Introduction: The Government of India, Ministry of Commerce & Industry, Department of Commerce, Directorate General of Foreign Trade (DGFT), has issued Notification No. 71/2023 on March 11, 2024. This notification introduces significant amendments to the Foreign Trade Policy (FTP), 2023, specifically addressing the import of inputs subject to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders, Export Oriented Units (EOUs), and Special Economic Zones (SEZs).
1. Introduction of Para 2.03A: A new para, 2.03A, is inserted under FTP 2023, outlining the importability conditions for items under Advance Authorisation, EOU, and SEZ without compliance to mandatory QCOs.
2. Conditions for Advance Authorisation:
- Pre-import conditions are established for Advance Authorisation, emphasizing utilization in the manufacturing of export products and subsequent export under the same authorization.
- Exemption from QCOs must be endorsed in the Advance Authorisation, and unutilized imports face specific regulations.
- The destruction or re-export of unutilized material is prescribed, along with payment of effective duty on MFN basis and interest for regularizing unutilized imports.
3. Conditions for EOUs:
- EOUs are granted exemption from mandatory QCOs on import of inputs for export production, with no permission for Domestic Tariff Area (DTA) clearance of such inputs or goods.
- A commitment to this effect is required at the time of importation, and the exemption is limited to physical exports.
4. Conditions for SEZs:
- Similar to EOUs, SEZs enjoy exemption from mandatory QCOs on import of inputs required for export production, without DTA clearance.
- A commitment to this effect is mandated at the time of importation, and the exemption is applicable only for physical exports.
5. Appendix-2Y: Sub-para (c) is appended to existing para 2.03, listing Ministries/Departments exempted by DGFT for goods used in the manufacture of export products.
Conclusion: The DGFT Notification No. 71/2023 signifies a strategic move by the Government of India to facilitate imports for Advance Authorisation, EOUs, and SEZs without stringent adherence to QCOs. This proactive approach aims to streamline processes for exporters, fostering ease of doing business. However, stakeholders need to carefully navigate the specified conditions to ensure compliance and take advantage of the exemptions provided under this notification. This step aligns with the government’s continuous efforts to promote and boost the country’s export-oriented sectors.
***
Government of India
Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade
Vanijya Bhawan
Notification No. 71/2023 – DGFT | Dated : 11 March 2024
Subject:- Enabling provisions for import of inputs that are subjected to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders, EOU and SEZ.
S.O.1251(E). – In exercise of powers conferred by Section 3 read with Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No. 22 of 1992), as amended, read with Para 1.02 and 2.03 of the Foreign Trade Policy (FTP), 2023, the Central Government hereby makes the following amendments to FTP, 2023 with immediate effect, in supersession of Notification No. 69/2023 dated 07.03.2024.
1. A new para 2.03 (A) is inserted below para 2.03 of FTP 2023, as follows:
“2.03A Importability of items under Advance Authorisation/EOU/SEZ without compliance to the mandatory Quality Control Orders (QCOs)
Import of Inputs under Advance Authorisation/EOU/SEZ without compliance to the mandatory QCOs, shall be subjected to the following conditions:
i) For Advance Authorisation:
a) Import of inputs under the Advance authorisation without compliance to the mandatory QCOs shall be with pre-import condition. Such inputs shall be utilised in the manufacturing of the export product (making normal allowance for wastage) and shall be exported under the same authorisation.
b) Exemption from mandatory QCOs shall be specifically endorsed in the Advance authorisation, upon the request of the authorisation holder. Imports under Authorisation without specific endorsement of exemption shall be made in accordance with mandatory QCOs.
c) Any unutilised imports or the products manufactured with inputs imported without compliance to the mandatory QCOs, shall not be transferred to DTA, even after regularisation of default in fulfilment of export obligation. For the purpose of this para, unutilised imports means imported inputs (without compliance of mandatory QCOs) which have not been accounted for, as per SION/Ad-hoc Norms, in the product exported under the same authorisation.
d) The unutilised imports shall be regularised as follows:
(i) The unutilised material shall be destroyed in the presence of jurisdictional GST/Customs authorities who shall certify the destruction of the goods or same may be re-exported;
(ii) In addition, such unutilised imports, irrespective of origin of goods, shall be liable to payment of effective duty on MFN basis along with interest on the exempted material, to Customs Authorities plus composition fee of an amount equivalent to 10% of the CIF value of unutilised imported inputs to DGFT. Proof thereof shall be submitted to the RA concerned before grant of EODC.
e) The exemption from QCO will be available for physical exports only and such exemption will not be allowed for deemed exports for Advance Authorisation
f) The facility of clubbing under para 4.36 of Handbook of Procedures (HBP), 2023 shall not be available.
g) The Export Obligation period for such authorizations shall be as per para 4.40 of Handbook of Procedures. However, EO period is restricted to 180 days from the date of clearance of import consignment in respect of QCO exemption for textile
h) Import of Inputs without compliance to the mandatory QCOs under DFIA scheme is not allowed.
(i) This exemption is further subject to para 2.03 (c) of FTP.
ii) For EOUs
(i) Exemption from applicability of mandatory QCOs issued under the BIS Act, 2016, shall be provided to EOU on import of inputs which are required for export production. No DTA clearance of such inputs or goods manufactured made out of such inputs, are allowed. An undertaking to that effect will be submitted to the Customs authorities by the EOU at the time of importation and a copy of the same shall also be submitted to the Development Commissioner concerned. The exemption from QCO will be available for physical exports only and such exemption will not be allowed for deemed exports. This exemption is further subject to para 2.03 (c) of FTP.
iii) For SEZ
(i) Exemption from applicability of mandatory QCOs issued under the BIS Act, 2016, shall be provided to SEZ on import of inputs which are required for export production. No Dl’A clearance of such inputs or goods manufactured made out of such inputs, are allowed. An undertaking to that effect will be submitted to the concerned Development Commissioner of the SEZ by the SEZ Unit at the time of importation. The exemption from QCO will be available for physical exports only. This exemption is further subject to para 2.03 (c) of FTP”.
3. The following sub-para (c) is appended to the existing para 2.03 of FTP 2023:
“(c) The list of Ministries/Departments whose notifications on mandatory QCOs, that arc exempted by the DGFT for goods to be utilised/consumed in manufacture of export products, arc given in Appendix-2Y of FTP 2023″.
Effect of this Notification: Enabling provisions are made for exempting inputs imported by Advance Authorisation holders, EOUs and SEZ from mandatory Quality Control Orders (QCOs). Accordingly, list of Ministries / Departments [ i.e. Ministry of Steel, Department for Promotion of Industry and Internal Trade (DPIIT) and Ministry of Textiles] are notified in Appendix 2Y of FTP, 2023.
This issue with the approval of Minister of Commerce & Industry.
(Santosh Kumar Sarangi)
Director General of Foreign Trade &
Ex-Officio Additional Secretary to the Government of India
E-mail: dgft@nic.in
[Issued from File No.01/89/180/13/AM-15/PC-2[AVE-5910]
