Notification regarding Legal Undertaking for Defence Exports

The Director General of Foreign Trade (DGFT) has vide Public Notice No. 63/2015-20 dated February 18, 2020 notified the format of a ‘Proforma of Undertaking’/‘Legal Undertaking’, which must be filed by the Indian exporter at the time of export of those SCOMET items which are being exported temporarily for the purpose of repair/ replacement/demo/display/exhibition/tender/RFP/RFQ/NIT. This ‘Proforma of Undertaking’ is in the form of a legal agreement between the Indian exporter and the President of India, acting through the DGFT, and has been notified to monitor the return of SCOMET items allowed to be exported for the aforementioned purposes. The ‘Legal Undertaking’ specifies the time period after which the exported SCOMET items are to be brought back to India, and the Indian exporter is required to file a ‘Letter of Confirmation’ with the DGFT upon their return, as a post reporting requirement.
Previously in 2019 the DGFT had, vide Public Notices 36/2015-20 & 50/2015-20, amended paragraphs 2.79C & 2.79D of the Handbook of Procedures of the Foreign Trade Policy 2015-20, respectively. These Public Notices introduced new steps to be followed and conditions to be fulfilled in order to obtain export authorization for the export of SCOMET items for (i) repair/replacement of imported item(s) overseas and their return; (ii) repair/replacement of indigenous SCOMET items; (iii) return of items imported into India for repairs; and (iv) demo/display/exhibition/tenders/RFP/RFQ/NIT.
In lieu of the above, it is observed that the ‘Legal Undertaking’ must be filed by the Indian exporter with the DGFT to obtain export authorization for:

A. The export/re-export of SCOMET items on return basis;
B. The re-export of indigenous SCOMET items after repair/replacement; and
C. The export of SCOMET items on temporary basis for demo/display/exhibition/tender/RFP/RFQ/NIT.

In addition to the ‘Legal Undertaking’, the exporter would also required to file the following documents, where applicable:

i. Proof of import of the item(s);
ii. Proof of obligation for replacement or repair of defective/damaged items;
iii. Proof of original export of the item(s);
iv. Proof of event (Demo/display/exhibition/tenders/RFP/RFQ/NIT);
v. Proof of participation; and
vi. Undertaking from the applicant firm.

ELP Comments

In order to improve the ease of doing business in the defence sector, the Government is taking several initiatives to alleviate the concerns of the industry. The DGFT has further simplified the export procedure by not requiring an ‘End User Certificate’, but just requiring the exporter to only file a ‘Letter of Confirmation’ upon return of the goods.

By filing such a ‘Legal Undertaking’, the exporter enters into a legal agreement that the products exported shall be returned within a specified time period (which may be extended by obtaining permission from DGFT), and can thus be held liable under the same for any irregularities between the information provided in the Undertaking and the actual performance. It must be noted that the DGFT has not notified the punishment applicable to any such exporter who fails to abide by the timelines specified in the Export Authorization or whose goods are used for a purpose other than that permitted. To ensure that exporters do not engage in misrepresentation or fraudulent activities so as to take advantage of this simplified procedure, the DGFT will need to soon impose strict controls and penal provisions.

These notifications serve as a step in the right direction, as they eliminate the need for a lengthy and drawn out approval process from the DGFT when the goods are only being exported for a short period of time and for a specific purpose. This ‘Legal Undertaking’ is along the same lines as the recently released Open General Export Licenses, and serves to ease the hassle of defence exports while also solidifying India’s status as a defence manufacturing hub by making it convenient for entities in India to engage with companies worldwide.

Please find attached the notification for your ready reference.

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