Back to Licence Raj – DGFT’s HSN 8471 Import Policy Changes?

On August 3, 2023, the Directorate General of Foreign Trade (DGFT) introduced a significant shift in India’s import policy via Notification No.23/2023. Specifically, this change affects items classified under HSN 8471 of Chapter 84, which includes digital products like laptops, tablets, servers, and more. This alteration poses a substantial impact on businesses and individuals alike. Let’s delve into a comprehensive understanding of the new rules and navigate the potential hurdles that may arise from these policy changes.

Amendments in Import Policy:

DGFT’s recent directive introduces several major changes to the import policy:

1. Restriction of Imports: The import of specific digital devices (laptops, tablets, all-in-one PCs, ultra-small form factor computers, and servers) under HSN 8471 is now ‘Restricted’, allowing import only against a valid Licence for Restricted Imports.

2. Exemptions: Despite the restrictions, DGFT has outlined a few exemptions. These include:

• • Imports under the Baggage Rules.
  • Import of a single unit of the mentioned devices, even those purchased through e-commerce portals, without a license requirement.
  • An exemption for up to 20 items per consignment for specific purposes like R&D, Testing, Benchmarking and Evaluation, and repair & re-export, subject to a condition that the imported goods will not be sold.

3. Revised Import Policy: The import policy of several items under CTH 8471 has been revised from ‘Free’ to ‘Restricted’, subject to the new policy condition.

Areas of Concern and Practical Issues:

Despite the policy’s clear intentions, the notification leaves room for ambiguity and raises several questions:

1. SEZ/FTZ to DTA/EOU/STPI Clearances: It’s unclear if the license requirement applies to clearances from an SEZ/FTZ unit into a DTA/EOU/STPI unit.
2. Determination of Essentiality: The notification mentions an exemption when the item is an essential part of a Capital Good. However, it doesn’t elaborate on how the essentiality will be determined and who holds the authority to do so.
3. Single Item Import: For the import of a single item, the need for a license is unclear as the notification suggests its applicability only in the case of more than one unit.

These points of uncertainty have already led to confusion, with bills of entry filed for DTA clearances currently on hold for want of licensing requirement.

Implications and Conclusion:

Though the notification’s intent to boost the Make in India initiative is commendable, the lack of clarity on several aspects marks a step back to the era of license raj, causing potential delays, demurrages, and confusions.

The differences between the deeming fiction of imports/exports under SEZ law and the concept of crossing the frontiers of India under Customs laws further compound the challenges faced by businesses. Therefore, a need arises for either a harmonization of these regulations or a comprehensive clarification from the authorities to alleviate the issues caused by these changes.

By addressing these concerns and providing clearer guidelines, DGFT could ensure a smoother transition to the new import policy, aiding businesses and maintaining the momentum of India’s dynamic economy.