BIS Update: Exemption from Quality Control Orders under Advance Authorization and extension of Quality Control Orders on certain goods

March 7, 2024, the Directorate General of Foreign Trade, introduced a new Para 4.18 A to the Foreign Trade Policy 2023 to enable the exemption of imported inputs under Advance Authorization and Export Oriented units from complying with the requirements of obtaining mandatory certification for products which are notified under certain Quality Control Orders.  The notification is available here.

Scope:

Presently the exemption is only available on goods falling under the scope of Quality Control Orders issued by the Ministry of Steel and the Department for Promotion of Industry and Internal Trade. Exemption from QCOs for Advance Authorization holders is applicable only for physical exports and not for deemed exports. The notification also expressly clarifies that the exemption would not be applicable to goods imported under the DFIA Scheme.

Conditions for availing exemptions:

• To qualify for the exemption under Advance Authorization, imports must adhere to the pre-import condition that they will be used in the manufacturing of the export product and exported under the same authorization. The exemption will be endorsed in the authorization itself.
• Unutilized imports or products manufactured with non-compliant inputs cannot be transferred to Domestic Tariff Area even after regularizing export obligation defaults. Options for regularization include destruction in the presence of authorities or re-exportation, with associated duties and fees.
• The facility of clubbing under para 4.36 of Handbook of Procedures (HBP), 2023 is not available for these advance authorizations.
• For Export Oriented Units, an undertaking that the products will be utilized in export production is to be submitted to the Customs authorities at the time of importation and to the Development Commissioner concerned.

Implications for Businesses:

This exemption could significantly reduce regulatory burdens for businesses engaged in export-oriented manufacturing, allowing them to focus more on production efficiency and market expansion. However, businesses need to ensure strict compliance with the conditions outlined in the notification to avoid any potential penalties or disruptions in their operations.

Further, while the exemption presents a favorable development for certain industries, it’s crucial to note its current limitation to specific products. For instance, certain goods subject to mandatory certification, such as chemicals, are not included in the scope of the exemption at present. This exclusion underscores the need for businesses operating in such sectors to continue adhering to existing regulatory requirements.

The exclusion of goods imported under the DFIA Scheme also underscores the need for careful consideration by businesses of available  trade schemes and their respective regulatory frameworks when planning import-export activities.

The date of entry into force of the existing Quality Control Order for the following chemicals has been extended:

As per the notifications, producers of these products will now have to secure BIS certification before these orders come into force. Once these orders come into force, both domestic and foreign manufacturers of these products will only be able to export/sell in India with a valid BIS license in place.

To obtain such license, both foreign producers and domestic manufacturers of these products would need to submit an application to the BIS seeking certification. Furthermore, the process of certification will also require physical testing and inspection of the relevant product at the factory premises as well as parallel testing by a BIS authorized laboratory in India to verify the same. BIS certification is a time-consuming process and therefore it is recommended that interested producers make applications for certification at the earliest in cases wherein Quality Control Orders have been issued and are pending enforcement.

 For a master list of all products under mandatory BIS certification, please click here.