Articles 22nd Mar 2022

ELP BIS Series – Part 3: Obtaining BIS License in India – Procedure and Practicalities

Authors

Nishant Shah Partner | Mumbai
Stella Joseph Partner | Mumbai
Prakhil Mishra Senior Associate | Delhi NCR
Pulkit Devpura Associate | Mumbai

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  • Introduction

    The final part of this three-part comprehensive series on the legal framework governing BIS license, discusses in detail the procedures to be followed for obtaining BIS licence from the relevant authorities in India. This part also highlights certain practical insights, especially while interacting with authorities. The article also discusses certain interpretational issues, typically faced while obtaining BIS licenses. Issues include stocks in hand prior to the date of mandatory application of requirement to obtain BIS licences, classification of parts, mixtures etc. and application of BIS Standards thereto.

  • Steps for obtaining for BIS License

    The procedure for granting a BIS license is stipulated under the Bureau of Indian Standards (Conformity Assessment) Regulations, 2018 (BIS Regulations). The said Regulations prescribes a total of eight Conformity Assessment Schemes, varying in parameters such as testing, inspection, whether a license or a certificate of conformance is issued, including the prescription for mandatory factory and market audits to be carried out. Notably, the most rigorous of all the Schemes applicable to majority products covered under the BIS Regulations is Scheme I and the present article focuses on the procedure for grant of BIS license as mandated under the given Scheme I.

    If one wants to obtain a BIS license under Scheme I, the following steps can be followed:

    • Determination of coverage under Quality Control Order (“QCO/ BIS Order”)[1]

    The first step while applying for a BIS license would be to determine coverage of the products under the scope of the relevant QCO. In some cases, this first step may be challenging and complex, if the product in question is available in multiple variants and combinations. In order to determine the coverage under a QCO, one would have to dissect in detail, the “scope” clause of the QCO, to arrive at the coverage under the relevant Indian Standard (IS), as well as the Product Manual issued by the BIS.

    The Product Manual issued is in the nature of a technical manual, providing clarification as regards the scope of QCO as well as other aspects – such as – sampling guidelines, list of test equipment, Scheme of Inspection and Testing (SIT) etc. The product manual typically covers the grouping guidelines which define how multiple products can be covered within the single category, thereby providing clarification as regards coverage under the QCO.

    Pointers for companies
    BIS typically publishes a draft of the Product Manual seeking comments from the industry. At this stage, if there is any ambiguity as regards coverage under the QCO for the various variants/ combinations of the product, it is advisable to make representation to BIS seeking suitable clarification on these aspects, before the product manual is finalized.

     

    • Preparation prior to filing application

    Prior to actual filing of the application for obtaining a BIS license, it is important that certain preparatory steps are carried out to ensure that complete and accurate data is collated and submitted in the application.

    To this end, key preparatory activities to be carried out are listed below:

    • Ensuring adequate equipment in the factory premise: The application requires submission of accurate data in relation to the machinery/ test equipment present at manufacturing facility. It is therefore essential to ensure, prior to filing the application, that all the machinery and testing equipment required to be detailed in the application are available at the manufacturing premises, and that they conform to the requirements specified in the IS.
    • Earmarking of testing area within factory premises: The applicant should have an earmarked area within the manufacturing premises for setting up a lab to conduct the requisite tests as prescribed under the QCO read with the Product Manual.
    • Appointment of Authorized Indian Representative (AIR): For foreign manufacturers, an Authorized Indian Representative (AIR) must be appointed in advance. AIR would be the person responsible on behalf of the foreign applicant for all the statutory compliances under the provisions of the BIS Act, 2016. Further, the BIS authorities would consider the AIR as the key point of communication on behalf of the foreign manufacturer. Thus, identification and appointment of AIR would be a crucial step prior to filing of application by foreign manufacturers. There are certain qualitative pre-requisites that a person should fulfil in order to be eligible for nomination as an AIR which can be found here.
    Pointers for companies
    The Product Manual typically gives guidelines with regards to several important aspects including on the sample size to be sent for testing before grant of license and the list of test equipment required in the factory premises. Therefore, during the pre-application preparation, the Product Manual should be gainfully referred to. Companies should study these aspects of the Product Manual even when it is at the draft stage and make representations to BIS in case it is practically not feasible to comply with any condition. The Product Manual also gains significance as at times it may prescribe relaxation from the conditions set out in the IS or a structuring possibility to reduce onerous compliance.
    • Filing of application for BIS license

    Once the relevant pre-application preparation is carried out, an application for BIS licence is required to be filed in the prescribed formats, along with specified annexures. The table below enlists the relevant forms and underlying documents which are required and submitted to BIS for the grant of BIS licence under Scheme I:

    Sl. No. Relevant Form Contents of the Form
    Forms applicable on both Indian and foreign manufacturers
    Form I Contains list of machines used in manufacturing of the products
    Form II Contains list of testing equipment/chemicals available at manufacturing premises and used in testing of the products
    Form III Declaration as regards following the scheme of testing and inspection prescribed under the relevant product manual
    Form IV Format of the test reports for the testing done at in-house laboratory
    Form V Form for application of BIS license, requiring the applicant to, inter alia:

    furnish details of the office and factory address

    disclose the names of top management and quality control personnel

    submit a listing of variety of products to be covered in the BIS license

    Forms applicable to only foreign manufacturers
    Form VI For appointment of the AIR and filing its nomination form
    Form IX Format of the agreement between the foreign manufacturer and BIS, in terms of which the foreign manufacturer undertakes to comply with the BIS Act, 2016 and the rules and regulations thereof
    Form X Indemnity Bond to be signed by the foreign manufacturer indemnifying and holding BIS harmless in respect of any third party claims with regards to conformance of products manufactured by the manufacturer on which the Indian Standard Mark is marked.
    Form XI Foreign applicant to deposit performance bank guarantee of USD 10,000
    Pointers for companies
    At present, Indian manufacturers can apply for the licence by filing an application on the Manak Online portal (https://www.manakonline.in/MANAK/login). Foreign manufacturers are still required to make physical filing of the applications for BIS licence. All of the above stated forms can be accessed at https://www.bis.gov.in/wp-content/uploads/2019/03/BIS_CA_12032019.pdf.
    • Preparation prior to factory visit
    • Scheduling the visit

    The BIS, on receipt of an application for grant of a BIS licence, examines the underlying forms and supporting documents. If the application is found to be complete, the BIS authorities will process the same and issue letters for conducting a visit to factory premises of the applicant and direct the applicant to pay the requisite charges (discussed below).

    • Statutory fees and other charges

    Once the applications for grant of BIS licence have been processed, and the factory visit has been scheduled, the BIS determines the applicable charges and fees and issues a letter stating the total quantum of amount to be deposited for conducting the visit. The charges under the head of “inspection charges” are applicable to both Indian and foreign manufacturers. There are however certain additional charges to be deposited by a foreign manufacturer. Such cumulation of the charges for foreign manufacturers can be found here . After the payment of the statutory fees and other charges, an inspection notice is sent by the BIS authorities to the applicant for scheduling the factory visit.

    • Preparation of factory premises

    The visit is undertaken to inspect the overall functioning of the factory from a quality control perspective (such as verifying the manufacturing flow chart, testing facility, qualification of the quality personnel, hygiene check etc.) in accordance with BIS Act and regulations thereunder.  The BIS Scientist is required to carry out certain specified activities during his/her visit, which can be found here .

    Pointers for companies
    After the appointment of the BIS Scientist, it helps to proactively meet the Scientist and explain to him/her about the product and the business in general, which may facilitate a better understanding of inspection to be carried out by the scientist during the factory visit. Further, prior to the actual factory visit, it is also advisable to carry out a dry run at the factory premises with the in-house quality personnel present, to ensure preparedness and to enable a smooth verification during the visit by the BIS scientist. For instance, in the event, any machinery or testing equipment listed in the application becomes unavailable in the factory premises for some reason, the same can be rectified prior to the actual factory visit.
    • Factory visit

    The factory visit by the BIS scientist is usually for one day in case of Indian manufacturing premises and two days in case of foreign manufacturing premises (excluding the travel days). During the visit, the BIS Scientist will be drawing two set of samples from the factory premises.  The first set will be shipped [to be arranged by the applicant itself] for testing at an Indian laboratory as selected by the scientist and disclosed only at the time of the visit; while the second set will be tested at the lab within the applicant’s manufacturing premises. Based on the results of the tests carried out during the factory visit, a test report is prepared by the Scientist. Top management personnel in-charge of the manufacturing premises are expected to be present during the visit of the BIS scientist for signing the report.

    • Testing of samples post factory visit

    One set of samples drawn by the scientist during the visit is required to be sent by the applicant for testing to a BIS authorized lab in India. Once the lab issues the test result, the same will be reviewed by the BIS for their correctness and conformance to the Indian Standard. In case the test results take longer than a month, a test report generated at the internal laboratory within the manufacturing premises may be considered for the grant of licence, and same shall be ratified on receipt of third-party laboratory report for conformity.

    Pointers for companies
    In relation to the application for a BIS license made by Indian applicants, the third-party test report can be obtained online even prior to issuance of BIS license on the Manak Online portal. However, such a facility is not yet ft available for foreign applicants.  Currently they are required to obtain a third-party test report by physically raising the test requests on the Indian NABL accredited/ BIS authorized labs after couriering the samples to India for carrying out such tests. One should also be mindful to constantly follow up with the BIS authorized labs to obtain the test results at the earliest.
    • Rectification of defects, if any, and grant of BIS licence

    The BIS authorities during their verification of documents and details may raise objections in case any discrepancies are noticed. Some instances of such discrepancies include:

    • Mismatch of the details provided in the application and supporting documents like company incorporation documents, machinery equipment, testing facility, calibration reports, manufacturing process flow, etc.
    • If the product fails, the tests conducted by the third-party BIS accredited lab.
    • If there is a non-disclosure of information on the part of the applicant. Such information could be pertaining to top management, production process, etc.

    If the above issues are raised by the BIS – to avoid any adverse consequence like rejection of the application, the applicant is expected to give adequate justification and file explanatory letters/details with the concerned scientist, ensuring the rectification of all the defects mentioned by the scientist. Usually, a time of 21-30 days’ is provided to the applicant to rectify the errors identified in the application submitted.

    The BIS on being satisfied that the applicant is eligible for grant of BIS licence (on having submitted all the above documents), will grant a licence to use or apply a Standard Mark in the manner specified in the BIS Act and regulations thereof.

    Pointers for companies
    The applicants should regularly follow-up with the BIS scientist regarding the issuance of the BIS license and submit any additional documents or clarifications which are sought by the Scientist to facilitate the same. Considering the large number of products being covered under mandatory BIS licensing and the lack of commensurate number of scientists, such follow-up helps timely issuance of a BIS license.
  • Compliances Post Receipt of License

    Upon and after the receipt of the BIS license, a licensed manufacturing premise should also be mindful of certain periodic/ongoing requirements which are mandated for the ongoing use of BIS license, and which enable the manufacturer to continue applying the Standard Mark on covered products.

    Some of these are:

    • For foreign manufacturers – submission of Indemnity Bond, BIS Agreement and the Performance Bank Guarantee: (As also discussed in Part I) a Performance Bank Guarantee (PBG) of USD 10,000 and an indemnity bond is required to be executed for grant of a BIS licence for foreign manufacturers, through signing of an agreement between BIS and the foreign manufacturer. The need for PBG from a foreign manufacturer is to ensure that in case of any violation of the BIS Act, Rules and Regulations- including non-payment of marking fee dues and breach of terms and conditions of the license- BIS would be able to enforce the PBG.
    • Payment of applicable Marking Fees: For marking of the products with a Standard mark, the licensee is also required to pay applicable marking fees. A “minimum marking fees” is calculated in terms of the average production capacity of the relevant industry. Once the average for the same is determined, the licensees are required to pay the minimum marking fee in advance for the first year of licence at the time of obtaining the license. The actual marking fee needs to be calculated at the end of first year. It is based upon the actual production on which the BIS mark is used against which the advance fee paid is adjusted.
    • Scheme of Inspection and Testing (SIT): Periodic testing is required to be carried out in terms of the SIT at such intervals as prescribed in the relevant Product Manual. The Product Manual may prescribe separate periodicity for different tests, and these are required to be complied with on an ongoing basis. Test reports so generated are required to be preserved at the manufacturing premises. Such records may come handy in case of surprise audit being conducted by the BIS personnel.
    • Updating BIS about important changes: Any changes such as changes in laboratory personnel at the manufacturing premises, changes in machinery and testing equipment, the calibration certificates of the machines, the manufacturing process flow and the factory location needs to be communicated to the BIS at the earliest.
    • Periodic returns as may be prescribed by BIS: Additionally, for some products, there is also a requirement to declare the consignee details periodically. Such consignee details would include number of BIS marked articles which are supplied by the licensed premises to Indian customers (refer https://www.manakonline.in/MANAK/login for more details).
  • Renewal of license

    The licence is granted initially for a period of not less than one year and up to two years depending upon the discretion of the BIS.  The licensee is required to apply for the renewal of the license three months prior to the expiration of the validity of the licence, pursuant to which the BIS licence may be extended for a period of one to five years. In case the licensee applies for renewal post the expiry of the initial validity of BIS licence, the licensee will be required to pay a late fee and during such period of delay, the licence will be inoperative.

  • Change in scope of licence/ addition of new products

    The licensee may add new products or change the scope of the current licence by making a simple application along with the supporting documents. These includesubmission of original test report(s) from BIS recognized laboratories showing conformity of the product to relevant Indian Standard(s), details of additional manufacturing and/or testing facilities in the prescribed format, and declaration as prescribed under the relevant Product Manual, if any in this regard.

  • Some interpretational issues while obtaining BIS License 
    • Applicability of QCO to existing stock in hand

    While one seeks to comply with a particular QCO, an issue may arise relating to applicability of the QCO on the existing stock manufactured prior to the date from which BIS licence is made mandatory. In relation to such stock, it is noteworthy that in the past, specific exemptions have been provided under particular QCOs. For example, in relation to Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012 [now replaced by the 2021 Order] (IT Goods QCO), issued under the erstwhile Bureau of Indian Standards Act, 1986 (1986 Act), a specific notification was issued inter alia setting out that “All products manufactured / imported before the notified date of coming into the order, i.e. July 3, 2013 shall not be covered by the provisions of the Order”. Thus, relevant exemptions in relation to each such applicable QCO would have to be examined to determine whether such facilitation has been provided for the stock in hand. In the absence of such specific exemption and upon a plain reading of Section 17 of the BIS Act, stock in hand, if any, would not be allowed to be imported, sold, stored for selling, etc.

    • Regarding coverage of goods/products in a QCO

    For interpretation of the scope of the QCO, the Indian courts have relied upon the “common parlance test”.  Hence, if a product was understood in the common parlance to be covered within the terms used in the QCO, then such a product was held to be covered within the ambit of QCO. In Kerneos Indai Aluminate Technologies Private Limited vs. UOI[2]the Hon’ble Andhra Pradesh High Court dealt with the issue of whether HARC (Aluminous Cement) was covered within Cement (Quality Control) Order, 2003. The said QCO itself defined and covered “cement” widely as follows: “(d) ‘cement’ means any variety of cement manufactured or sold in India and includes blast furnace slag cement, portland pozzolana cement, rapid hardening Portland cement, white portland cement, hydrophobic portland cement,… or any other variety of cement which the Central Government may, by notification in the Official Gazette, specify for the purposes of this Order”. In this context, the Hon’ble Andhra Pradesh High Court gave due relevance to the understanding of cement in common parlance and held that in popular or commercial usage, HARC is not understood as “cement”. It also relied upon the decision of the Hon’ble Supreme Court in Associated Cement Co. Ltd. v. State of M.P[3] which, while looking at the popular and commercial usage of the term “cement” held in the context of export tax that “refractory material produced by the appellant does not fall within the Entry “all types of cement” and consequently it is not eligible to levy of export tax”.

    Thus, for determining coverage of products – including variations/ combinations/mixtures of the product, the test of “common parlance” may prove useful while making a definitive determination.

    • Applicability to products imported, which are subsequently exported

    QCO typically applies to products sold in India and therefore contain a specific exclusion as regards to the products which are exported out of India. However, one issue that arises in this regard is the coverage of products which are imported, but subsequently exported out of India- whether the QCO would still cover such products. On a harmonious reading of the QCO with Section 17 of the BIS Act and General Notes Regarding Import Policy set out in Schedule I of the ITC(HS), 2017 (“General Notes”), a view can be adopted that the products imported from outside India for purposes of re-export may not attract the provisions of the QCO. This view emerges from the following aspects:

    • Typically, the QCO itself stipulate that it shall not apply for “goods or articles meant for export
    • In terms of para 2 of the General Notes, “Quality of the products that are subject to mandatory Indian Standards, as applicable to domestic goods, shall be required to comply with quality specified for the product as per same Indian Standards”.
    • Therefore, given that domestic products which are meant for export are not subject to the QCO, this provision may be interpreted to mean that QCO should not apply for products which are brought into India and which are meant for re-export.

    However, such a view may be disputed based upon a plain reading of Section 17 of the BIS Act, which sets out that “No person shall manufacture, import, distribute, sell, hire, lease, store or exhibit for sale any such goods, article, process, system or service under sub-section (1) of section 16…. (a) without a Standard Mark, except under a valid license”. Further, in this context, one may also refer to instances where Indian authorities have given specific dispensation with regards to imported goods meant for export. This indicates that in the absence of such specific dispensation, the requirement would continue for such imported goods (though ultimately meant for exports)[4].

    • Implications for marked goods kept in the premises prior to obtaining license

    As per Section 17(3) of the BIS Act “No person shall use or apply or purport to use or apply in any manner, in the manufacture, distribution, sale, hire, lease or exhibit or offer for sale of any goods, article, process, system or service, or in the title of any patent or in any trade mark or design, a Standard Mark or any colourable imitation thereof, except under a valid licence from the Bureau”. In light of this definition, a question arises on the status of finished un-licensed products which are lying at the shop floor, warehouses, etc. prior to the issuance of the BIS licence. In this context, one can usefully refer to the decision in Tata Metaliks Kubota Pipes Limited and Ors. Vs. Union of India and Ors.[5], where, it was observed that the requirement to not “use” an un-licensed product would apply even to products already produced by the manufacturer prior to the date of issuance of the BIS licence. Thus, such goods would not be eligible to carry the Standard Mark and businesses should be careful to not mark their products till the BIS license is actually obtained.

  • Concluding Remarks

    To trade in India, obtaining a BIS License becomes a critical and indispensable requirement for entities covered under QCOs. As on 31st March, 2021, the total number of operative BIS licences issued to domestic manufacturing premises aggregated to 37873, whereas those issued to foreign manufacturing premises was 1009 for 119 Indian Standards in 53 countries across the world[6]. Further, given the escalation in the number of QCOs issued in recent times, and with COVID-related restrictions now progressively relaxed, one can expect to see the number of BIS licenses being issued rise further.

    The conformity assessment procedures in India to obtain the BIS license are one of the most stringent in the world. Further, the Indian Government has repeatedly indicated its intention to strictly enforce QCOs to ensure quality standards in the country. It would thus become important for international and domestic businesses to understand their obligations and ensure compliance of applicable requirements for providing BIS marked products in the country.

    We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

    Nishant Shah, Partner – Email –  NishantShah@elp-in.com
    Stella Joseph, Partner – Email – StellaJoseph@elp-in.com
    Prakhil Mishra, Associate – Email – prakhilmishra@elp-in.com;
    Pulkit Devpura, Advocate – Email – pulkitdevpura@elp-in.com

  • References

    [1] Refer ELP’s BIS Series – Part 2: Legislative Framework In India (https://www.mondaq.com/india/contracts-and-commercial-law/1170384/elp39s-bis-series-part-2-legislative-framework-in-india)
    [2] W.P. Nos.24863 of 2020 & 49 of 2021, (AP HC, 17.06.2021).
    [3] [2005 (4) ALT 27 (SC)].
    [4] For instance, the Minutes of the 98th Meeting of the Board of Approval for SEZs held on 29th May, 2020, dealt with a similar issue. The applicant in that case, an SEZ Unit, had imported non-BIS products (caustic soda lye) for manufacturing of Alumina Trihydrate in its SEZ unit. While the Board allowed the applicant to utilize such non-BIS caustic soda and export the final goods in this single instance, it required an undertaking that the applicant will not import non-BIS products in future.
    [5] W.P. 16603 (W) of 2009 with W.P. 14315 (W) of 2009 with W.P. 12814 (W) of 2009, (05.02.2010 – CALHC).
    [6] https://www.bis.gov.in/wp-content/uploads/2022/02/Annual_report_for_final_approval_on_12-1-2022.pdf.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice.