Export Processing Zone Scheme: Customs Manual

Free Trade Zones (FTZ)/ Export Processing Zones (EPZs) have emerged as an effective instrument to
boost export of manufactured products. The Zones, set up as enclaves separated from the Domestic Tariff
Area (DTA) by physical barriers, are intended to provide an internationally competitive duty free
environment for export production at low costs. The basic objectives of EPZs are to enhance foreign
exchange earnings, develop export-oriented industries and to generate employment opportunities. The
first Zone was set up at Kandla (Gujarat) in 1965, followed by SEEPZ, Mumbai in 1972. Thereafter, four
more Zones were set up at NOIDA (UP), FALTA (West Bengal), Cochin (Kerala), Chennai (Tamil Nadu) in
1984 and at Vishakapatnam (Andhra Pradesh) in 1989. In 1997, Surat Export Processing Zone came into
existence. With the announcement of Special Economic Zone Scheme in year 2000, the four Export
Processing Zones / FTZ, namely Kandla, SEEPZ, Cochin and Surat have been converted into Special
Economic Zones with effect from 1-11-2000.

2. Each Zone provides basic infrastructural facilities, like developed land, standard design factory
buildings, built-up sheds, roads, power supply and drainage, in addition to a whole range of fiscal
incentives by way of Customs, Excise and Income Tax exemptions. Customs clearance facilities are
offered within the Zone at no extra charge, while facilities like banking, post office and clearing agencies
are also available in the service centers attached to each Zone.

3. The Export & Import Policy provisions for Export Processing Zones are the same as applicable to
EOUs. Thus, the provisions of EXIM Policy regarding importability of goods, DTA sale, clearance of
samples, sub-contracting, inter-unit transfer, repairs, re-conditioning and re-engineering, sale of unutilized
material, debonding etc. for EOUs are applicable to EPZ units.

4. The Development Commissioners appointed by the Ministry of Commerce monitor and coordinate
the functioning of each Zone. The Customs act in close liaison with the Development Commissioner of
the respective Zone in providing bond facilities and for ensuring that goods imported/indigenously
procured duty free are utilised in the production of goods for export. To enable the EPZs to import/procure
locally their requirement of raw materials, capital goods and office equipment etc. duty free, a number of
Customs and Central Excise notifications have been issued by the Ministry of Finance. These
notifications specify the different categories of items allowed to be imported/procured duty free as well as
the conditions thereof. The permissible item, cover almost all categories of goods required in connection
with the production activity for export & include capital goods, raw materials, components, packing,
consumables, spares etc. The relevant notifications are as under:-

133/94-Cus, dated 22.6.1994 for allowing duty free import of specified goods to the units located
(i) in the Export Processing Zone;
58/2000-Cus, dated 8.5.2000 for allowing granite-quarrying units located in the Export Processing
(ii) Zone to import specified goods duty free;

(iii 177/94-Cus, dated 21.10.1994 for allowing Gems & Jewellery units located in the Export
) Processing Zone to import specified goods duty free;

(iv) 126/94-CE, dated 2.9.1994 for allowing EPZ units to procure locally the specified goods duty free;
37/2000-CE, dated 8.5.2000 for allowing granite-quarrying units located in the Export Processing
(v) Zone to procure specified goods duty free;

As the policy provisions for units located in Export Processing Zone are the same as those
applicable to EOUs, for details the chapter on EOUs may please be referred to. It may be mentioned that
in case of EPZ, the units are not required to take licence under section 58 of the Customs Act. Further,
the EPZ units are not required to pay cost recovery charges for the Customs staff posted in the Zone.