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Can a Merchant Exporter help the EPCG holder to fulfill its exports in his own firm ?

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Can a Merchant Exporter help the EPCG holder to fulfill its exports in his own firm ?
By: Kishan Barai
January 5, 2019
All Articles by: Kishan Barai       View Profile
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As merchant exporter, you can export the goods manufactured by the manufacturer and such exports can discharge the export obligation against EPCG authorisation issued to the manufacturer. Here are the relevant provisions: 

As per Para 2.42 of the Foreign Trade Policy (FTP):
Third party exports (except Deemed Export) as defined in Chapter 9 shall be allowed under FTP. In such cases, export documents such as shipping bill shall indicate name of both manufacturing exporter/manufacturer and third party exporter(s). Bank Realization Certificate (BRC), Export Order and Invoice should be in the name of third party exporter.

As per Para 9.60 of the FTP:
"Third-party exports" means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, export documents such as shipping bills shall indicate names of both manufacturer exporter/manufacturer and third party exporter(s). Bank Realisation Certificate (BRC), Self Declaration Form (SDF), export order and invoice should be in the name of third party exporter.

As per Para 9.58 of the FTP:
(a) "Supporting Manufacturer" is one who manufactures goods/products or any part/accessories/components of a good/product for a merchant exporter or a manufacturer exporter under a specific Authorisation. 
(b) “Supporting Manufacturer” for the EPCG Scheme shall be one in whose premises/factory Capital Goods imported/ procured under EPCG Authorisation is installed.

In the context of EPCG authorisations, as per Para 5.10 of Handbook of Procedures, Vol. 1 (HBP)
In addition to conditions in paragraph 5.04 of FTP, the following conditions shall also be applicable for the fulfilment of export obligation:
(a) Name of the supporting manufacturer as well as the exporter shall be indicated on export documents. 
(b) EPCG authorisation holder may export either directly or through third party(ies). 
(c) In case the Authorization Holder wants to export through a third party, export documents viz., shipping bills / Bill of exports etc. shall indicate name of both authorization holder and supporting manufacturer, if any, along with EPCG authorization number. BRC, GR declaration, export order and invoice should be in the name of third party exporter. The goods exported through third party should be manufactured by the EPCG Authorisation Holder or the supporting manufacturer where the capital goods imported under the authorisation have been installed. Proceeds realised through normal banking channel from third party exporter’s account to the authorisation holder’s account on account of such exports only shall be counted towards fulfilment of export obligation.
(d) The EPCG authorization holder shall submit the following additional documents for discharge of EO through third party (ies): 
(i) A copy of agreement entered into between the authorization holder and the ultimate exporter undertaking to export the goods manufactured by the authorization holder/supporting manufacturer for fulfilment of the export obligation against the EPCG authorization in question. 
(ii) Proof of having despatched the goods from authorization Holder’s factory premises to the ultimate exporter/port of export viz. 
(a) LUT certificate issued by GST.gov.in / Tax invoice for export prescribed under the GST rules with due authentication by the Customs verifying the exports along with the shipping bill number, date and EPCG authorization number or 
(b) Invoice duly incorporating the relevant EPCG authorization number & date at the time of dispatch in case the unit is not registered with Central Excise / GST. 
(iii) Lorry Receipt (LR) /Logistical evidence for transportation of goods from the premises of the authorization holder to the third party/port of export. 
(iv) An undertaking from the 3rd party on a stamp paper, declaring that the products exported for fulfilment of EO by them on behalf of the license holder as per details given in the statement of exports, were manufactured by the license holder. 
(v) Financial evidence for having received proceeds through normal banking channel from third-party exporter’s account to the authorization holder’s account on account of such exports towards such third party supplies. 
(vi) Disclaimer certificate from third party that they shall not use such proceeds towards EO fulfilment of any EPCG authorization (s) obtained by them.

As per Para 1.14 of HBP:
For claiming benefits under EDI system in respect of Third Party exports the process will be initiated by the First party who will link shipping bills and BRCs to repository. If the First Party chooses not to claim benefit for a particular shipping bill item/s, it may authorize Third Party to claim benefit for such shipping bill item/s. After such authorization by First party, Third Party will be able to utilize the shipping bill item/s in its application”.

So, you can file the shipping bill in your own name but you must mention the name and address of the manufacturer (EPCG authorisation holder) in the shipping bill as supporting manufacturer. You must also take care to ensure that you mention the EPCG authorisation number and date on the shipping bill. Of course, the other conditions mentioned in Para 5.10 of HBP must be fulfilled. 

Cordially yours,
Kishan Barai

 

By: Kishan Barai - January 5, 2019

 

 

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