In a significant move, the Directorate General of Foreign Trade (DGFT) has rolled out pivotal amendments to the Foreign Trade Policy (FTP) 2023, aimed at facilitating the import of inputs that are subject to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders and Export Oriented Units (EOUs). The notification No. 69/2023-DGFT, dated 7 March 2024, ushers in a series of modifications that promise to streamline the import processes for key stakeholders in the Indian trade ecosystem.
Understanding the Amendments
The DGFT’s latest notification introduces a new paragraph, 4.18A, under FTP 2023, outlining the conditions under which imports of inputs under Advance Authorisation without compliance to the mandatory QCOs can be executed. This exemption aims to simplify the import process while ensuring that the imports are utilized in the manufacturing of export products, thereby promoting India’s export-oriented growth.
Key Provisions and Their Implications
- Pre-Import Condition: Imports of inputs under Advance Authorisation without adhering to mandatory QCOs must now follow a ‘pre-import condition.’ This implies that such inputs are to be directly used in manufacturing the export product, accounting for normal wastage, and must be exported under the same authorisation.
- Specific Endorsement Requirement: Exemptions from QCO compliance must be explicitly endorsed in the Advance Authorisation upon the holder’s request. Unendorsed imports must meet the QCO mandates, ensuring a regulated import framework.
- No DTA Transfer: The notification stipulates that any unutilised imports or products made from inputs imported without QCO compliance cannot be transferred to the Domestic Tariff Area (DTA), even after export obligation regularisation.
- Regularisation of Unutilised Imports: Unutilised materials are to be either destroyed in the presence of jurisdictional GST/Customs authorities or re-exported. Additionally, the Advance Authorisation (AA) holder is required to pay due duties, taxes, and a composition fee to DGFT, fostering accountability.
- Physical Exports Only: The exemption from QCOs is restricted to physical exports, excluding deemed exports, ensuring that the benefits are channelled towards genuine export activities.
- Clubbing Restrictions: The facility of clubbing under para 4.36 of the Handbook of Procedures (HBP) 2023 is unavailable for such authorisations, aiming to maintain the integrity of export obligations.
- Export Obligation (EO) Period: The EO period for such authorisations will align with para 4.40 of the HBP, providing a clear timeframe for fulfilling export commitments.
- Compliance with Para 2.03 (c) of FTP: This exemption is also subject to specific conditions outlined in para 2.03 (c) of FTP, ensuring a comprehensive regulatory framework.
Additional Clarifications
The notification further delineates that the import of inputs without complying with mandatory QCOs under the Duty-Free Import Authorisation (DFIA) scheme is not permitted. For EOUs, an exemption from QCO applicability is provided for imports essential for export production, contingent on an undertaking submitted to Customs authorities.
Impact and Expectations
This strategic move by the DGFT is anticipated to alleviate the regulatory burden on Advance Authorisation holders and EOUs, enabling smoother operation flows and bolstering India’s export potential. By exempting certain imports from stringent QCO compliance, the government aims to enhance the competitiveness of Indian exports on the global stage. However, the introduction of specific conditions and obligations ensures that this flexibility does not compromise quality standards or regulatory compliance.
Conclusion
The DGFT’s notification No. 69/2023-DGFT represents a thoughtful approach to fostering export growth while maintaining regulatory oversight. As stakeholders in the Indian trade sector navigate these amendments, understanding the nuances of these provisions will be crucial in leveraging them effectively. The amendments promise to provide a much-needed impetus to exporters, paving the way for a more dynamic and competitive Indian export landscape in the coming years.
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Government of India
Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade
Vanijya Bhawan
Notification No. 69/2023- DGFT | Dated 7 March 2024
Subject:- Enabling provisions for import of inputs that are subjected to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders and EOU- reg
S.O. 1162(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, 2.01 and 2.03 of the Foreign Trade Policy (FTP), 2023, the Central Government hereby makes the following amendments to FTP, 2023.
2. Below para 4.18 of FTP 2023, a new para 4.18 (A) is inserted as follows:
“4.18A Importability of items under Advance Authorisation without mandatory Quality Control Orders (QCOs)
Import of Inputs under Advance Authorisation, without compliance to the mandatory QCOs, shall be subjected to the following conditions:
(i) 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.
(ii) 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.
(iii) 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.
(iv) The unutilised imports shall be regularised as follows:
(a) 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; and in addition
(b) The AA holder shall pay duties/taxes/cesses exempted along with interest on the unutilsed exempted material to Customs Authorities plus composition fee of an amount equivalent to 10% of the CIF value of unutilized imported inputs to DGFT. Proof thereof shall be submitted to the RA concerned before grant of EODC.
(v) The exemption from QCO will be available for physical exports only and such exemption will not be allowed for deemed exports for Advance Authorisation Holders.
(vi) The facility of clubbing under para 4.36 of Handbook of Procedures (HBP), 2023 shall not be available.
(vii) The EO period for such authorizations shall be as per para 4.40 of Handbook of Procedures.
(viii) This exemption is further subjected to para 2.03 (c) of FTP.
3. The following sub-para is appended to the existing para 4.24 of FTP 2023:
“(d) Import of Inputs without compliance to the mandatory QCOs under DFIA scheme is not allowed.”
4. The following sub-para is appended to the existing para 6.07 of FTP 2023:
“(k) Exemption from applicability of mandatory Quality Control Orders (QCOs) issued under the BIS Act, 2016, shall be provided to EOU on import of inputs which are required for export production. 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. No DTA clearance of such inputs or goods manufactured made out of such inputs, are allowed. 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 subjected to para 2.03 (c) of FTP.”
5. The following sub-para is appended to the existing para 2.03 of FTP 2023:
(c) The list of Ministries/Departments whose notifications on mandatory QCOs, that are exempted by the DGFT for goods to be utilised/consumed in manufacture of export products, are given in Appendix-2Y of FTP 2023.
Effect of this Notification: Enabling provisions are made for exempting inputs imported by Advance Authorisation holders and EOUs, from mandatory Quality Control Orders (QCOs) Accordingly, list of Ministries / Departments ( i.e. Ministry of Steel and Department for Promotion of Industry and Internal Trade (DPIIT) 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[A]/E-5910]
