificate/permission. Import on Export basis 2.21 New or second hand capital goods, equipments, components, parts and accessories, containers meant for packing of goods for exports, jigs, fixtures, dies and moulds may be imported for export without a licence/certificate/permission on execution of Legal Undertaking/Bank Guarantee with the Customs Authorities provided that the item is freely exportable without any conditionality/requirement of licence/ permission as may be required under ITC(HS) Schedule II. Re-import of goods repaired abroad 2.22 Capital goods, equipments, components, parts and accessories, whether imported or indigenous, may be sent abroad for repairs, testing, quality improvement or upgradation or standardisation of technology and re-imported without a licence/certificate/permission. Import of goods used in projects abroad 2.23 After completion of the projects abroad, project contractors may import, without a licence/ certificate/ permission, used goods including capital goods provided they have been used for at least one year. Sale on High Seas 2.24 Sale of goods on high seas for import into India may be made subject to this Policy or any other law for the time being in force. Import under Lease Financing 2.25 Permission of licensing authority is not required for import of new capital goods under lease financing. Clearance of Goods from Customs 2.26 The goods already imported/shipped/arrived, in advance, but not cleared from Customs may also be cleared against the licence/ certificate/ permission issued subsequently. Execution of BG/LUT 2.27 Wherever any duty free import is allowed or where otherwise specifically stated, the importer shall execute a Legal Undertaking (LUT)/Bank Guarantee (BG) with the Customs Authority before clearance of goods through the Customs, in the manner as may be prescribed. In case of indigenous sourcing, the licence/ certificate/ permission holder shall furnish BG/LUT to the licensing authority before sourcing the material from the indigenous supplier/nominated agency.

Private/ Public Bonded Warehouses for Imports

2.28

Private/Public bonded warehouses may be set up in the Domestic Tariff Area as per the terms and conditions of notification issued by Department of Revenue. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such private/public bonded warehouses. Such goods may be cleared for home consumption in accordance with the provisions of this Policy and against Licence/certificate/ permission, wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods. If such goods are not cleared for home consumption within a period of one year or such extended period as the custom authorities may permit, the importer of such goods shall re-export the goods.

Free Exports 2.29 All goods may be exported without any restriction except to the extent such exports are regulated by ITC(HS) or any other provision of this Policy or any other law for the time being in force. The Director General of Foreign Trade may, however, specify through a public notice such terms and conditions according to which any goods, not included in the ITC(HS), may be exported without a licence/ certificate/ permission. Export of Samples 2.30 Export of samples and Free of charge goods shall be governed by the provisions given in Handbook (Vol.1). Export of Passenger Baggage 2.31 Bonafide personal baggage may be exported either along with the passenger or, if unaccompanied, within one year before or after the passenger's departure from India. However, items mentioned as Restricted in ITC(HS) shall require a licence/certificate/permission, except in the case of edible items.

Export of Gifts 2.32 Goods, including edible items, of value not exceeding Rs.1,00,000/- in a licensing year, may be exported as a gift. However, items mentioned as restricted for exports in ITC(HS) shall not be exported as a gift, without a licence/certificate/permission, except in the case of edible items.

Export of Spares 2.33 Warranty spares, whether indigenous or imported, of plant, equipment, machinery, automobiles or any other goods may be exported alongwith the main equipment or subsequently but within the contracted warranty period of such goods subject to approval of RBI. Third Party Exports 2.34 Third party exports, as defined in paragraph 9.55 shall be allowed under the Policy. Export of Imported Goods 2.35 Goods imported, in accordance with this Policy, may be exported in the same or substantially the same form without a licence/certificate/permission provided that the item to be imported or exported is not mentioned as restricted for import or export in the ITC(HS). Exports of such goods imported against payment in freely convertible currency would be permitted against payment in freely convertible currency.

2.36 Goods, including those mentioned as restricted item for import (except prohibited items) may be imported under Customs Bond for export in freely convertible currency without a licence/ certificate/ permission provided that the item is freely exportable without any conditionality/ requirement of licence/permission as may be required under ITC (HS) Schedule II. Export of Replacement Goods 2.37 Goods or parts thereof on being exported and found defective/damaged or otherwise unfit for use may be replaced free of charge by the exporter and such goods shall be allowed clearance by the customs authorities provided that the replacement goods are not mentioned as restricted items for exports in ITC(HS). Export of Repaired Goods 2.38 Goods or parts thereof on being exported and found defective, damaged or otherwise unfit for use may be imported for repair and subsequent re-export. Such goods shall be allowed clearance without a licence/ certificate/permission and in accordance with customs notification issued in this behalf. Private Bonded Warehouses for Exports 2.39 Private bonded warehouse exclusively for exports may be set up in DTA as per the terms and conditions of the notifications issued by Department of Revenue. Such warehouse shall be entitled to procure the goods from domestic manufacturers without payment of duty. The supplies made by the domestic supplier to the notified warehouses shall be treated as physical exports provided the payments for the same are made in free foreign exchange.

Denomination of Export Contracts 2.40 All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but the export proceeds shall be realised in freely convertible currency. Contracts for which payments are received through the Asian Clearing Union (ACU) shall be denominated in ACU Dollar. The Central Government may relax the provisions of this paragraph in appropriate cases. Export contracts and Invoices can be denominated in Indian rupees against EXIM Bank/ Government of India line of credit.

Realisation of Export Proceeds 2.41 If an exporter fails to realise the export proceeds within the time specified by the Reserve Bank of India, he shall, without prejudice to any liability or penalty under any law for the time being in force, be liable to action in accordance with the provisions of the Act, the Rules and Orders made thereunder and the provisions of this Policy. Free movement of export goods 2.42 Consignments of items meant for exports shall not be withheld /delayed for any reason by any agency of the Central/State Government. In case of any doubt, the authorities concerned may ask for an undertaking from the exporter. No seizure of Stock 2.42.1 No seizure of stock shall be made by any agency so as to disrupt the manufacturing activity and delivery schedule of export goods. In exceptional cases, the concerned agency may seize the stock on the basis of prima facie evidence. However, such seizure should be lifted within 7 days. Export Promotion Council 2.43 The basic objective of export promotion councils is to promote and develop the exports of the country. Each Council is responsible for the promotion of a particular group of products, projects and services. The list of the councils, and their main functions are given in Handbook (Vol.1). Registration -cum-Membership Certificate 2.44 Any person, applying for (i) a licence/ certificate/ permission to import/ export, [except items listed as restricted items in ITC(HS)] or (ii) any other benefit or concession under this policy shall be required to furnish Registration-cum-Membership Certificate (RCMC) granted by the competent authority in accordance with the procedure specified in the Handbook (Vol.1) unless specifically exempted under the Policy.

CHAPTER-4 DUTY EXEMPTION/REMISSION SCHEME

Duty Exemption/Remission Scheme	4.1	The Duty Exemption Scheme enables duty free import of inputs required for export production. An Advance Licence is issued under Duty Exemption Scheme. The Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. Duty Remission scheme consist of (a) DFRC and (b) DEPB. DFRC permits duty free replenishment of inputs used in the export product. The DEPB scheme allows drawback of import charges on inputs used in the export product.
Advance Licence	4.1.1	An Advance Licence is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme. Duty free import of mandatory spares upto 10% of the CIF value of the licence which are required to be exported/ supplied with the resultant product may also be allowed under Advance Licence. Advance Licence can be issued for:- Physical exports:- Advance Licence may be issued for physical exports to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s) for import of inputs required for the export product. Intermediate supplies:- Advance Licence may be issued for intermediate supply to a manufacturer-exporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter/deemed exporter holding another Advance Licence. Deemed exports:- Advance Licence can be issued for deemed export to the main contractor for import of inputs required in the manufacture of goods to be supplied to the categories mentioned in paragraph 8.2 (b), (c), (d) (e) (f),(g) (i) and (j) of the Policy. In addition, in respect of supply of goods to specified projects mentioned in paragraph 8.2 (d) (e) (f), (g) and (j) of the Policy. An Advance Licence for deemed export can also be availed by the sub-contractor of the main contractor to such project provided the name of the sub contractor(s) appears in the main contract. Such licence for deemed export can also be issued for supplies made to United Nations Organisations or under the Aid Programme of the United Nations or other multilateral agencies and paid for in foreign exchange.

	4.1.2	Advance Licence is issued for duty free import of inputs, as defined in paragraph 4.1.1 subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of basic customs duty, additional customs duty, anti dumping duty and safeguard duty, if any. Advance Licence for deemed export shall be exempted from basic customs duty and additional customs duty only. However in case of supplies to EOU/SEZ/ EHTP/ STP under such licences, anti-dumping duty and safeguard duty shall also be exempted.
	4.1.3	Advance Licence and/or materials imported thereunder shall not be transferable even after completion of export obligation.
	4.1.4	Advance Licences (including Advance Licence for deemed exports and intermediate supply) shall be issued with a positive value addition. However, for exports for which payments are not received in freely convertible currency, the same shall be subject to value addition as specified in Appendix-32 of Handbook (Vol.1).
	4.1.5	Advance Licence shall be issued in accordance with the Policy and procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time bound export obligation as may be specified.
	4.1.6	The facility of Advance Licence shall also be available where some of the inputs are supplied free of cost to the exporter. In such cases, for calculation of value addition, the notional value of free of cost inputs alongwith value of other duty-free inputs shall be taken into consideration. However, if all the inputs are supplied free of cost, such shall be covered under paragraph 4.2.7 of the Policy.
Export Obligation	4.1.7	The period for fulfilment of the export obligation under Advance Licence shall be as prescribed in the Handbook (Vol.1).
Advance Licence for annual requirement	4.1.7A	Advance licence can also be issued on the basis of annual requirement for physical exports.
		Export House, Trading House, Star Trading Houses and Super Star Trading Houses shall be entitled for the Advance Licence for annual requirement. However, if the status holders are holding the certificate as merchant exporter, they are also entitled to the Advance Licence for Annual Requirement provided they agree to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant licence.
		The entitlement under this scheme shall be upto 200% of the FOB value of export in the preceding licensing year. Such licence shall have positive value addition.
Advance Release Orders	4.1.8	An Advance Licence holder, holder of advance licence for annual requirement and holder of DFRC intending to source the inputs from indigenous sources/State Trading Enterprises/ EOU/SEZ/ EHTP/STP units in lieu of direct import has the option to source them against Advance Release Orders denominated in foreign exchange/ Indian rupees. The transferee of a DFRC shall also be eligible for ARO facility. However, supplies may be obtained against the licence from EOU/ EHTP/ STP/SEZ units, without conversion into ARO.
Back-to-Back Inland Letter of Credit	4.1.9	An Advance Licence holder, holder of advance licence for annual requirement and holder of DFRC may, instead of applying for an Advance Release Order, avail of the facility of Back-to-Back Inland Letter of Credit in accordance with the procedure specified in Handbook (Vol.1).
Prohibited Items	4.1.10	Prohibited items of imports mentioned in ITC(HS) shall not be imported under the licence issued under the scheme.
	4.1.11	Deleted
Re-import of exported goods under Duty Exemption/ Remission Scheme	4.1.12	Goods exported under Advance Licence/ DFRC/ DEPB may be re-imported in the same or substantially the same form subject to such conditions as may be specified by the Department of Revenue from time to time.
Admissibility of Drawback	4.1.13	In the case of an Advance Licence, the drawback shall be available in respect of any of the duty paid materials, whether imported or indigenous, used in the goods exported, as per the drawback rate fixed by Ministry of Finance (Directorate of Drawback). The Drawback shall however be restricted to the duty paid materials as mentioned in the licence.
Value Addition	4.1.14	The value addition for the purposes of this chapter shall be:-
	V.A	A - B = ------------ x 100, where B
	V.A	is Value Addition
	A	is the FOB value of the export realised /FOR value of supply received.
	B	is the CIF value of the imported inputs covered by the licence, plus any other imported materials used on which the benefit of duty drawback is being claimed.

Duty Free Replenishment Certificate (DFRC)	4.2	DFRC is issued to a merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty, and special additional duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import.
	4.2.1	DFRC shall be issued on minimum value addition of 25% except for items in gems and jewellery sector for which value addition as given in paragraph 4.56.1 of the Handbook (Vol.1) shall be applicable.
	4.2.2	DFRC may be issued in respect of exports for which payments are received in non-convertible currency. Such exports shall, however, be subject to value addition and conditions as specified in Appendix-32 of Handbook (Vol.1). DFRC may also be issued for supplies effected under paragraph 8.2 of the Policy.
	4.2.3	DFRC shall be issued only in respect of products covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of Acetic Anhydride, Ephedrine and Pseudo Ephedrine in the Handbook (Vol-II). However DFRC may be issued for SIONs allowing import of Acetic Anhydride, Ephedrine and Pseudo Ephedrine provided these items are specifically deleted from the list of import items.
	4.2.4	DFRC shall be issued for import of inputs as per SION as indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and or the material(s) imported against it shall be freely transferable.
	4.2.5	The export products, which are eligible for modified VAT, shall be eligible for CENVAT credit. However, non excisable, non dutiable or non CENVAT products, shall be eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the time of imports under the scheme.
	4.2.6	The exporter shall be entitled for drawback benefits in respect of any of the duty paid materials, whether imported or indigenous, used in the export product as per the drawback rate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however be restricted to the duty paid materials not covered under SION.
Jobbing, repairing etc. for re-export	4.2.7	Import of goods, including those mentioned as restricted in ITC(HS) but excluding prohibited items, in terms of paragraph 4.1.1 supplied free of cost, may be permitted for the purpose of jobbing without a licence/certificate/ permission as per the terms of notification issued by Department of Revenue from time to time. Similarly import of goods for carrying out repairs, re-conditioning, re-engineering, testing etc. shall be allowed as per the terms and conditions of the Customs notification even though the goods may be restricted for imports under the Exim Policy/ITC(HS) Classification of Imports and Exports Book.
Duty Entitlement Passbook Scheme	4.3	The objective of DEPB is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product.
	4.3.1	Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade by way of public notice issued in this behalf, for import of raw materials, intermediates, components, parts, packaging material etc.
	4.3.2	The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as well.
Validity	4.3.3	The DEPB shall be valid for a period of 12 months from the date of issue.
Transferability	4.3.4	The DEPB and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB, which shall be the port from where exports have been made. Imports from a port other than the port of export shall be allowed under TRA facility as per the terms and conditions of the notification issued by Department of Revenue.

Applicability of Drawback	4.3.5	Normally, the exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty/excise duty paid in cash on inputs under DEPB shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. In cases, where the additional customs duty is adjusted from DEPB, no benefit of CENVAT/ Drawback shall be admissible.
Scheme for Gem and Jewellery	4.4	Exporters of gem and jewellery are eligible to import their inputs by obtaining Replenishment (REP) Licences from the licensing authorities in accordance with the procedure specified in this behalf.
Replenishment Licence	4.4.1	The exporters of gem and jewellery products listed in Appendix-26 of the Handbook (Vol.1) shall be eligible for grant of Replenishment Licences at the rate and for the items mentioned in the said Appendix to import and replenish their inputs. Replenishment licence may also be issued for import of consumables as per the details given in paragraph 4.80 of Handbook (Vol.1).
Export of Cut & Polished Diamonds for Certification/ Grading	4.4.2	Gems and Jewellery exporters with a track record of at least three years and having an annual average turnover of Rs.5 crores and above during the preceding three licensing years or the authorised offices /agencies in India of Gemological Institute of America (GIA), The Robert Mouawad Campus, International Gemological Institute (IGI) and European Gemological Laboratory (EGL) in USA, Hoge Road Voor Diamand, Antwerp, (HRD), World Diamond Centre of Diamonds High Council, Antwerp, Belgium may be permitted to export cut & polished diamonds each weighing 0.50 of a carat and above to the said laboratories/agencies, for the purpose of certification/grading reports by them with a condition that the same should be re-imported with the certificate/grading reports issued by them without any import duty at the time of re-import.
	4.4.2.1	At the time of export of cut and polished diamonds for certification/grading, exporter should give an undertaking to the customs that the cut and polished diamonds will be re-imported within three months of exports for certification/ grading. The export invoice should clearly indicate the estimated value, height, circumference, weight of each diamond to be exported for certification/ grading so that at the time of their import, the above specification could be compared with the original ones to establish their identity. Subsequently these cut and polished diamonds would be exported as per the provisions of the Policy.

Schemes for Gold/ Silver/ Platinum Jewellery	4.4.3	Exporters of gold/silver/platinum jewellery and articles thereof may import their essential inputs such as gold, silver, platinum, mountings, findings, rough gems, precious and semi-precious stones, synthetic stones and unprocessed pearls etc. in accordance with the procedure specified in this behalf.
Nominated Agencies	4.4.4	The exporter availing the schemes of gold/ silver/platinum jewellery and articles thereof may obtain gold/silver/platinum from the nominated agencies. The nominated agencies are MMTC Ltd, Handicraft and Handloom Export Corporation (HHEC), State Trading Corporation (STC), The Project and Equipment Corporation of India Ltd (PEC) and any agency authorised by Reserve Bank of India (RBI). A bank authorised by RBI is allowed export of gold scrap for refining and import in the form of standard gold bars.
Items of Export	4.4.5	The following items, if exported, would be eligible for the facilities under these schemes:

		(a)	Gold jewellery, including partly processed jewellery and any articles including medallions and coins (excluding the coins of the nature of legal tender), whether plain or studded, containing gold of 8 carats and above;
		(b)	Silver jewellery including partly processed jewellery, silverware, silver strips and any articles including medallions and coins (excluding the coins of the nature of legal tender and any engineering goods) containing more than 50% silver by weight;
		(c)	Platinum jewellery including partly processed jewellery and any articles including medallions and coins (excluding the coins of the nature of legal tender and any engineering goods) containing more than 50% platinum by weight.

Value Addition	4.4.6	The value addition will be as given as per paragraph 4.56.1 of Handbook (Vol.1).
Wastage Norms	4.4.7	Under the schemes for gold/silver/platinum jewellery, the wastage or manufacturing loss shall be admissible as per paragraph 4.56 of the Handbook (Vol.1).
Export against Supply by Foreign Buyer	4.4.8	Where export orders are placed on the nominated agencies/ status holder/ exporters of three years standing having an annual average turnover of Rs. Five Crore during the preceding three licensing years, the foreign buyer may supply to the nominated agencies/status holder/exporter, in advance and free of charge, gold/ silver/ platinum, alloys, findings and mountings of gold/ silver/ platinum for manufacture and export. The exports may be made by the nominated agencies directly or through their associates or by the status holder/exporter as the case may be. The import and export of findings shall be on net to net basis. The foreign buyer may also supply to the nominated agencies/status holder/ exporter in advance and free of charge plain, semi finished gold/silver/platinum jewellery including findings/ mountings/ components for repairs/re-make and export subject to minimum value addition of 10%. However, if the so imported semi finished gold/silver /platinum jewellery is exported as studded jewellery, value addition of 15% shall be achieved. In such cases of export, wastage of 2% may be permitted. The procedures in this regard shall be as prescribed in the Handbook (Vol.1)

Export Promotion Tours/Export of Branded Jewellery

4.4.9

The nominated agencies and their associates, with the approval of Department of Commerce, and others, with the approval of Gem & Jewellery Export Promotion Council (GJEPC), may export gold/ silver/platinum jewellery and articles thereof for holding/participating in exhibitions abroad. Personal carriage of gold/ silver/platinum jewellery, precious, semi-precious stones, beads and articles and export of branded jewellery is also permitted. These exports shall be subject to the conditions as given in the Handbook (Vol.1).

Export Against Supply by Nominated Agencies	4.4.10	The exporter may obtain the gold/silver/platinum as an input for export products from nominated agencies in advance or as replenishment after exports in accordance with the procedure specified in this behalf.
Export Against Advance Licence	4.4.11	An Advance Licence may be granted for the duty free import of:

		(a)	Gold of fineness not less than 0.995 and mountings, sockets, frames and findings of 8 carats and above;
		(b)	Silver of fineness not less than 0.995 and mountings, sockets, frames and findings containing more than 50% silver by weight;
		(c)	Platinum of fineness not less than 0.900, mountings, sockets, frames and findings containing more than 50% platinum by weight.
	4.4.12	Such licences shall carry an export obligation which will be required to be fulfilled in accordance with the procedure specified in this behalf.
		The Advance Licence holder may obtain gold/silver/ platinum from the nominated agencies in lieu of direct import in accordance with the procedure specified in this behalf.

Gem Replenishment Licence	4.4.13	Gem Replenishment (Gem & Jewellery REP) Licence may be issued under the schemes for export of gold/ silver/ platinum jewellery and articles thereof as given in paragraph 4.4.8, 4.4.9, 4.4.10 and 4.4.11 of the Policy. In the case of plain gold/ silver/platinum jewellery and articles, the value of such licences shall be determined with reference to the realisation in excess of the prescribed minimum value addition. In the case of studded gold/silver/platinum jewellery and articles thereof, the value of Gem Replenishment Licence shall be determined by taking into account the value of studdings used in items exported, after accounting for the value addition on gold/ silver/ platinum including admissible wastage. Such Gem REP licences shall be freely transferable.
Gem REP Rate and Item	4.4.14	The scale of replenishment and the item of import will be as prescribed in Appendix 26A of Handbook (Vol.1).
Personal Carriage of Export/ Import Parcels	4.4.15	Personal carriage of gems and jewellery export parcels by foreign bound passengers and personal carriage of gems & jewellery import parcels by an Indian importer/foreign national may be permitted as per the conditions given in Handbook (Vol.1).
Diamond Imprest Licence	4.4.16	Diamond Imprest Licence for import of cut & polished diamonds including semi processed diamonds, half cut diamonds, broken in any form, for mixing with cut & polished diamonds or for export as it is, may be issued for export of cut & polished diamonds. Such licences shall carry an export obligation, which has to be discharged in accordance with the procedure specified in this behalf.
Eligibility	4.4.16.1	An exporter of cut & polished diamonds who is status holder may be issued a licence for import of cut & polished diamonds upto 5% of the export performance of the preceding year of cut & polished diamonds.
Export Obligation	4.4.16.2	The export obligation against each consignment shall be fulfilled within a period of five months from the date of clearance of such consignment through Customs. However, at no point of time, the importer shall be required to maintain records of individual import consignments nor will they be required to co-relate export consignments with the corresponding import consignments towards fulfilment of export obligation.
Private/ Public Bonded Warehouse	4.4.17	Private/Public Bonded Warehouses may be set up in SEZ/ DTA for import and re-export of cut & Polished diamonds, cut & polished coloured gemstones, uncut & unset precious & semi-precious stones. Import & re-export of cut & polished diamonds & cut & polished coloured gemstones will be subject to achievement of minimum value addition of 5%.
Diamond & Jewellery Dollar Accounts	4.4.18	Firms and companies dealing in the purchase/sale of rough or cut and polished diamonds/diamond studded jewellery with a track record of at least 3 years in import or export of diamonds/ diamond studded jewellery and having an average annual turnover of Rs. 5 crore or above during preceding three licensing years may also carry out their business through designated Diamond Dollar Accounts. The Diamond Dollar Account Scheme shall operate under the current licensing scheme of this chapter. This scheme shall be optional and those importers/exporters who wish to continue to use Rupee Accounts shall be allowed to do so under the existing policies.
		Dollars in such accounts available from bank finance and/or export proceeds shall be used only for
		(i)	Import/purchase of rough diamonds from overseas/local sources,
		(ii)	Purchase of cut and polished diamonds from local sources,
		(iii)	Import/purchase of gold from overseas/ nominated agencies and repayment of dollar loans from the bank; and
		(iv)	Transfer to the Rupee Account of the exporter. Details of this Diamond Dollar Accounts Scheme (DDAS) are given in the Handbook (Vol.1). The procedure outlined in the Handbook (Vol.1) shall also apply to diamond studded jewellery.

A non DDA holder is also permitted to supply cut and polished diamonds to DDA holder, receive payment in dollars and convert same into rupees within the period of 7 days and the cut and polished diamonds so supplied by non-DDA holder will also be counted towards the discharge of his export obligation and/or entitled him to replenishment licence as the case may be.

CHAPTER-5 EXPORT PROMOTION CAPITAL GOODS SCHEME

EPCG Scheme	5.1	The scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of licence. However, in respect of EPCG licences with a CIF value of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years. The capital goods shall include spares, jigs, fixtures, dies and moulds. EPCG licence may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the licence holder. Second hand capital goods upto 10 years old may also be imported under the EPCG scheme.
	5.1A	Spares for the existing plant and machinery may also be imported under the EPCG scheme subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of licence.

Eligibility	5.2	The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.
Conditions for import of Capital Goods	5.3	Import of capital goods shall be subject to Actual User condition till the export obligation is completed.
Export obligation	5.4	The following conditions shall apply to the fulfilment of the export obligation:-
		(i)	The export obligation shall be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme. The export obligation may also be fulfilled by the export of same goods, for which EPCG licence has been obtained, manufactured or produced in different manufacturing units of the licence holder/specified supporting manufacturer (s)/ vendor(s). The 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 same and similar products except for categories mentioned in Handbook (Vol.1). Alternatively, export obligation may also be fulfilled by exports of other goods manufactured or service provided by the same firm/company which has the EPCG licence. However, in such cases, the additional export obligation imposed under EPCG scheme shall be over and above the average exports achieved by the unit in preceding three years for the substitute products/services. This facility shall only be available to manufacturer exporters/ service provider.

(ii)

The export obligation under the scheme shall be, in addition to any other export obligation undertaken by the importer, except the export obligation for the same product under Advance Licence, DFRC, DEPB or Drawback scheme.

	5.5.1	Any firm/company registered with BIFR or any firm/ company acquiring a unit, which is under BIFR shall be allowed EO extension as per the rehabilitation package prepared by the operating agency subject to subsequent approval of BIFR. However, in cases where the rehabilitation package does not specify the EO extension period, a time period upto 12 years reckoned from the date of issue of licence would be permitted on merits of the case for fulfilment of export obligation. Similarly, small-scale SSI units shall also be entitled for similar facility as per the rehabilitation scheme of the concerned State government. However, in cases where the State rehabilitation scheme does not specify the EO extension period, a time period upto 12 years reckoned from the date of issue of licence would be permitted on merits of the case for fulfilment of export obligation
	5.5.2	In the case of EPCG licences issued to agro units in the agri export zones, a period of 12 years reckoned from the date of issue of the licence would be permitted for the fulfilment of export obligation.

Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier	5.6	A person holding an EPCG licence may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG licence holders shall be eligible for deemed export benefit under paragraph 8.3 of the Policy.
Benefits to Domestic Supplier	5.7	In the event of a firm contract between the EPCG licence holder and domestic manufacturer for such sourcing, the domestic manufacturer may apply for the issuance of Advance Licence for deemed exports for the import of inputs including components required for the manufacturer of said capital goods.
		The domestic manufacturer may also replenish the inputs including components after supply of capital goods to the EPCG licence holders.
Fixation of Export Obligation	5.7A	In case of direct imports, the export obligation relating to the EPCG licence shall be reckoned with reference to the duty saved value on the CIF value of capital goods (including spares, jigs, fixtures, dies and moulds) actually imported. In case of domestic sourcing, the export obligation relating to EPCG shall be reckoned with reference to the notional Customs duties saved on the FOR of capital goods (including spares, jigs, fixtures, dies and moulds).
	5.8	Service provider in Agri export zone shall have the facility to move or shift the capital goods within the zone provided he maintains accurate record of such movements. However, such equipments shall not be sold or leased by the licence holder.

CHAPTER- 6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs) AND SOFTWARE TECHNOLOGY PARKS (STPs)

Eligibility

6.1

Units undertaking to export their entire production of goods and services, except permissible sales in the DTA, as per this Policy, may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, and rendering of services. No trading units shall, however, be permitted.

Export and Import of Goods	6.2	(a)		An EOU/EHTP/STP unit may export all goods and services except items that are prohibited in ITC (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS).
		(b)		An EOU/EHTP/STP unit may import without payment of duty all types of goods, including capital goods, as defined in the Policy, required by it for its activities as mentioned in paragraph 6.1 above or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.
		(c)		Deleted
		(d)		STP/EHTP/EOU may import/procure from DTA without payment of duty specified goods for creating a central facility for use by software development units in STP/EHTP/EOU. The central facility for software development can also be accessed by units in the DTA for export of software.
		(e)		An EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may import/procure all types of goods, without payment of duty, required by it for its activities or in connection therewith as available to other EOUs. However, such units may be permitted to take only specified goods for use outside the bonded area.
		(f)		Deleted
		(g)		EOU gem and jewellery units may also source gold/silver/platinum through the nominated agencies.
		(h)		EOU/EHTP/STP unit, other than service units, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer subject to RBI clearance, if any.
Second Hand Capital Goods	6.3	Second hand capital goods may also be imported duty free without any age limit.
Leasing of Capital Goods	6.4	An EOU/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/EHTP/STP unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.
Net Foreign Exchange Eearnings (NFE)	6.5	EOU/EHTP/STP unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a period of five years from the commencement of production.
Letter of Permission/ Letter of Intent and Legal Undertaking	6.6	(a)	On approval, a Letter of Permission (LOP)/Letter of Intent (LOI) shall be issued by the Development Commissioner to EOU/EHTP/STP unit. The LOP shall have an initial validity of 3 years for commencement of production. Its validity may be extended by another 3 years, beyond initial validity, by the competent authority. However proposals approved prior to 1.4.2002 shall be considered on case to case basis by the BOA.
		(b)	LOP/LOI issued to EOU/EHTP/STP units by the concerned authority would be construed as a licence for all purposes.
		(c)	The unit shall execute a legal undertaking with the Development Commissioner concerned. Failure to ensure positive NFE or to abide by any of the terms and conditions of the LOP/LOI/IL/LUT shall render the unit liable to penal action under the provisions of the Foreign Trade (Development & Regulation) Act, 1992 and the Rules and Orders made there under without prejudice to action under any other law/rules and cancellation or revocation of LOP/LOP/IL.
Application and Approvals	6.7	(a)	Only project having a minimum investment of Rs.1 crore and above in building, plant and machinery shall be considered for establishment under EOU scheme. Minimum investment should take place on coming into production of the unit. (This shall, however, not apply to existing units and units in EHTP/STP/ handicrafts/ agriculture/ floriculture/ acqua-culture/ animal husbandry/ information technology, services and such other sectors as may be decided by the BOA). Applications for setting up of units under EOU scheme other than proposals for setting up of unit in the services sector (except software and IT enabled services, or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per the criteria indicated in Appendix 14-I of Handbook (Vol-I)
		(b)	In other cases, approval may be granted by the Board of Approval (BOA) set up for this purpose as indicated in Appendix 14-I of Handbook (Vol-I)
		(c)	Proposals for setting up EOU requiring industrial licence may be granted approval by the Development Commissioner after clearance of the proposal by the Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.
DTA Sale of Finished Products/ Rejects Waste/ Scrap/ Remnants and By-products	6.8	The entire production of EOU/EHTP/STP units shall be exported subject to the following:
		(a)		Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8(b) on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement under paragraph 6.8(b). Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE.
		(b)		Units, other than gems and jewellery units, may sell goods/ services upto 50 % of FOB value of exports, subject to fulfillment of positive NFE on payment of applicable duties. Sales made to a private bonded warehouse set up under the policy shall also be taken into account for the purpose of arriving at FOB value of exports by EOUs provided payment for such sales are made from EEFC account. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors, tea (except instant tea) and books or by a packaging/ labeling /segregation/ refrigeration unit and such other items as may be notified from time to time.
		(c)		Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of positive NFE as prescribed in the Policy. In respect of sales of plain jewellery, the recipient shall pay concessional rate of duty to the Customs in Indian rupees as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable in Indian rupees as notified by Customs.
		(d)		Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in the DTA as per the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of duties as applicable under paragraph 6.8 (b) within the overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. Sale of waste/scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment of full duties.
		(e)		There shall be no duties/taxes on such scrap/waste/ remnants in case the same are destroyed with the permission of Customs authorities.
		(f)		EOU/ EHTP/ STP units may be permitted to sell finished products which are freely importable under the Policy in the DTA against payment of full duties provided they have achieved the positive NFE as per the Policy.
				Such sales may also be permitted in exceptional cases without achievement of positive NFE.
		(g)		For services, including software units, sale in the DTA in any mode, including on-line data communication, shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment for such services is received in free foreign exchange.

		(h)	By-products included in the LOP may also be sold in the DTA subject to achievement of positive NFE on payment of applicable duties within the overall entitlement of paragraph 6.8(b). Sale of by-products by units not entitled to DTA sales or beyond the entitlements of paragraph 6.8 (b) shall also be permissible on payment of full duties.
	Note:	In the case of units manufacturing electronics hardware and software, the NFE and DTA sale entitlement shall be reckoned separately for hardware and software.
Other Supplies in DTA	6.9	The following supplies effected from DTA to EOU/EHTP/STP units will be counted for the purpose of fulfilment of positive NFE:
		(a)		Supplies effected in DTA in terms of Chapter 8 of the Policy
		(b)		Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA or against foreign exchange remittance received from overseas.
		(c)		Supplies to other EOU/EHTP/STP/SEZ units provided that such goods are permissible for procurement in terms of paragraph 6.2 of the Policy.
		(d)		Supplies made to private bonded warehouses set up under Chapter 2 of the Policy and/or under Section 65 of the Customs Act.
		(e)		Supply of goods against special entitlement of duty free import of goods.
		(f)		Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance
		(g)		Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in India Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.
		(h)		Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items.
Export through status holder	6.10	An EOU/EHTP/STP unit may export goods manufactured/software developed by it through a merchant exporter/status holder recognized under this Policy or any other EOU/EHTP/STP/SEZ unit.
Samples	6.11	Procedure for export/supply of samples by EOU/EHTP/STP units is given in Appendix 14-I of Handbook Vol-I.
Entitlement for supplies from the DTA	6.12	(a)		Supplies from the DTA to EOU/EHTP/STP units will be regarded as "deemed exports" and the DTA supplier shall be eligible for the relevant entitlements under chapter 8 of the Policy besides discharge of EP if any, on the supplier. Notwithstanding the above, EOU/ EHTP/ STP units shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlements specified in chapter 8 of the Policy. For the purpose of claiming deemed export duty drawback, they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available. In addition the EOU/EHTP/STP units shall be entitled to the following:-
				i.	Reimbursement of Central Sales Tax.
				ii.	Exemption from payment of Central Excise Duty on all goods as per entitlement under Paragraph 6.2 of the Policy.
				iii.	Reimbursement of Central Excise Duty paid on bulk tea procured from licenced auction centres by Development Commissioner of concerned Zone so long as levy on bulk tea in this regard is in force.
				iv.	Reimbursement of Duty paid on fuels procured from domestic oil companies, by the Development Commissioner of the concerned Zone as per the rate of Drawback notified by the Directorate General of Foreign Trade from time to time.
		(b)		Supplier of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol.1).
		The entitlements under paragraph (a) (i) and (ii) above shall be available provided the goods supplied are manufactured in India.
Other Entitlements	6.13	Other entitlements of EOU/EHTP/STP units are indicated in the Appendix 14-I of Handbook (Vol-I).
Inter Unit Transfer	6.14	(a)		Transfer of manufactured goods from one EOU EHTP/STP unit to another EOU/EHTP/STP/ SEZ unit will be allowed.
		(b)		Deleted
		(c)		Capital goods may be transferred or given on loan to other EOU/SEZ/EHTP/STP units with prior permission of the concerned Development Commissioner and Customs authorities.

Sub-Contracting	6.15	(a)	EOU/EHTP/STP unit, including gem and jewellery units, may on the basis of annual permission from the Custom authorities, subcontract production process in DTA, which may also involve change of form or nature of goods, through job work by units in the DTA. These units may also subcontract upto 50% of the overall production of previous year in value terms for job work in DTA with the permission of the Customs authorities. Subcontracting of both production and production process may also be undertaken without any limit through other EOU/EHTP/ STP/SEZ units on the basis of records maintained in the unit. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner.
		(b)	EOU may, on the basis of annual permission from the Customs authorities, undertake job work for export, on behalf of DTA exporter, provided the goods are exported directly from EOU and export document shall jointly in the name of DTA/EOU. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.
		(c)	Scrap/waste/remnants generated through job work may either be cleared from the job workers premises on payment of applicable duty or destroyed in the presence of Customs/ Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
		(d)	Sub-contracting/exchange by gems and jewellery EOUs through other EOUs or SEZ units or units in DTA shall be as per procedure indicated in Appendix 14-I of Handbook (Vol-I).
Sale of Un-utilised Material	6.16	(a)	In case an EOU/EHTP/STP unit is unable, for valid reasons, to utilize the goods and services, imported or procured from DTA, it may be transferred to other EOU/SEZ/EHTP/STP units or disposed off in the DTA on payment of applicable duties and submission of import licence by DTA unit, wherever applicable or exported. Such transfer from EOU/EHTP/STP unit to another such unit would be treated as import for the receiving unit.
		(b)	Capital goods and spares that have become obsolete/surplus, may either be exported, transferred to another EOU/EHTP/STP/SEZ or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA. No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/ waste/ remnants/rejects are destroyed within the Unit after intimation to the Custom authorities or destroyed outside the Unit with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
Reconditioning Repair and Re-engineering	6.17	EOU/EHTP/STP units may be set up with the approval of BOA to carry out reconditioning, repair, remaking, testing, calibration, quality improvement, up-gradation of technology and re-engineering activities for export in freely convertible foreign currency. Such units may import goods of any origin for the above activities. The provisions of paragraphs 6.8, 6.9,6.10,6.11, 6.12, 6.14 and 6.15 shall not, however, apply to such activities.
Replacement/ Repair of imported/ Indigenous Goods	6.18	(a)	The general provisions of the Policy relating to export of replacement/repair of goods would also apply equally to EOU/EHTP/STP units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner.
		(b)	The goods sold in the DTA and found to be defective may be brought back for repair/ replacement, under intimation to the concerned jurisdictional Customs/Excise authorities.
		(c)	Goods or parts thereof on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorized agents in India or indigenous suppliers. However destruction shall not apply to precious and semi precious and precious metals.
Approval Period	6.19	LOP/LOI shall be valid for a period of 5 years from the date of commencement of production. This period may be extended further by the Development Commissioner concerned for period of 5 years at a time.
Exit from EOU Scheme	6.20	(a)	Subject to the approval of the Development Commissioner, EOU/EHTP/STP units may opt out of the scheme. Such exit from the scheme shall be subject to payment of duties of Customs and Excise and the industrial policy in force at the time of exit.
		(b)	If the unit has not achieved the obligations under the scheme, exit from the scheme, shall also be subject to penalty as may be imposed by the competent authority.
		(c)	In the event of a gem and jewellery unit ceasing its operation, gold and other precious metals, alloys, gem and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency.
		(d)	An EOU//EHTP/STP unit may also be permitted by the Development Commissioner, as a one time option, to exit from the scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the eligibility criteria under that Scheme and standard conditions indicated in Appendix 14-I of Handbook (Vol-I).
Conversion	6.21	(a)	Existing DTA units, may also apply for conversion into an EOU/EHTP/STP unit, but no concession in duties and taxes would be available under the scheme for plant, machinery and equipment already installed.
		(b)	The existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such cases the units will continue to remain in bond and avail the permissible exemption in duties and taxes as applicable under the relevant scheme.

Monitoring of NFE	6.22	The performance of EOU/EHTP/STP units shall be monitored by the Units Approval Committee as per the guidelines given in Appendix 14-I of Handbook (Vol-I).
Export through Exhibitions/Export Promotion Tours /Export through show rooms abroad/Duty Free Shops.	6.23	EOUs/EHTP/STP may :
		(i)	Export of goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner.
		(ii)	Personal carriage of gold/ silver/ platinum jewellery, precious, semi-precious stones, beads and articles.
		(iii)	Export of goods is also permitted for display/sale in the permitted shops set up abroad.
		(iv)	Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents.
		(v)	Set up show rooms/retail outlets at the International Airports.

Personal Carriage Of Import / Export Parcels Including Through Foreign bound Passengers	6.24	Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. The export proceeds shall, however, be realized through normal banking channel. Import/export through personal carriage for units, other than gem and jewellery units, shall be allowed provided the goods are not in commercial quantity.
Export /Import by Post /Courier	6.25	Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs.
	6.26	Deleted
Administration of EOUs/Power of Development Commissioner	6.27	Details of administration of EOUs and Power of Development Commissioner are given in Appendix 14-I of Handbook (Vol.1).
Revival of Sick units	6.28	Subject to a unit being declared sick by the appropriate authority, proposals for revival of the unit or its take over may be considered by the Board of Approval.
Fast Track Clearance	6.29	A fast track clearance procedure for EOUs having status holder certificate under the Policy shall be notified separately.

Note:

In the case of units under EHTP/STP Schemes, necessary approval / permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Ministry of Communication and Information Technology, Department of Information Technology for the purpose instead of the Development Commissioner of SEZ and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA.

CHAPTER-7

SPECIAL ECONOMIC ZONES

Eligibility	7.1	(a)	Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
		(b)	Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported.
		(c)	SEZ units may be set up for manufacture of goods and rendering of services.
Export and Import of Goods.	7.2	(a)	SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies and components except prohibited items of exports in ITC (HS). The units may also export by-products, rejects, waste scrap arising out of the production process. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS) Classification of Export and Import Items.
			SEZ units, other than trading/service unit, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer, subject to RBI clearance, if any.
		(b)	SEZ unit may import/procure from the DTA without payment of duty all types of goods and services, including capital goods, whether new or second hand, required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS). However, any permission required for import under any other law shall be applicable. Goods shall include raw material for making capital goods for use within the unit. The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.
		(c)	SEZ units may procure goods required by it without payment of duty, from bonded warehouses in the DTA set up under the Policy and/or under Section 65 of the Customs Act and from International Exhibitions held in India.
		(d)	SEZ units, may import/procure from DTA, without payment of duty, all types of goods for creating a central facility for use by units in SEZ. The Central facility for software development can also be accessed by units in the DTA for export of software.
		(e)	Gem & Jewellery units may also source gold/ silver/ platinum through the nominated agencies.
		(f)	SEZ units may import/procure goods and services from DTA without payment of duty for setting up, operation and maintenance of units in the Zone.
Leasing of Capital Goods	7.3	SEZ 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 SEZ unit and the domestic/ foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty.
Net Foreign Exchange Earning (NFE)	7.4	SEZ unit shall be a positive Net Foreign exchange Earner. Net Foreign Exchange Earning (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given in Appendix -14-II of the Handbook (Vol-I)
Monitoring of performance	7.5	(a)	The performance of SEZ units shall be monitored by the Unit Approval Committee.
		(b)	The performance of SEZ units shall be monitored as per the guidelines given in Appendix 14-II of Handbook (Vol-I).
Legal Undertaking	7.6	The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.
Approvals and Applications	7.7	(a)	Applications for setting up a unit in SEZ other than proposals for setting up of unit in the services sector (except software and IT enabled services, trading or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per procedure indicated in Annexure to Appendix 14-II of Handbook (Vol-I) . In other cases approval may be granted by the Board of Approval.
		(b)	Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.
DTA Sales and Supplies	7.8	(a)	SEZ unit may sell goods, including by-products, and services in DTA in accordance with the import policy in force, on payment of applicable duty.
		(b)	DTA sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. Similarly for units undertaking manufacturing and services/ trading activities against a single LOP, DTA sale shall be subject to achievement of NFE cumulatively.
		(c)	The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfilment of positive NFE:
			(i)	Supplies effected in DTA in terms of Chapter 8 of the Policy.
			(ii)	Supplies made to bonded warehouses set up under the Policy and/or under Section 65 of the Customs Act.
			(iii)	Supplies to other EOU/SEZ/ EHTP/ STP units provided that such goods are permissible for procurement by units.
			(iv)	Supplies against special entitlement of duty free import of goods
			(v)	Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance
			(vi)	Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.
			(vii)	Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items indicated in the Appendix 14-II of Handbook.
Entitlement for Supplies from the DTA	7.9	Supplies from DTA to SEZ shall be entitled for the following:
		(a)	DTA supplier shall be entitled for:
			(i)	Drawback Or DEPB in lieu of Drawback
			(ii)	Discharge of Export performance, if any, on the supplier.
			(iii)	Deleted
			(iv)	Notwithstanding the above, SEZ units shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlements specified in paragraph 8.3 of the Policy. For the purpose of claiming entitlements at paragraph 8.3(b), they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available.
		(b)	SEZ units shall be entitled for:-
			(i)	Exemption from Central Sales Tax;
			(ii)	Exemption from payment of Central Excise Duty on all goods eligible for procurement by the unit.
			(iii)	Reimbursement of Central Excise Duty, paid on bulk tea procured from the licenced auction centres by the Development Commissioner of concerned zone as long as levy on bulk tea in this regard is in force.
			(iv)	Reimbursement of Duty paid on fuels or any other goods procured from DTA as per the rate of drawback notified by the Directorate General of Foreign Trade from the date of such notification.
		(c)	Supplier of precious and semi-precious stones, synthetic stones and processed pearls from Domestic Tariff Area to the units situated in SEZ shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol. I).
		(d)	The entitlements under paragraphs (a) and (b) (ii) above shall be available provided the goods supplied are manufactured in India.
Export Through Status Holder	7.10	SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/STP unit.
Inter-unit Transfer	7.11	(a)	SEZ units may transfer manufactured goods, including partly processed/semi-finished goods and services from one SEZ unit to another SEZ/EOU/ EHTP/STP unit.
		(b)	Goods imported/procured by a SEZ unit may be transferred or given on loan to another unit within the same SEZ which shall be duly accounted for, but not counted towards discharge of export performance.
		(c)	Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/ EHTP/ STP unit with prior permission of the Development Commissioner and Customs authorities concerned.
		(d)	Transfer of goods in terms of sub-paras (a) and (b) above within the same SEZ shall not require any permission but the units shall maintain proper accounts of the transaction.
Other Entitlements		Other entitlements of SEZ units are indicated in the Appendix 14-II of the Handbook (Vol-1).

Sub- Contracting	7.12	(a)		SEZ unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/ EHTP/ STP, with the annual permission of Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner.
		(b)		Sub-contracting by SEZ gems and jewellery units through other SEZ units or EOUs or units in DTA shall be subject to following conditions
				i)	Goods, finished or semifinished, including studded jewellery, taken outside the zone for sub- contracting shall be brought back to the unit within 30 days. No cut and polished diamonds, precious and semi-precious stones (except precious and semi precious stone having zero duty) shall be allowed to be taken outside the zone for sub-contracting.
				ii)	Receive plain gold/silver/platinum jewellery from DTA in exchange of equivalent quantity of gold/silver/ platinum, as the case may be, contained in the said jewellery.
				iii)	SEZ units shall be eligible for wastage as applicable for sub-contracting and against exchange
				iv)	The DTA unit undertaking job work or supplying jewellery against exchange of gold/silver/platinum shall not be entitled to export benefits.
		(c)		All units, including gem and jewellery, may sub-contract part of the production or production process through other units in the same SEZ without permission of Customs authorities subject to records being maintained by both the supplying and receiving units.
		(d)		SEZ units other than gems and jewellery units may be allowed to undertake job-work for export, on behalf of DTA exporter, provided the finished goods are exported directly from SEZ units. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.
		(e)		Scrap/waste/remnants generated through job work may either be cleared from the job workers premises on payment of applicable duty or returned to the unit.
		(f)		SEZ units engaged in production/processing of agriculture/horticulture products, may on the basis of annual permission from the Customs authorities take out inputs and equipments to the DTA farm subject to the procedure indicated in Appendix 14-II of the Handbook (Vol-I)
Exit from SEZ Scheme	7.13	(a)		SEZ unit may opt out of the scheme with the approval of the Development Commissioner. Such exit from the scheme shall be subject to payment of applicable Customs and Excise duties on the imported and indigenous capital goods, raw materials etc. and finished goods in stock. In case the unit has not achieved positive NFE, the exit shall be subject to penalty, that may be imposed by the adjudicating authority under Foreign Trade (Development and Regulation) Act, 1992.
		(b)		SEZ unit may also be permitted by the Development Commissioner, as one time option, to exit from SEZ scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the eligibility criteria of that Scheme and standard conditions for exit indicated in Appendix 14-II of Handbook (Vol-I).
Export through Exhibitions/ Export Promotion Tours/ Export through show rooms abroad /Duty Free Shops	7.14	SEZ, units may :
		(i)	Export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner.
		(ii)	Personal carriage of gold/ silver/ platinum jewellery, precious, semi-precious stones, beads and articles.
		(iii)	Export of jewellery is also permitted for display/ sale in the permitted shops set up abroad.
		(iv)	Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents.
		(v)	Set up show rooms/retail outlets at the International Airports.
Personal Carriage of Export/ Import parcel.	7.15	Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. Import/export through personal carriage for units, other than gem and jewellery unit , shall be allowed provided the goods are not in commercial quantity
Export /Import by post/ courier	7.16	Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs.
Disposal of Rejects/Scrap/ Waste/ Remnants	7.17	Rejects/scrap/waste/remnants arising out of production process or in connection therewith may be sold in the DTA on payment of applicable duty. No duty shall be payable in case scrap/waste/ remnants/ rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the SEZ with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
Replacement/ Repair of Goods	7.18	(a)		The general provisions of Policy relating to export of replacement/ repaired goods shall apply equally to SEZ units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner.
		(b)		The goods sold in the DTA and found to be defective may be brought back for repair/ replacement under intimation to Development Commissioner.
		(c)		Goods or parts thereof, including gem stones and precious metal components for jewellery making, on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorised agents in India or the indigenous suppliers. Destruction shall however not apply to gem stones and precious metals.
		(d)		Goods may be transferred to DTA/abroad for repair/ replacement, testing or calibration, quality testing and R & D purpose under intimation to Customs authorities and subject to maintenance of records.
Management of SEZ	7.19	(a)		SEZ will be under the administrative control of the Development Commissioner.
		(b)		All activities of SEZ units within the Zone, unless otherwise specified, including export and re-import of goods shall be through self certification procedure.
Setting up of SEZ in Private/Joint/ State Sector	7.20	A SEZ may be set up in the public, private, joint sector or by state Government as per details indicated in Appendix 14-II of the Handbook(Vol-I).
Samples	7.21	SEZ units may, on the basis of records maintained by them, and on prior intimation to Customs authorities:
		(i)		supply or sell samples in the DTA for display/ market promotion on payment of applicable duties;
		(ii)		Remove samples without payment of duty, on furnishing a suitable undertaking to Customs authorities for bringing the goods back within a stipulated period;
		(iii)		Export free samples, without any limit, including samples made in wax moulds, silver mould and rubber moulds through all permissible mode of export including through couriers agencies/post.
Sale of Un-utilised Material/ Obsolete goods	7.22	(a)		In case an SEZ unit is unable, for valid reasons, to utilize the goods, including capital goods and spares, it may dispose them in the DTA in accordance with the import policy in force and on payment of applicable duties or export them.
		(b)		Capital goods and spares that have become obsolete/surplus may either be exported or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA.
		(c)		No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged and scrap/waste/ remnants/rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the Zone with the permission of Custom authorities. However destruction shall not apply to precious and semi precious and precious metals
		(d)		SEZ unit may be allowed by Customs authorities concerned to donate imported/ indigenously procured computer and computer peripherals without payment of duty, two years after their import/procurement and use by the units, to recognized non-commercial educational institutions, registered charitable hospitals etc as per the details given in Appendix 14-II in Handbook (Vol-I).
Entitlement for SEZ Developer	7.23	For development, operation and maintenance of infrastructure facilities in SEZs, the developer shall be eligible for the following entitlements
		(a)	Income tax exemption as per 80 IA of the Income Tax Act.
		(b)	Import/ procure goods without payment of Customs/Excise duty.
		(c)	Exemption from Service tax.
		(d)	Exemption from CST.
	7.24	Deleted

CHAPTER-8 DEEMED EXPORTS

Deemed Exports	8.1	"Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange.
Categories of Supply	8.2	The following categories of supply of goods by the main/ sub-contractors shall be regarded as "Deemed Exports" under this Policy, provided the goods are manufactured in India:
		(a)	Supply of goods against Advance Licence/Advance Licence for annual requirement/DFRC under the Duty Exemption /Remission Scheme;
		(b)	Supply of goods to Export Oriented Units (EOUs) or units located in Special Economic Zone (SEZs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs);
		(c)	Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme;
		(d)	Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/ funds, where the legal agreements provide for tender evaluation without including the customs duty;
		(e)	Supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertiliser plants.
		(f)	Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty coupled with the extension of benefits under this chapter to domestic supplies;
		(g)	Supply of goods to the power projects and refineries not covered in (f) above.
		(h)	Supply of marine freight containers by 100% EOU (Domestic freight containersmanufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the Customs; and
		(i)	Supply to projects funded by UN agencies.
		(j)	Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding.
		The benefits of deemed exports shall be available under paragraph (d), (e), (f) and (g) only if the supply is made under the procedure of International Competitive Bidding (ICB).
Benefits for Deemed Exports	8.3	Deemed exports shall be eligible for any/all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol.1):-
		(a)	Advance Licence for intermediate supply/ deemed export/DFRC.
		(b)	Deemed Exports Drawback.
		(c)	Refund of Terminal Excise duty.

CHAPTER-9 DEFINITIONS

	9.1	For the purpose of this Policy, unless the context otherwise requires, the following words and expressions shall have the following meanings attached to them.
	9.2	"Accessory" or "Attachment" means a part, sub-assembly or assembly that contributes to the efficiency or effectiveness of a piece of equipment without changing its basic functions.
	9.3	"Act" means the Foreign Trade (Development and Regulation) Act, 1992 (No.22 of 1992).
	9.4	"Actual User" means an actual user who may be either industrial or non-industrial.
	9.5	"Actual User (Industrial)" means a person who utilises the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit.
	9.6	"Actual User (Non-Industrial)" means a person who utilises the imported goods for his own use in
		(i)	any commercial establishment carrying on any business, trade or profession; or
		(ii)	any laboratory, Scientific or Research and Development (R&D) institution, university or other educational institution or hospital; or
		(iii)	any service industry.
	9.7	"AEZ" means Agricultural Export Zones notified by DGFT.
	9.8	"ALC" means the Advance Licensing Committee in the Directorate General of Foreign Trade for recommending grant of licences under Duty Exemption Scheme and for recommending Input Output norms and value addition norms to be notified by Director General of Foreign Trade.
	9.9	"Applicant" means the person on whose behalf the application is made and shall, wherever the context so requires, include the person signing the application.
	9.9A	"BOA" means the Board of Approval as notified by the Department of Commerce
	9.10	"Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. Capital goods also include packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in the services sector.
	9.11	"Competent Authority" means an authority competent to exercise any power or to discharge any duty or function under the Act or the Rules and Orders made thereunder or under this Policy.
	9.12	"Component" means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved. A component includes an accessory or attachment to the component.
	9.13	"Consumables" means any item, which participates in or is required for a manufacturing process, but does not necessarily form part of the end-product. Items, which are substantially or totally consumed during a manufacturing process will be deemed to be consumables.
	9.14	"Consumer Goods" means any consumption goods, which can directly satisfy human needs without further processing and includes consumer durables and accessories thereof.
	9.15	"Counter Trade" means any arrangement under which exports/imports from/to India are balanced either by direct imports/exports from the importing/exporting country or through a third country under a Trade Agreement or otherwise. Exports/Imports under Counter Trade may be carried out through Escrow Account, Buy Back arrangements, Barter trade or any similar arrangement. The balancing of exports and imports could wholly or partly be in cash, goods and/or services.

	9.15A	"Developer" means a person or body of persons, company, firm and such other private or government undertaking, who develops, builds, designs , organises, promotes, finances, operates, maintain or manages a part or whole of the infrastructure and other facilities in the Special Economic Zones as approved by the central Government.
	9.15B	"Development Commissioner" means the Development Commissioner of the Special Economic Zone.

9.16

"DFRC" means Duty Free Replenishment Certificate.

9.16A

"Domestic Tariff Area" means area within India which is outside the Special Economic Zones.

	9.17	"Drawback, " in relation to any goods manufactured in India and exported, means the rebate of duty chargeable on any imported material or excisable material used in the manufacture of such goods in India. The goods include imported spares, if supplied with capital goods manufactured in India.
	9.18	"EHTP " means Electronic Hardware Technology Park.
	9.19	"EOU" means Export Oriented Unit.
	9.20	Deleted
	9.21	"Excisable goods" means any goods produced or manufactured in India and subject to a duty of excise under the Central Excise and Salt Act 1944 (1 of 1944).
	9.22	"Exporter" means a person who exports or intends to export and holds an Importer-Exporter Code number unless otherwise specifically exempted.
	9.23	"Export Obligation" means the obligation to export the product or products covered by the licence or permission in terms of quantity, value or both, as may be prescribed or specified by the licensing or competent authority.
	9.24	"Handbook (Vol.1)"means the Handbook of Procedures (Vol.1) and "Handbook (Vol.2)" means Handbook of Procedures (Vol.2) published under the provisions of the paragraph 2.4 of the Policy.
	9.25	"Importer" means a person who imports or intends to import and holds an Importer-Exporter Code number unless otherwise specifically exempted.

9.25A

"Infrastructure facilities" means industrial, commercial and social infrastructure or any other facility for the development of the Special Economic Zone as notified.

	9.26	"ITC(HS)" means ITC(HS) Classifications of Export and Import Items Book.
	9.27	"Jobbing" means processing or working upon of raw materials or semi-finished goods supplied to the job worker so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process.
	9.28	"Licensing Authority" means the authority competent to grant a licence under the Act/Order.
	9.29	"Licensing Year" means the period beginning on the 1st April of a year and ending on the 31st March of the following year.
	9.30	Manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling. Re-conditioning repair, remaking, refurbishing, testing
		calibration, re-engineering. Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining.

	9.31	"Manufacturer Exporter" means a person who export goods manufactured by him or intends to export such goods.
	9.32	"MAI" means Market Access Initiative
	9.33	"Merchant Exporter" means a person engaged in trading activity and exporting or intending to export goods.
	9.34	"NFEP" means Net Foreign Exchange Earning as a percentage of exports.
	9.35	"Notification" means a notification published in the Official Gazette.
	9.36	"Order" means an Order made by the Central Government under the Act.
	9.37	"Part" means an element of a sub-assembly or assembly not normally useful by itself and not amenable to further disassembly for maintenance purposes. A part may be a component or an accessory.
	9.38	"Person" includes an individual, firm, society, company, corporation or any other legal person.
	9.39	"Policy" means the Export and Import Policy, 2002-07 as amended from time to time.
	9.40	"Prescribed" means prescribed under the Foreign Trade (Development and Regulation) Act, 1992 (No. 22 of 1992) or the Rules or Orders made thereunder or under this Policy.
	9.41	"Public Notice" means a notice published under the provisions of paragraph 2.4 of the Policy.
	9.42	"Raw material" means:
		(i)	basic materials which are needed for the manufacture of goods, but which are still in a raw, natural, unrefined or unmanufactured state; and
		(ii)	for a manufacturer, any materials or goods which are required for his manufacturing process, whether they have actually been previously manufactured or are processed or are still in a raw or natural state.
	9.44	"Registration-Cum-Membership Certificate" (RCMC) means the certificate of registration and membership granted by an Export Promotion Council or other competent authority as prescribed in the Policy or Handbook (Vol.1).
	9.45	"Rules" means Rules made by the Central Government under Section 19 of the Act.
	9.46	"Services" include all the tradable services covered under General Agreement on Trade in Services and earning free foreign exchange.
	9.47	"Service Provider" means a person providing
		(i)		Supply of a service from India to any other country;
		(ii)		Supply of a service from India to the service consumer of any other country in India; and
		(iii)		Supply of a service from India through commercial or physical presence in the territory of any other country.
		(iv)		Supply of a service in India relating to exports paid in free foreign exchange.
	9.48	"SEZ" means Special Economic Zone notified by the Ministry of Commerce & Industry, Department of Commerce.
	9.49	"Ships" mean all types of vessels used for sea borne trade or coastal trade and shall include second hand vessels.
	9.50	"SION" means Standard Input Output Norms notified by DGFT in the Handbook (Vol.2), 2002-07/approved by Board of Approval.
	9.51	"Spares" means a part or a sub-assembly or assembly for substitution, that is ready to replace an identical or similar part or sub-assembly or assembly. Spares include a component or an accessory.
	9.52	"Specified" means specified by or under the provisions of this Policy.
	9.53	"Status holder" means an exporter recognised as "Export House/Trading House by DGFT/ Development Commissioner or Star Trading House/ Super Star Trading House" by the Director General of Foreign Trade.
	9.54	"STP" means Software Technology Park
	9.55	"Third-party exports" means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, shipping bills shall indicate the name of both the exporter/manufacturer and exporter(s).

	9.55A			"Unit Approval Committee" means the Committee notified for Special Economic Zones to consider proposals on matters relating to Special Economic Zone unit under its jurisdiction.
		9.56	"Wild Animal" means any wild animal as defined in Section 2(36) of the Wildlife (Protection) Act, 1972.

also see :http://dgftcom.nic.in/exim/2000/not/not02/not0302.htm