What is Export Processing Zone (EPZ) ?

 Export Processing Zone Scheme

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:-

            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.

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