Alerts & Updates 20th Jan 2023

SCOMET Update: Liberalization to the Export Control Policy Regulations concerning “Stock and Sale”

Authors

Sanjay Notani Partner | Mumbai
Ambarish Sathianathan Partner | Mumbai
Harika Bakaraju Principal Associate | Mumbai

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Liberalization to the Export Control Policy Regulations concerning “Stock and Sale”

  • Amendment issued by the Directorate General of Foreign Trade

    The Directorate General of Foreign Trade (DGFT), on 17 January 2023, issued an amendment under Paragraph 2.79A of the Handbook of Procedures (HBP) of the Foreign Trade Policy 2015-20 (FTP). Through the amendment, the DGFT has expanded the categories of companies that can receive certain export authorizations under the SCOMET (see below).

    This amendment is in furtherance of the earlier policy concerning “Export authorization for bulk export of SCOMET items[1] by an Indian exporter to an entity abroad for subsequent transfer to end users” (Stock and Sale Policy) under Paragraph 2.79A of the HBP.

  • What changes does the amendment bring about?

    Prior to the amendment, the export authorizations under the Stock and Sale Policy were granted only to a principal company/ wholly owned subsidiary in India (Applicant Exporter) exporting SCOMET items to their subsidiaries/principal company situated abroad (Stockist). However, post amendment, the following Indian companies can receive export authorization:

    • Indian parent company exporting to its subsidiary abroad;
    • Indian subsidiary exporting to its parent situated abroad; or
    • Indian subsidiary exporting to another subsidiary of its foreign parent.

    The amendment also provides discretion to the Inter Ministerial Working Group (IMWG) to relax the above requirement based on the description/end use/end-user of the SCOMET item sought to be exported from India.

  • Does the update change the mechanism for seeking approval by Applicant Exporters?

    While there is no change in the requirement to seek approval for export by the Applicant Exporters and the subsequent re-export by Stockist to the end-user/for end-use in a particular country, certain amendments in the process of providing such approval in the context of repeat orders have been made.

  • Conclusion
    The amended Paragraph 2.79A mainly expands the scope of Applicant Exporters who can seek export authorization. It also liberalizes the process of providing approvals by the Chairman, IMWG to repeat orders without the need for verification. The remaining process of seeking/providing authorization for bulk exports of the SCOMET items by an Applicant Exporter to a Stockist who in turn sells to an end-user remains the same.The DGFT has been playing an active role in issuing liberalized policies. The policy appears to be part of the Government of India’s push to maximise ease of doing export business during this critical period for the Indian economy.
  • 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:

    Sanjay Notani, Partner –SanjayNotani@elp-in.com
    Ambarish Sathianathan, Partner –AmbarishSathianathan@elp-in.com
    Harika Bakaraju, Principal AssociateHarikaBakaraju@elp-in.com

  • References

    [1] SCOMET items (excluding Category 0, Category 3A4001, Category 6, and transfer of technology under any category)

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein