An exporter does not always manufacture every product within its own factory. Merchant exporters and some manufacturer exporters may depend on another production unit to manufacture goods for export. In such cases, the supporting manufacturer can become an important part of the EPCG arrangement.
The Export Promotion Capital Goods Scheme covers manufacturer exporters with or without supporting manufacturers. It may also cover merchant exporters tied to supporting manufacturers, subject to the applicable DGFT requirements. However, the relationship must be properly recorded instead of being treated as an informal production arrangement.
What Is a Supporting Manufacturer?
A supporting manufacturer is the production unit associated with an EPCG authorisation holder for manufacturing the goods connected with the export obligation. The capital goods may be installed at the supporting manufacturer’s premises when the transaction is structured according to the applicable provisions.
Businesses reviewing EPCG eligibility for merchant exporters should first determine which entity will hold the authorisation, where the machinery will be installed and who will manufacture the export products.
Is a Supporting Manufacturer a Machinery Supplier?
A supporting manufacturer and a machinery supplier perform different roles. A machinery supplier provides the equipment, while the supporting manufacturer participates in producing the goods covered by the EPCG arrangement.
The two roles should not be considered interchangeable merely because the same business appears in multiple transaction documents. The commercial arrangement and the actual use of the capital goods should remain clear.
Why Is Authorisation Endorsement Important?
The name of the supporting manufacturer should be endorsed on the EPCG authorisation before the capital goods are installed at its factory or premises. This helps connect the authorisation, machinery location and manufacturing activity.
The following information should be reviewed carefully:
- Legal name of the supporting manufacturer;
- Factory address and registration details;
- Machinery description and quantity;
- Proposed installation location;
- Export product details;
- Relationship with the authorisation holder.
Any later change in the supporting manufacturer may require an amendment and communication to the relevant authorities. Exporters should therefore confirm the production arrangement before importing or procuring machinery.
How Should Export Records Be Maintained?
Export obligation records should establish a reasonable connection between the capital goods, manufacturing activity and exported products. The authorisation holder may export directly or through an eligible third party, but the supporting records should clearly identify the relevant EPCG authorisation.
Exporters studying EPCG Scheme rules in India should pay attention to both specific and average export obligation requirements. Merely producing goods through a supporting manufacturer does not remove the authorisation holder’s compliance responsibilities.
Which Documents May Be Required?
Depending on the transaction structure, important documents may include:
- EPCG authorisation and endorsements;
- Machinery import or purchase documents;
- Installation certificate;
- Manufacturing or job-work agreement;
- Production and stock records;
- Shipping bills and export invoices;
- e-BRC or other realisation records;
- Annual export obligation reports.
Consistent descriptions across these records can reduce questions during export obligation reporting or EODC processing.
Common Mistakes to Avoid
Common issues include adding the supporting manufacturer after machinery installation, mentioning an incorrect factory address, failing to amend changes and maintaining weak production records. Exporters should also avoid assuming that every export will automatically count toward the obligation without proper documentation.
Final Thoughts
A supporting manufacturer arrangement can be used under the EPCG Scheme when the roles, machinery location and export activity are properly defined. Early planning is important because authorisation endorsement, installation and record keeping are connected.
The authorisation holder should maintain clear evidence showing how the supporting manufacturer, capital goods and exported products relate to one another.
