How to set-up an Export
The needs for higher level of technological
and industrial progress made the Government devise a series of export
promotional schemes. EOU & SEZ Schemes are one among them, which
provides an internationally competitive duty free environment coupled
with better infrastructural facilities for export production.
Export Oriented Units (EOUs) now constitute
a very important sector in the country’s Export Production scenario.
They have become dominant players in our export strategy, and their
share in the Country’s export performance is about 10%. The export
growth rate of 30% compares very favorably with the National export
How to set-up an Export Oriented Unit (EOU)
“How to set-up an Export Oriented Unit (EOU)” is a step-by-step
The information is divided into 5 parts:
Who is eligible to become an EOU?
An EOU can be set up by any entrepreneur for manufacturing of
goods and also for rendering services. An EOU can be set
up for repair, reconditioning, re-making and re-engineering
Trading activity is not allowed in the EOU Scheme.
EOU unit is required to achieve only positive Net Foreign Exchange
(NFE) over a period of 5 years.
Policy for EOU is given in Chapter-6 Foreign Trade Policy
and Chapter 6 of Handbook of Procedure (Vol. – I)
EOU can also be set up in the following sectors: -
Conversion of existing DTA/EPCG (Export Promotion Capital Goods)
units to EOU Scheme
Existing DTA units or EPCG units are permitted for conversion into
EOU Scheme as one time option. In case there is an outstanding export
commitment under the EPCG Scheme, it will be sub summed in the export
performance (EP) of the unit. If the unit is having outstanding
export commitment under the Advance Licensing Scheme, it will discharge
the same as well, as per its conditions before conversion into EOU
Scheme. However, duties of Customs and Central Excise already suffered
shall not be refunded on conversion into EOU.
1) Planning your venture:
Is it your own or
Is it with foreign participation and, if so, nature of participation
(foreign investment allowed 100%)
2) What process do you intend to do i.e. Manufacturing, rendering
and export of services or: -
Repair, reconditioning, re-making, re-engineering etc.
3) Technology to be used:
Related cost and conditions
4) Feasibility report:
On your own or with help of consultant
5) The finances involved:
Land, structure, buildings etc.(Please note, building construction
material is not exempted from duty).
Capital Goods, machinery etc.
Payment for royalties etc.
Administration and establishment
Others : like interest on loans, related taxes and levies etc.
6) The current competition overseas:
Demand and price levels.
7) The import laws and other requirements in target markets:
Any fiscal/ non-fiscal barriers, like anti-dumping laws.
Preferential treatment to competitor countries.
8) Location of the Unit:
The first thing before setting up an EOU the entrepreneur has to
decide the location of unit: -
i. close to port or rail/ road.
ii. availability of raw material and
iii. Environment clearance needed if unit is located within
25 kms of an urban town
Accordingly the application will be submitted to the concerned
Development Commissioner under whose jurisdiction that state comes.
9) Capital goods, machinery and equipment to be used:
Indigenous or foreign (allowed duty free)
10) The raw materials and other inputs, like consumables etc.
that would be required:
Source (allowed duty free)
Monthly, quarterly and annual requirements.
11) The production process:
Whether production process requires air-conditioning plant, special
furnaces or kilns etc.
Details and cost. (Please note, air-conditioning equipment
permitted duty free only if it is essential for production process).
12) The production capacity and spare capacity:
Do you intend to utilize the same by doing sub-contracting work
for other export units in DTA or Export Oriented Units.
Whether you want to get job work done outside the EOU.
Details of sub-contractors.
13) Any by-products turned out in the production process:
Details of by-products
Whether these would be exported or sold in Domestic Tariff Area
14) Effluents or waste-material:
How do you propose to treat these or discharge them.
Details of packaging (packaging material allowed without payment
Whether the normal grid could supply adequate power.
Or there would be a need for a captive power plant.
Cost of power plant
Fuel required for captive power plant (e.g. furnace oil, LPG,
HSD, coal etc.) (allowed duty free)
17) Other information:
Firm/company should be duly registered and details about Proprietor/Partner/
A current account with the bank authorized to deal in foreign exchange
should be opened.
Sale tax registration to be obtained from the Sale Tax Department.
18) Mandatory clearances from State Government: -
Pollution clearance certificate.
Approvals of building plan in cases where building is proposed to
Registration as a small scale industrial unit, if applicable
Registration under Factories Act.
All applications are to be filed with the concerned Development
Commissioner of Special Economic Zone (For jurisdiction of Development
Commissioner) Appendix 14-I- K
The unit/ promoter has to apply in the application form, to be
given in triplicate given in Handbook of Procedures in Appendix
14-1A (Please click here)
Project Report including a write up on the background of the promoters
establishing their credentials and standing.
Please see Appendix 14-1B (Please click here) for
documents required by the Development Commissioner for approval.
For sector specific conditions Please see Appendix 14-1C (Please
DD for Rs. 5,000/- drawn in favour of The Pay & Accounts Officer,
Ministry of Commerce and Industry, Department of Commerce, payable
at the Central Bank of India, Udyog Bhavan, New Delhi.
Registration –cum-Membership Certificate (RCMC) should be obtained
from the office of the concerned Development Commissioner.
Import Export Code: If the unit does not have an Import
Export code (IEC), it will apply in the prescribed form (Appendix
18-B) to the Zone Administration for the same.
Letter of Permission (LOP)
After submitting the application form and if every thing is in
order, Letter of Permission (LOP) is issued by the Zone Administration
within 2 weeks after interview of the promoter by the Approval Committee.
For format of LOP please see Appendix 14-IE (Please click
Legal undertaking (LUT)
A legal undertaking in the prescribed form undertaking to abide
by the terms and conditions of the LOP has to be executed
by the unit in format given at Appendix 14-1F (Please click here ).
A Green Card will be issued to the unit by the Zone Administration
Approval from State Government Agencies:
After the approval from the Development Commissioner concerned,
the manufacturing and other activities have to be undertaken under
customs bond for which formal application is to be made to the jurisdictional
Assistant Commissioner/ Deputy Commissioner of the Customs/ Central
Excise for issuance of a Private Custom Bonded Warehouse Licence
under section 58 and 65 of the Customs Act, 1962. The application
shall be accompanied by the following documents/information: -
Copy of notification whereunder the place (proposed location of
unit) has been declared as warehousing station under section
9 of the Customs Act. In case the approved place is not a notified
warehousing station, a separate application for issuance of such
notification is to be submitted to the Commissioner of Customs through
the jurisdictional Assistant Commissioner/ Deputy Commissioner.
Copy of LOI/LOP issued by Development Commissioner concerned and
LUT accepted by the Development Commissioner.
Details of the premises including ground plan, purchase/rent/lease
deed, allotment letter from Industrial Development Corporation/
Authority (if any)
Details about the constitution of the firm/company including its
Project Report indicating stage wise manufacturing process.
List of raw material, consumables and capital goods etc. required.
Undertaking that cost recovery and other charges shall be paid.
After verification of the premises and relevant documents,
the requisite licence under section 58 and 65 of the Customs Act
will be issued by the Assistant Commissioner/ Deputy Commissioner
Customs/ Central Excise on priority basis.
B-17 bond is a multi – purpose surety bond which the unit has to
execute with the Jurisdictional Assistant/ Deputy Commissioner Customs/
Central Excise on a non-judicial stamp paper of Rs. 300/-. Format
of the Bond is prescribed under Notification No. 6/98 CE (N.T) dt.
B-17 Bond is a surety bond and in case valid surety cannot be arranged
security @5% of the bond amount has to be furnished. The bond amount
shall be equal to 25% of the duty foregone on the capital goods
required in the next 5 years plus duty foregone on the value of
raw material for a period of 3 months.
B-17- Bond covers the following activities:-
Duty free import/ procurement of goods as per relevant notification
and warehousing/storage in the unit and their utilization.
Transhipment of import/ export of goods duty free between port
of import/ export and units premises.
Movement of duty free goods for job work and return.
Temporary clearance for repair and display in exhibitions, testing/
However it dose not cover differential duty amount against advance
DTA sale for which a separate bond is to be executed.
The unit has also to take a Central Excise Manufacture Code No.
from the Superintendent, Central Excise to enable them to sell in
the domestic market.
The Development Commissioner is empowered to grant approvals
on the following matters: -
Import of additional capital goods
Enhancement of production capacity
Change in name/ constitutions
Change of location/expansion
Extension of validity of LOP/LOI/LOA:
Import of Office equipment:
Merger of two or more EOU/SEZ Units
Import of spares and accessories of DG sets
Eligibility certificates for grant of employment visa to low level
foreign technicians to be engaged by EOUs as per Ministry of Home
Affairs Letter No. 250227/7/99-F-1 dated 20-9-1999 (Annexure-XI).
Sale of goods in DTA.
De-bonding/ Exit from EOU scheme.
Approval from State Government Agencies:
The unit has to secure approval for its wiring and electrical plan
from the Electrical authorities.
It has also to secure power allocation and wiring approval
from the State Electricity Board.
The industrial water supply is undertaken by the
The unit has to take a registration under the State Government
Sales Tax Act and Central Sales Tax Act.
In case the unit already has a registration with the State Sale
Tax Department the address of the additional premises should also
be endorsed in the registration certificate.
The unit has also to take Small Scale Industry (SSI) Registration
from the District Industries Center to apply for State Government’s
In case there are effluents or emissions the unit has to secure
approval form the Pollution Control Board.
Every Zone has a statutory Single Window Clearance Board.