Notification No. 71 / 2023 dtd 11.03.2024 issued by Ministry of Commerce and Industry to clarify enabling provisions for import of inputs that are subjected to mandatory Quality Control Orders (QCOs) by Advance Authorisation Holders, EOU and SEZ, which provides Appendix 2Y of Foreign Trade Policy indicating products covered under Quality Control Orders issued by Department of Promotion and Industry and Internal Trade (DPIIT), Ministry of Steel and Ministry of Textile. The detailed list for which Quality Control Orders are mandatory for importation has been notified in notifications issued by respective Ministry.
Earlier, this policy was not mandatory for Advance Authorisation Holders, EOU and SEZ even though they were allowed to clear the goods for domestic market and thereby, there was no level playing things and domestic suppliers were not insulated of receiving the goods, where inputs are used without application of Quality Control Orders of the said Ministries.
Therefore, we give below the relevant provisions and care needs to be taken by Advance Authorisation Holders, EOU & SEZ.
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2.03 Compliance of Imports with Domestic Laws :
(a) Domestic Laws/ Rules/ Orders/ Regulations/ technical specifications/ environmental/safety and health norms applicable to domestically produced goods shall apply, mutatis mutandis, to imports, unless specifically exempted.
(b) However, goods to be utilized/ consumed in manufacture of export products may be exempted by DGFT from domestic standards/ quality specifications.
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In accordance to the aforesaid provision in the foreign trade policy, ministry of commerce has issued the Notification No. 71/2023 dtd. 11.03.2024 providing import conditions for specified items subjected to mandatory quality control orders even for advance authorisation holder/ EOU/ SEZ subject to granting certain exemptions of meeting mandatory compliance to quality control orders in the case of Textile, Steel & items notified by Department of Promotion of Industry & Internal Trade (DPIIT). Copies of such Notifications issued by relevant ministry making mandatory compliance under QCO for items specified is enclosed herewith.
Salient features are provided below:
- Any item to be imported under advance authorisation will not require pre-mandatory requirements under Quality Control Order subject to following conditions :
a) All imports will have pre-import condition. In another words such export products, so imported without compliance of pre-mandatory requirement under quality control order will be used only for export product and therefore import for replenishment will not be exempted with mandatory requirement.
b) While obtaining advance authorisation, such exemption will be clearly endorsed by the regional authority on the request of exporter. It means while applying the advance authorisation, exporter will have to make the request for endorsement of such exemption on advance authorisation.
c) If such endorsement of exemption is not made on the advance authorisation even the imports under advance authorisation have to meet mandatory compliance under the quality control orders.
d) If exporter has consumed more than that of notified SION or adhoc norms , such persons will deem to be violating provisions of Customs Act and penalty , confiscation provisions will be attracted over & above penalty for un-fulfilled export obligation to that extent.
e) Any surplus or un-utilised material cannot be transferred or sold in domestic market. Therefore, such material either will have to be re-exported or destructed in presence of custom officer, but in any case, it cannot be used for manufacture of domestic use and supply domestically.
f) Such material so destructed, advance authorisation will have to pay custom duty at the effective rate of duty applicable to normal importer irrespective of country of origin or rate applicable under Free Trade Agreement (FTA) and also, they will have to pay composition fees of amount equivalent to 10% of CIF value of such material so destructed. This will be mandatory document to be uploaded alongwith redemption application for obtaining EODC.
g) Where such advance authorisation obtained with such endorsement will not be clubbed with any other advance authorisation.
h) Advance Authorisation obtained for exporting textile product will have to fulfil export obligation within 180 days from the date of importation.
- Any item to be imported under EOU will not require pre-mandatory requirements under Quality Control Order .
EOU Unit is exempted for meeting pre-mandatory requirement as a quality control order subject to following conditions:
a) EOU Unit Holder will have to provide undertaking to the Development Commissioner and Custom Authorities stating that such goods will not be used for manufacture of goods and sold in DTA or supplied in DTA as such.
b) When such imports are made claiming exemption of pre-mandatory requirement, good manufactured out of such raw material will be only exported and not allowed to be supplied in domestic tariff area.
c) In case such domestic sale is made, it will be contravention of Foreign Trade (Development & Regulations) Act read with provisions of Customs Act 1962.
d) Any un-utilised and surplus raw material cannot be transferred or sold in domestic market. Therefore, such material either will have to be re-exported or destructed in presence of custom officer, but in any case, it cannot be used for manufacture of domestic use and supply domestically.
e) Such goods so imported will have to be used for physical export. Even the deemed export is not allowed.
3) Any item to be imported under SEZ will not require pre-mandatory requirements under Quality Control Order .
a) SEZ Unit Holder will have to provide undertaking to the Development Commissioner stating that such goods will not be used for manufacture of goods and sold in DTA or supplied in DTA as such.
b) When such imports are made claiming exemption of pre-mandatory requirement, good manufactured out of such raw material will be only exported and not allowed to be supplied in domestic tariff area.
c) In case such domestic sale is made, it will be contravention of SEZ Act read with provisions of Foreign Trade (Development & Regulations) Act and read with provisions of Customs Act 1962.
d) Any un-utilised and surplus raw material cannot be transferred or sold in domestic market. Therefore, such material either will have to be re-exported or destructed in presence of custom officer, but in any case, it cannot be used for manufacture of domestic use and supply domestically.
e) Such goods so imported will have to be used for physical export. Even the deemed export is not allowed.
In another words, any goods which are required to be sold in domestic market by Advance Authorisation Holders, EOU & SEZ where goods imported from such importers who were not registered with BIS, will have to also obtain such registration otherwise goods cannot be sold in domestic market, otherwise it will be liable for confiscation and penalty will be imposed.
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