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What is the procedure for EPCG license redemption?

In this blog, understand the step-by-step process of redeeming an EPCG license and the documents required.

An Export Promotion Capital Goods (EPCG) license is a type of export incentive offered by the Government of India to promote export of capital goods. Under this scheme, an exporter can import capital goods at a concessional customs duty rate to produce goods for export. The EPCG license redemption scheme aims to boost exports and increase foreign exchange earnings while promoting the growth of domestic capital goods industry.

Who is customs house agent or customs broker?

An exporter who has availed of the benefits of an Export Promotion Capital Goods (EPCG) license gets imposed with an export obligation. EPCG redemption refers to the process of fulfilling this export obligation. Under this scheme, an exporter is required to export goods worth six times the value of the capital goods imported under the EPCG license. Once the export obligation is fulfilled, the EPCG license holder can apply for redemption of the license. The redemption of the license involves paying a nominal redemption fee and the surrender of the original license to the Directorate General of Foreign Trade (DGFT). After the redemption process is complete, the exporter is free to import capital goods at a concessional customs duty rate again.

It is important for exporters to fulfill their export obligation within the stipulated time frame to avoid penalties and loss of benefits. Failure to fulfill the export obligation can result in the imposition of penalties and even the suspension of the exporter’s license. The license is typically valid for 6 years, and the capital goods imported under the scheme must be used to produce export goods within a specified time frame. The EPCG scheme is administered by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry¹.

Documents required for EPCG redemption

Here are some of the documents that are required for EPCG redemption:
1. Original EPCG license
2. Export obligation discharge certificate (EODC) issued by a bank, confirming the fulfillment of the export obligation
3. A self-declaration stating that no penalty has been imposed on the exporter for non-fulfillment of the export obligation
4. Copy of the bill of entry for the capital goods imported under the EPCG scheme
5. Copy of the shipping bill for exports made to fulfill the export obligation
6. Original certificate of installation and commissioning of the imported capital goods
7. Original equipment manufacturers (OEM) certificate for the capital goods imported under the EPCG scheme
8. Bank realization certificate (BRC) or foreign inward remittance certificate (FIRC) for the exports made to fulfill the export obligation

EPCG redemption procedure at DGFT

Here are the general steps involved in the EPCG redemption procedure at DGFT²:

1. Obtaining Export Obligation Discharge Certificate (EODC)

The exporter has to fulfill their export obligation and obtained the necessary Export Obligation Discharge Certificate (EODC) from a bank.

2. Submission of documents to DGFT

The exporter must submit the original EPCG license, along with the EODC and other necessary documents to DGFT.

3. Document verification by DGFT

DGFT will now verify the documents and check if the exporter has fulfilled their export obligation.

4. Exporter gets demand notice

If everything is in order, the DGFT office calculates the redemption fee and issues a demand notice to the exporter.

5. Payment of redemption fee

The exporter must pay the redemption fee to the DGFT office.

6. Issuance of redemption letter

Once the redemption fee is paid, the DGFT office issues a redemption letter and cancels the original EPCG license. The exporter is then free to import capital goods at a concessional customs duty rate again.

EPCG redemption procedure at customs

The EPCG license redemption procedure at customs involves the physical verification of the imported capital goods and the submission of necessary documents to the customs authorities. Here are the general steps involved in the EPCG redemption procedure at customs:
1. The exporter must submit the original EPCG license, along with the necessary documents, to the customs authorities.
2. The customs authorities verify the documents and physically inspect the imported capital goods to ensure that they are being used for the production of export goods.
3. If everything is in order, the customs authorities issue a "no-objection certificate" (NOC) to the exporter.
4. The exporter must then submit the NOC, along with the EODC and other necessary documents, to the DGFT office.
5. The DGFT office verifies the documents and checks that the exporter has fulfilled their export obligation.
6. If everything is in order, the DGFT office calculates the redemption fee and issues a demand notice to the exporter.
7. The exporter must pay the redemption fee to the DGFT office.

Once the redemption fee is paid, the DGFT office issues a redemption letter and cancels the original EPCG license. (3) While Amazon Global Selling does not play a direct role in the EPCG license redemption process or EPCG license closure procedure, it can help exporters fulfill their export obligations by providing them with access to a large customer base and global shipping options.

Amazon Global Selling: Hassle-free e-commerce exports from India

Amazon Global Selling enables Indian exporters to sell internationally, while simplifying the export process with support at every stage. Leveraging Amazon’s tools and products, you can establish and manage your e-commerce exports business from India and sell on 18+ Amazon global marketplaces, and get expert support for fulfillment, compliance, and webinar.

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Frequently Asked Questions

Is it mandatory to hire a customs house agent?

Hiring a Customs House Agent (CHA) is not mandatory but recommended for a smooth and hassle-free customs clearance process.

Does a customs broker work for the government?

No, a customs broker does not work for the government. They are private entities or individuals who act as intermediaries between businesses and customs authorities.

What are the other names used to call customs house agents?

CHAs are known by various names in different countries or regions. In addition to CHA, they may also be referred to as customs brokers, customs agents, customs clearing agents, or customs representatives.

Can I do the customs clearance of my own cargo?

Yes, you can choose to handle the customs clearance of your cargo, provided you have the necessary knowledge, resources, and time to effectively navigate the customs procedures.

What are the latest intermodal shipping trends?

The latest trends in intermodal shipping include increased digitization, sustainable practices, and use of specialized equipment for efficient handling.

Published on July 29, 2023.

Sources:
1. https://www.dripcapital.com/en-in/resources/blog/customs-house-agent-broker
2. http://delhicustoms.gov.in/knowledge.html
3. https://cblms.gov.in/knowledgecenter_detail?parent=1&type=1
4. https://dailylogistic.com/customs-house-agent-cha-customs-broker/
5. https://www.toclogistics.com/5-biggest-advantages-of-working-with-a-licensed-customs-broker/

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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.