The list of prohibited goods is part of foreign trade policy. It serves to ensure that sensitive materials enter the country with proper disposal. 

To ensure that businesses Follow EPCG guidelines, the Directorate General of Foreign Trade (DGFT) will provide regular updates on prohibited goods.  

It is essential for businesses to be aware of any changes to their listings and to seek professional advice if they have any questions about a particular product. 

This is where Curated Exim consultants play a crucial role in helping businesses comply. Keep up to date with the latest regulations. And guarantee that they will not violate any trade restrictions. 

Examples of Prohibited Goods 

 
The list of prohibited items under the EPCG scheme is comprehensive and covers a wide range of products. These goods generally include items that may have a direct impact on national security and public health or are subject to international sanctions. The following are the specific products prohibited under the EPCG scheme: 

1. Cables: Permitted only as an integral part of Capital Goods 
    

2. Railway wagons (excluding specialized Tractors): Not Permitted 
    

3. Tractors: Not Permitted 
    

4. Trucks / Tippers / Dumpers and spares thereof including Tyres: Permitted only to mining sector 
    

5. Motor Cars, Sports utility Vehicle / All purpose vehicles: Not Permitted 
    

6. Airport Ground Handling Equipments: Not Permitted   
    

7. Furniture, carpets, crockery, marble, chandelier, tiles, flooring, doors for rooms, fixing panels: Permitted only to Hotel Industry   
    

8. Construction equipment viz. Cranes etc.: Permitted only for providing services   
    

9. All construction material like sheds, cement, steel: Not Permitted   
    

10. Computer and Printers: Not Permitted   
     

11. All seconds Hand Capital Goods: Not Permitted 
     

12. Capital Goods (including Captive plants and Power Generator Sets of any kind) for export of electrical energy: Not Permitted 
     

13. Pre-fabricated Polyurethane Foam (PUF)  : Permitted for use in (i) Chilled Rooms and (ii) Cold Storages set up by the Processing Units for storage of prefrozen and frozen marine products respectively, meant for exports under the EPCG Scheme 
     

14. Furniture and fixtures, flooring materials and furnishing materials : Not Permitted 
     

15. Pre-fabricated Polyurethane Foam (PUF) panels/doors : Permitted for use in (i) Chilled Rooms and (ii) Cold Storages set up by the Units for storage of fresh fruits and vegetables, meant for exports under the EPCG Scheme 
     
     

How Prohibited Goods Impact Importers and Exporters 

Importing prohibited items under the EPCG scheme can have severe consequences for a business. Failure to comply with the restrictions may result in fines, penalties or even revocation of the EPCG license if contraband is imported.  

Customs authorities will seize those goods. Cause delays There is an additional cost. And there may be disruptions in business operations. The legal and financial implications can cause significant failure.  

This is especially true if the business does not adhere to the guidelines set by the DGFT and other regulatory agencies. 

Additionally, importing prohibited products can have a negative impact on a company’s reputation. Collection of sensitive items such as military equipment or hazardous materials may draw negative attention from officials and business partners. Compliance violations can also damage relationships with customs authorities. 

This makes future business difficult. For exporters who rely on EPCG benefits, this may result in license suspension or loss of privileges—affecting growth and market access in the long term. 

How Curated Exim Consultants Can Help 

 
Navigating the complexities of an EPCG project and understanding the list of prohibited items can be a challenging task. This is where Curated Exim Consultants can provide valuable assistance. Our team of experts helps businesses comply with India’s trade policies.  

To ensure that imported or exported products are not classified as prohibited. With a deep understanding of foreign trade policy and expertise in DGFT regulations, we can guide your company through the nuances of EPCG planning, reducing the risk of costly errors. 

Whether you want to import capital goods under the EPCG scheme or need help determining whether your product is banned, Curated Exim consultants can help ensure your business is on the right track.  

We provide expert advice, regulation updates, and a comprehensive understanding of import and export regulations in India. 

(References: Economic Times, Ministry of Commerce) 

Why are bank guarantees important for exporters? 

Bank guarantees are financial instruments that assure the government that exporters using advanced licenses and EPCG schemes will meet their export obligations. If the exporter defaults on its obligations, the government can demand this guarantee to recover the duty exemption granted. Although these guarantees are necessary, the government also offers discounts to reduce compliance burdens for exporters with clear records or special status. 

A bank guarantee is required under the Advance Licensing Scheme. 

The advanced licensing program allows exporters to import duty-free inputs used in the production of export goods. However, duty-free imports include an obligation to deliver the finished goods within a specified period. 

Bank guarantees ensure that the government can recover abandoned tariffs if the exporter defaults on its export obligations. This provision is generally mandatory, especially for first-time or small exporters. 

Advance License: Special Exemptions for High Performers 

Status Holders 

Exporters with “status” recognition, such as One Star, Two Star, and higher Star Export Houses, may qualify for full or partial exemption from the bank guarantee requirement. This recognition is based on export performance and provides a level of trustworthiness to these entities. 

Government Undertakings and PSUs 

Public sector undertakings (PSUs) and government-backed entities are typically exempt from bank guarantees, given their high credibility and established compliance. 

Established Export Houses 

Large Export Houses or those with a high export turnover may receive exemptions. These exemptions incentivize exporters with significant contributions to the national export output. 

High Compliance Record 

Exporters with a proven history of meeting export obligations under previous licenses are often exempted from providing bank guarantees. This exemption is a reward for consistent compliance and encourages other exporters to maintain similar standards. 

Companies in government-approved cluster special economic zones 

Group Members and SEZ Participants: Due to the increased scrutiny and compliance of the masses, companies operating within government-sponsored industrial clusters or special economic zones (SEZs) can benefit from reduced or waived bank guarantees. 

ECGC insured exporter ECGC Supported Exporters  

Reduce Credit Risk Exporters who receive insurance coverage from the Export Credit Guarantee Corporation of India are eligible for discounts. This reduces the exporter’s risk and provides additional protection to the government—a subsidiary of a large export company that provides custom designs.  

Subsidiaries with a proven parent company  

Subsidiaries of multinational corporations or large export entities with a consistent history of meeting their obligations are partially exempt based on their results—the parent company’s operations. 

Exporter with a long history of exporting Decades of Compliance 

Companies with a track record of 10 years or more of continuous exports without defaults or penalties may qualify for automatic exemption due to long-standing trust. 

ISO certified manufacturer ISO 9001 and ISO 14001 Certified Exporter  

Companies with international certificates indicate standards of quality and environmental management. They are often eligible for exemption. Such certification signals compliance and adherence to high-performance standards.  

High-value export projects Government-sponsored projects  

Exporters involved in high-value or strategically important export projects, such as those related to defence or renewable energy, may qualify for special exemptions. These projects are under strict government supervision, which reduces the bank guarantee requirements. 

Companies with high exports  

Companies with consistently high export values ​​year after year, eligibility for exemption, it is based on contribution to the national economy and a proven track record. Export units approved under Make in India Make in India Accredited Units: Companies aligned with the ‘Make in India’ initiative and have been recognized by the government for their contributions. Also, they benefit from exemptions, demonstrating their role in strengthening the country’s manufacturing sector. 

Exporters under bilateral or multilateral trade agreements Trade Agreement Benefits  

Exporters operating under specific bilateral and multilateral agreements promoting international trade and cooperation are exempted. These agreements often include provisions for reducing trade barriers and providing financial guarantees.  

Exporters in priority areas Projects of national importance  

Exporters in areas of high importance to national development, such as high technology, Sustainable energy and critical infrastructure, May be eligible for exemption from bank guarantees. These projects often receive government support to support strategic goals.  

Government Contract Holder 

An exporter who holds a long-term contract with a government agency or agency. Especially those involved in large public projects. This may be exempted due to security and regulatory requirements related to such agreements. 

Companies with an excellent social compliance record Social Responsibility and Compliance 

Exporters who can demonstrate a high level of social responsibility, including compliance with labour laws, Ethical Guidelines, and sustainability initiatives, may be considered for a discount as part of government efforts to promote responsible business practices.  

Green and Environmentally Certified Exporter Environmentally Focused Companies 

 Exporters certified according to recognized environmental standards (such as Green Business Certification) are eligible for rebates because they comply with environmentally friendly practices, thus promoting sustainable exports. Exporters receive special support from state governments.  

State-sponsored exemptions 

Some state governments may have policies that provide discounts to exporters or reduce bank guarantees. These policies are part of a regional development project aimed at promoting trade and the growth of local industry.  

Industry-specific exemptions Sector-based policies 

Specific industries, such as pharmaceutical or electronics manufacturing, may have tailored policies that offer discounts or reduced bank guarantees. This depends on the nature of key exports and expected global competition.  

Exporters with proven supply chain security measures AEO and Supply Chain Certification 

Exporters certified as Authorized Economic Operators (AEO) or with recognized supply chain security standards may be eligible for exemption. These certifications indicate a high level of confidence and safe practices in the handling of goods, reducing the perceived risk. 

Startups Accepted under government programs Government-Backed Startups 

Startups accepted by government programs such as Startup India benefit from policy initiatives that reduce financial and procedural barriers. This may lead to the exemption of some bank guarantees.  

Exporters Involved in Humanitarian or Relief Efforts Special Purpose Exemption  

Companies exporting goods for humanitarian purposes or as part of relief efforts (e.g., medical supplies, emergency equipment) are eligible for an exemption to ensure the timely and continuous passage of essential supplies. 

Exemption based upon Export Turnover of Rs.1 Crore 

Manufacturers and exporters or service providers registered with GST with an export value of Rs.1 crore or more in the preceding financial year and consistent exports over the past two years are exempt. 

Exemption based the payment of GST of Rs.1 Crore 

GST-registered manufacturers or service providers who paid Rs 1 crore or more as GST in the previous financial year are also eligible for this exemption. 

Compliance: key points in risk-free trading 

For exporters, a bank guarantee can represent a significant financial obligation. Understanding when discounts apply can reduce this burden. This results in smoother business operations and increased cost efficiency. Key points of risk associated with compliance and bank guarantees in advance licenses and EPCG schemes include: 

Refund upon Fulfilment of Obligation:

Bank guarantees are generally refundable once the exporter successfully fulfils its export obligations. 

Penalty for non-compliance:

If the obligation is not fulfilled within the specified period. The government may require a bank guarantee. This leads to financial recovery and additional penalties. 

Renewal Requirements:

Periodic renewal and verification of compliance with bank guarantees are necessary to avoid penalties. 

Curated Exim: Your trusted guide to bank guarantee compliance. 

With a focus on proactive guidance and risk mitigation, Curated Exim helps exporters maintain smooth operations. Help them confidently and efficiently take advantage of tax exemptions. Our dedication to timely support and dispute resolution ensures that businesses Remain compliant while focusing on their core export activities, making Curated Exim a key partner in optimizing trade profitability. 

1. What is a Bank Guarantee (BG) under EPCG? 

In the simplest terms, a Bank Guarantee is like a financial safety net provided by a bank on behalf of its customers. Under the EPCG Scheme, the BG acts as a promise made by the bank to customs, ensuring that if the applicant (importer) fails to meet their obligations, the bank will cover the amount owed. This is particularly important because businesses can save on custom duties when importing machinery or equipment under EPCG, and the BG ensures customs authorities have a fallback if things go wrong. 

2. How is the Bank Guarantee Executed under the EPCG Scheme? 

When a company receives an EPCG license, it is allowed to import capital goods without paying customs duties upfront. However, there’s a catch – the company must meet an export obligation (EO) that is equal to six times the value of the duty saved, within six years. 

If the company doesn’t meet its export obligations, it is required to pay back the duties along with interest. To ensure this commitment, customs often ask the company to provide a Bank Guarantee or sign a bond. The BG ensures that, in case of default, customs will receive the payment from the bank. 

3. Why is a Bank Guarantee Important under EPCG? 

A Bank Guarantee under the EPCG scheme serves as a financial assurance for customs authorities. It ensures that, even if the company fails to meet its export obligations, the duties will still be paid by the bank on the company’s behalf. This protects both parties – customs get their dues, and the company has the flexibility to use imported machinery while working towards fulfilling its export targets. 

4. Bank Guarantee Exemption under the EPCG Scheme 

In some cases, companies may not need to provide a Bank Guarantee. This exemption is granted based on certain criteria, such as: 

1.Position holder:  

Star export company (from one star to five stars) are exempt from bank guarantee requirements.  

2.Public sector operations (PSU):  

PSUs are not required to provide bank guarantees under the EPCG scheme.  

3.Exports without credit:  

Exporters with a zero-credit status can receive full or partial exemption from bank guarantees.  

4.Special Economic Zone (SEZ) Unit:  

Exporters in special economic zones are exempt from bank guarantees.  

5.Export Oriented Units (EOUs):  

EOU can import capital goods without a bank guarantee.  

6.Exporters who have previously complied with the requirements:  

Compliance with the previous EPCG authorization resulted in the bank’s guarantee requirements being reduced or zeroed.  

7.Turnover above ₹5 Crore:  

Companies with an annual turnover of more than Rs 5 crore are eligible for exemption from bank guarantees.  

8.GST Payments Above ₹1 Crore:  

Exporters who paid more than ₹1 crore in GST in the previous year are eligible for exemption from bank guarantee. 

5. Conditions for Bank Guarantee Exemption 

While exemptions can be granted, they come with conditions. Some of the key conditions include: 

The company should not have defaulted on its export obligations for any past licenses under the EPCG scheme. 

The company must not have been penalized under the Customs Act, the Central Excise Act, FEMA, or the Foreign Trade Act in the past three financial years. 

If the company is a member of an Export Promotion Council (EPC), it must provide a certificate proving export performance or payment of duties. 

In cases where the company is not a member of an EPC, a certificate from a Chartered Accountant registered with the GST department must be provided. 

6. How Curated Exim Can Help You with EPCG-Related Matters 

Navigating the EPCG scheme and Bank Guarantee requirements can be complex. That’s where Curated Exim Consultants come in. We specialize in handling all matters related to the EPCG scheme, including assisting with BG execution and exemption applications. 

Here’s why Curated Exim can be your ideal partner: 

Expertise in EPCG regulations 

Our team is well-versed in EPCG policies and can help ensure your compliance. 

Tailored solutions 

We offer customized solutions to meet your specific needs, whether it’s securing a Bank Guarantee or applying for an exemption. 

End-to-end support 

From applying for an EPCG license to ensuring that you meet export obligations, we handle it all. 

Seamless interaction with authorities 

We liaise directly with customs, DGFT, and other relevant authorities to ensure your business operations remain smooth and compliant. 

By choosing Curated Exim, you can focus on growing your business while we handle the complexities of the EPCG scheme for you. 

End-User Restrictions on SCOMET Item Exports

The export of SCOMET goods from India is under strict regulations to make sure that these are not used in any unauthorised manner. There are many end-user restrictions on these special item exports; some of them are mentioned below:

1. Individuals, entities, or countries on the denied parties lists or under international sanctions are restricted.
2. End-user certification and on-site inspections are essential to confirm the legality. Without them, exports will be restricted.
3. The use of export items for weapons of mass destruction or related activities is restricted.
4. To prevent the export from being restricted, regular status updates on the items’ use, precise verification of end-to-end use, and end-user credentials are important.
5. Adherence and compliance with international nonproliferation norms and national security regulations are essential to avoid restrictions.
6. Some technologies and materials are restricted and cannot be exported without special licences.
7. Exports of items that can be used for unauthorised military or nuclear applications are heavily restricted.

Significance of End User Certificate (EUC) in SCOMET Exports

The end-user certificate plays an important role in the export of SCOMET items. It makes sure that sensitive items and technologies are used in a responsible way as per regulations. Here are some of the importance of EUC:

1. It helps to verify that the goods will not be used for any illegal purposes, like the development of weapons of mass destruction (WMDs).
2. The EUC ensures that the exporters comply with national and international laws and avoid penalties.
3. With an EUC, exporters should mitigate the risk of their products being misused or re-exported to unintended locations. It acts as a layer of security by holding the end user accountable for properly using the items.
4. The EUC is an important document for obtaining an export licence. It provides the licensing authorities with the necessary information to assess the use and safety of the proposed export.
5. The EUC helps countries meet their international obligations. It also controls the flow of sensitive materials and technologies to ensure that exports do not contribute to global security threats.
6. EUC helps trace the SCOMET items, ensuring they can be tracked from the point of export to the final end user.
7. Having an EUC builds trust and transparency between exporters and importers. It reassures the government and regulatory bodies that the transactions are legitimate and that the goods are used as per the declaration.

Penalties for Non-Compliance with SCOMET Regulations

Non-compliance with SCOMET regulations can lead to severe penalties.

1. Exporters found to be violating SCOMET regulations can face substantial penalties, the amount of which will depend on the severity and nature of the violation.
2. Severe breaches of SCOMET regulations can also result in the imprisonment of the individuals responsible. The duration of the punishment will depend on the nature of the offence and legal provisions.
3. If companies and individuals are found to be non-compliant, then their export licences can also be suspended.
4. Those who violate SCOMET regulations can also be blocked and prohibited from exporting items in the future.
5. Regulatory authorities and customs can also seize non-compliant items, which can result in financial losses for the exporter.
6. Non-compliant companies or individuals may face civil and criminal liabilities, including lawsuits, fines, and criminal charges.
7. Companies or individuals not compliant with SCOMET regulations will be restricted from participating in government contracts or projects.

Best Practices for Businesses to Ensure SCOMET Compliance

It is important to make sure that businesses comply with SCOMET regulations for exporting special items. Some of the best practices are mentioned below to help you maintain SCOMET compliance:

Regular training: Regular training sessions are essential for employees engaged in export activities to keep them updated about the SCOMET regulations and any changes.

Regulatory updates: Exporters should also check the amendments to SCOMET regulations on DGFT’s official website.

Using compliance programmes: Create and manage a detailed compliance manual per the SCOMET licence programme guidelines. Regular internal audits can also be conducted to review and verify compliance with SCOMET.

Documentation and record-keeping: It is essential to maintain detailed records of all export transactions, such as licences, certificates, shipping documents, etc. A document retention policy can also be established to keep records for the required period.

Risk management: Regular risk assessments can be conducted to identify the possible risks of exporting SCOMET items. Exporters can also develop and use risk mitigation plans to avoid the same.

End user verification: Thorough verification of customers or end users is essential to check their reliability and ensure they are not using export items for illegal purposes.

Technology and automation: Exporters must use compliance management software to handle compliance procedures like risk assessment, documentation, record-keeping, etc. They can also use automated tracking systems to monitor the movement of the SCOMET items in the supply chain.

Coordinating with regulatory bodies: Regular communication with regulatory authorities is essential to stay up-to-date on compliance requirements.

Third-party consultations and auditing: At regular intervals, third-party consultants and auditors should be arranged to review and assess the efficacy of the compliance programmes being used.

Conclusion

In conclusion, complying with SCOMET regulations is essential for businesses engaged in exporting sensitive items from India. The stringent end-user restrictions, the critical role of the End User Certificate (EUC), and the potential penalties for non-compliance highlight the importance of adhering to these guidelines. By following best practices such as regular training, documentation, risk management, and staying updated with regulatory changes, exporters can ensure they meet SCOMET requirements. This not only protects national security but also promotes global trust, transparency, and responsible trade.

New Process for Updated SCOMET Module

1. The updated SCOMET module includes a streamlined and effective process for controlling the export of sensitive items. The new method comprises several steps, such as:
2. Classification of items: Exporters must classify items based on the SCOMET list, which categorizes goods according to their nature and sensitivity. This helps to determine the export control requirements for each product.
3. Declaration: Exporters must submit a SCOMET declaration to the authorities detailing all the items they want to export. This will include information about the product, its use, and the end user.
4. License: Per the declaration, the authorities will assess the risk and issue a permit if everything is fine. Everyone should get a license. If the exporter doesn’t get it, they must apply again.
5. Compliance: When the license is granted, exporters work according to its terms and conditions to ensure that the items are not used unauthorized.
6. Record keeping: Proper records are kept showing compliance with export regulations. Exporters must maintain documentation and copies of every transaction, trade, license, certificate, etc.
7. Audits and inspections: Authorities may conduct audits and inspections to ensure that the exported items are being used according to what is said in the licenses and declarations.
8. Training and awareness: Exporters must be trained in SCOMET and broader regulatory requirements. Such awareness sessions will help ensure compliance and avoid violations of export controls.

Regulatory Authority for SCOMET Exports in India

The export of SCOMET items from India is regulated by the Directorate General of Foreign Trade (DGFT), which works under the Ministry of Commerce and Industry.

It is a primary regulatory authority responsible for developing and implementing the Foreign Trade Policy in India, including SCOMET items. Some of the critical roles and responsibilities of the DGFT include:

1. Drafts and updates the foreign trade policy, which includes regulations regarding the export of SCOMET items. The SCOMET list and its guidelines are generally reviewed and adjusted to address global trade and security concerns.
2. Exporters of SCOMET items must obtain a licence from the DGFT by providing detailed information about the items, their end use, and the end user. The DGFT will then assess your application to ensure that it meets national and international compliance standards.
3. The DGFT verifies the end-user and end-use of the SCOMET exports to ensure that the items are not being illegally used.
4. DGFT constantly monitors item compliance with SCOMET regulations through post-shipment audits and inspections.
5. The DGFT has also collaborated with international organizations to maintain export controls and increase global security.
6. DGFT provides exporters guidance and information about SCOMET regulations and policies through circulars, notifications, and outreach programs.

Licensing Procedure for SCOMET Exports from India

Exporting SCOMET items from India includes a detailed and regulated process that is managed by DGFT. These are the steps that can be followed to obtain an export licence for SCOMET products:

1. Classification of goods: Exporters must check if their goods fall under the SCOMET list as per the ITC (HS) Classification of Export and Import Items. If your products are on the list, verify the specific category under which they fall to understand the applicable controls and documentation requirements.
2. Digital signature certificate (DSC): Exporters must obtain a valid digital signature certificate to submit an online application through the DGFT website.
3. Online registration: Exporters must register on DGFT’s SCOMET online application portal and create a user profile. The exporting company must be registered with DGFT and have a valid importer-exporter code (IEC).
4. Apply: Complete the online application form (ANF 2N) on the DGFT website with all the required information, including end-user certificates, technical specifications, copies of contracts, purchase orders, etc.
5. Reviewing: The DGFT conducts a preliminary review to ensure that all the necessary information and documentation are provided. The application may then be forwarded to technical experts or relevant government departments for further evaluation.
6. Inter-departmental consultations: The application is assessed for possible risks, including diversion to unauthorised uses or destinations. This is done by consulting with various departments, such as the Ministry of External Affairs, the Ministry of Defence, and the Indian Customs Department. For some high-risk items, security clearance is required from national security agencies.
7. Approval process: The DGFT will decide whether to approve the application based on the assessments and consultations. If sanctioned, an export licence is issued, mentioning the conditions and terms of the export. If rejected, the reasons will be communicated to the applicant.
8. Issuing licence: When the export license is approved, it will be issued electronically and can be downloaded from the DGFT portal. The licence will specify details like the validity period, quantity of items, and export conditions.
9. Post-license compliance: Exporters may be required to ensure that the items meet the conditions mentioned in the license. They must maintain records of all transactions, documents, invoices, bills, receipts, etc.
10. Reporting and verification: Per the license conditions, submit the post-shipment reports to DGFT. They may also conduct compliance audits to verify the end use of the shipped items.

Documentation Requirements for SCOMET Export License

To apply for an export licence for SCOMET items, exporters need to provide a set of documents, including:

1. Application form (ANF 2N): This is the primary document to be filled out and signed by the exporter. It is available on the DGFT website.
2. Cover letter: A cover letter addressed to the DGFT mentioning the nature of the export, the items involved, and the purpose of the application.
3. End-user certification: The end-user must sign a certificate confirming the use of the exported items. The documents needed include the end user’s name and address, specific end uses of items, and an assurance that the goods will not be used for unauthorised purposes. An authorised representative of the end-user organisation should sign the certificate.
4. Technical specifications: The technical specifications and descriptions of the SCOMET items to be exported may include technical data sheets, brochures, product catalogues, technical drawings, or diagrams.
5. Purchase order: A copy of the purchase order mentioning the quantities of the items, pricing details, terms, and conditions of the sale is required.
6. Proforma invoice: A proforma invoice mentions details of the transaction, like the description of goods, the total value of the shipment, payment terms, etc.
7. Importer-exporter code: To identify the exporter, a copy of the importer-exporter code is issued by DGFT to the exporting company.
8. Digital signature certificate: A valid digital signature certificate is needed for the authorised signatory of the export company.
9. Previous export data: Mention the details of past exports of similar items, including export licences and shipment details.
10. Declaration: This will be needed to explain the purpose of the export, compliance with the regulations, and any other necessary declarations.

Conclusions

In conclusion, the SCOMET regulations and DGFT application processes are essential to ensuring the safe and controlled export of sensitive items from India. By following the updated SCOMET module and adhering to stringent regulatory requirements, exporters play a crucial role in maintaining national and international security.

From the classification of goods to post-license compliance, each step ensures that the export of items with potential military and civilian applications is transparent, lawful, and accountable. Exporters must stay vigilant in their documentation, license application, and compliance procedures to avoid any violations and contribute to global security efforts.

The DGFT’s comprehensive oversight helps maintain a delicate balance between trade facilitation and security, protecting both the country and the world from the misuse of sensitive technologies.

A SCOMET Declaration is an important document that exporters in India need to submit when they intend to export goods listed under the SCOMET category. It is part of the compliance process, which ensures that the export of sensitive items is monitored and controlled by national and international security measures.

Some of the critical components of the SCOMET Declaration include details of the exporters, consignee, and end-user, item description, purpose of export, license, permits, technical specifications, certifications, etc.

It is essential to ensure that exporters comply with national and international regulations during exports. SCOMET declaration helps prevent misuse of unique items, provides transparency in the export process and holds exporters accountable.

What is SCOMET Items

SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technology) items are specific chemicals, organisms, and technologies that are regarded as having the potential to be used for both military and civilian purposes. They could be used as weapons of mass destruction. Hence, SCOMET items are sensitive due to their potential use in legal and illegal manners. The Directorate General of Foreign Trade, under the Ministry of Commerce and Industry, Government of India, maintains and manages the SCOMET list, which is divided into different categories.

SCOMET Item Categories Explained

The SCOMET list has several categories covering sensitive technology and materials. These are explained below:

Category 0: Nuclear materials, nuclear-related other materials, equipment and technology

Category 1: Toxic chemical agents and other chemicals

Category 2: Micro-organisms and toxins

Category 3: Materials, materials processing equipment and related technologies

Category 4: Nuclear-related other equipment and technology not controlled under Category 0

Category 5: Aerospace systems, including production and test equipment, related technology and specially designed components and accessories.

Category 6: Munitions list

Category 7: Reserved

Category 8: Special materials and related equipment, material processing, electronics, computers, telecommunications, information security, sensors and lasers, navigation and avionics, marine, aerospace and propulsion.

Export Regulations for SCOMET Items

Exporting SCOMET items should be done in compliance with specific regulations and approvals, like the following:

1. Exporting SCOMET items requires a license from the DGFT, which can be applied for through its online portal.
2. The exporter must submit an application with detailed items to be exported and their end-use and end-user information.
3. Government agencies, such as DGFT, the Ministry of Defence, and the Ministry of External Affairs, review the application to ensure it complies with national and international regulations.
4. Government agencies like DGFT may require verifying the end-user to ensure that the items will not be used illegally.
5. Exporters must ensure their activities comply with international treaties and regimes, such as the Wassenaar Arrangement, the Missile Technology Control Regime, and the Chemical Weapons Convention.
6. Exporters must also submit post-shipment documents and compliance reports to DGFT to verify that the items are used for the declared purposes.

Conclusion

In conclusion, the SCOMET Declaration plays an important role in regulating the export of vital commodities from India, ensuring compliance with national and international safety norms Through guidelines issued by the Director General of Foreign Trade (DGFT)  and other regulatory bodies have established compliance with -Strong regulatory environment factors that not only safeguard global security but also encourage transparency and accountability in international trade.

Exporters should strive to adhere to established procedures to ensure the responsible export of these critical goods, starting with obtaining licenses and sending documentation on cargo on post-export.

You must discharge the Export obligation under the EPCG License. The DGFT can penalize the license holder if there is a failure to complete export obligations in the stipulated time. 

What is Export Obligation Discharge Certificate? 

Export Obligation Discharge Certificate (EODC) is granted by the local office of the Directorate General of Foreign Trade (DGFT) in ANF 5B after applying. Proof of completion of export obligation, such as shipping bill and bill of export, shall be produced to DGFT to close advance license upon completion of export obligation. This Export Obligation Discharge Certificate will be issued to the authorized holder by the regional authority after fulfilling all the advance license formalities1. 

Export Obligation under EPCG Scheme 

The Export Obligation period under the EPCG Scheme is six years. The export obligation is six times the duty saved on capital goods, which needs to be fulfilled within six years from the date of issue of the EPCG License. Exports made under Advance Authorisation, DFIA, Drawback, or incentive scheme shall be counted on to the fulfilment of ligation.  

There are two types of export obligation under the EPCG scheme, as depicted in the picture; we will understand each one by one below – 

Average Export Obligation(AEO) 

Under AEO, the average turnovers of the same and similar goods in the last three financial years before the license issuance shall be maintained during each financial year till the Specific Export Obligation is satisfied. 

Specific Export Obligation (SEO) 

The exports must be six times the duty-saved value within six years from the date the EPCG License is issued. The export obligation is completed in parts. 1) Ist part: in the First four years of obtaining the license, the exporter shall complete a minimum of 50% of the Export Obligation. 2) 2nd part: the balance obligation shall be completed in the second part, namely in the 5th and 6th year of obtaining the license.  

The EPCG scheme was introduced to enhance exports. The Average Export Obligation ensures that the average level of exports is maintained constant. The Specific Export Obligation must ensure exports increase after installing machinery imported under the EPCG Scheme.  

At times, the license holders, under certain circumstances, cannot fulfil that export obligation within that period. In this article, we concentrate on the options available for the exporter in case such commitments are not fulfilled. 

Non-fulfillment of Export Obligation under EPCG Scheme 

The license holder has six years to meet the export obligation. It means that the completion of the export obligation is watched for six years. On or before 30th April, the license holder must send the export obligation fulfilment report to DGFT. We will see the options for the license holder if they fail to fulfil the Export Obligation in the section below. 

If SEO is not fulfilled 

• EPCG Scheme: For a grant of extension in an export obligation period of 2 years, only one request shall be made on payment of a composition fee equivalent to 2% of the proportionate duty saved.  

• Offsetting To the customs, the Licensee holder shall pay, in case of failure to comply with the export obligation even after the expiration of the extended EO period, the entire customs duties plus 15% annual interest.  

• DGFT may condone a shortfall of up to 5% in SEO arising from the duty-saved amount, but AEO should be 100%. 

If AEO is not fulfilled 

• If, after availing of the EPCG License, the ban on exporting goods is imposed, then EO will automatically be extended for the period of imposition. It is not required that AEO be mandatorily possessed for the time during which an export ban is imposed.  

• If the license holder does not comply with AEO requirements within a reasonable period, he shall pay the customs duties with 15% annual interest to the Customs Authority.  

• DGFT shall announce public notices listing products that show a drop in world trade of over 5% every year. If the HS code of the export product on which your company depends is on this list, you can apply a reduction of AEO to some extent for that specific calendar year. For this reason, the license holder must request a new Annual Average calculation. 

What If AEO is fulfilled but SEO is not? 

If the licensee has passed 100% of the AEO but could not pass the SEO, he shall be liable to pay an amount equal to proportionate duty saved together with 15% annual interest. 

What If SEO is fulfilled but AEO is not? 

The license holder must keep the AEO. If the AEO is unmet, the DGFT does not look at the SEO. They will tell you to pay the total Duty saved value plus Interest. 

FAQs

Q1. Due to some delay in furnishing the evidence of discharge of export obligation against advance authorisations issued to us, our name has been put on the denied entities list (DEL) by our jurisdictional JDGFT. Does it mean we cannot carry on our import or export activities?

Ans: No. So long as you have an IEC and it is not suspended/revoked, your import and export activities can go on. When your name is put on the DEL list, you will not get licenses or authorisations or duty credit certificates from the offices of the DGFT, till your name is removed from the DEL list.

Q2. We want to procure certain inputs from an EOU against an ARO issued by invalidating our advance authorisation in accordance with Para 4.20 of FTP. The EOU says that they will charge the BCD and SWS that they reverse. How to disburden those taxes as we will be using the inputs in the manufacture of our finished goods that will be exported?

Ans: If the inputs you procure are goods manufactured by the EOU, then the supplies to you against ARO qualify as deemed exports. You or the EOU can claim deemed exports drawback of the BCD and SWS paid back to the government by the EOU, as allowed under Chapter 7 of the FTP. If the EOU supplies its imported inputs as it is, then no deemed exports benefits will be available as they are not goods manufactured in India. Then, the option available to you is to claim drawback of the BCD and SWS paid as mentioned in Para 4.15 of FTP.

Notified goods alone are eligible for this scheme. The importers of such goods may apply online through the portal of CBIC and claim concessional duty rates for their imported goods.  

IGCR in Customs supports the importers financially if they are important for some specific goods for some specific purposes. Let’s investigate the details of the regime of IGCR and understand the procedures specified in the IGCR Rules for the Importers of notified goods.

IGCR Rules 

The IGCR Rules are implemented by the CBIC. The CBIC stands for Central Board of Indirect Taxes and Customs. It gives definitions for various terms relevant for the implementation of Import of Goods at Concessional Duty Rate Rules. Imports of notified goods in the schedule are eligible to avail concessional duty rates. However, this concession is applicable only to goods used for the purpose outlined in the IGCR rules. 

They must take care that the imported goods are used for the declared purpose. To convey this to the CBIC, the importers also must give an advance intimation of claiming relaxation under the IGCR rules and further monthly filings of the returns for the utilization of the goods. These returns are filed through the ICEGATE portal.  

The goods are also to be used by the importers within six months of the date of import. In case of no use for a month, the importers can file the NIL return, but it must be filed compulsorily.  

If, subsequently, the importer fails to use the goods so imported for the intended purpose within the utilization period, he cannot claim concession under the IGCR Rules and shall be liable to repay the excess duty to the CBIC along with applicable interest. 

Role of ICEGATE in IGCR Implementation

To use such rules in IGCR and other customs-related management, CBIC has developed an online portal known as ICEGATE. CBIC belongs to the Revenue Department of the Government of India under the Ministry of Finance.  

Indian Customs Electronic Data Interchange Gateway is the full form of ICEGATE. This provides support to the customs authorities in maintaining information regarding customs formalities electronically. It acts as a medium of communication between the trade user and the customs department.  

It offers e-filing services through the portal, helping traders file requests efficiently and effectively through electronic means. The Importers willing to claim the concession shall give prior intimation through the IGCR module of the ICEGATE portal by submitting the details of imported goods and their intended purpose of use in the prescribed manner. 

Procedure to Claim Relaxation under IGCR Rules

Importers must follow the prescribed procedure to claim relaxation under IGCR rules. This procedure has been given in IGCR rules and updated sometimes through circulars issued by CBIC. Following is the procedure an importer needs to go through: 

Prior Intimation of Intent 

The importer must give prior intimation about the IGCR benefit’s use. He may log into the portal of ICEGATE, go to the IGCR section and give the prior intention with details of all imported goods. After submitting the information and on its acceptance, this would generate a Unique IGCR Identification Number abbreviated as IIN. 

Bond Bank Guarantee 

The importer also needs to furnish a one-time continuity bond. It should be according to the prescribed format and should cover all the goods being imported under this procedure. Later, the physical copy of the Bond and Bank Guarantee is submitted to the jurisdictional officer who approves the bond request on the ICEGATE portal.

Bill of Entry at the Port 

The importer must declare the details of IIN, that is, IGCR Identification Number and Bond Number along with other details on the bill of entry. The Deputy Commissioner or the Assistant Commissioner of Customs allows the benefit of exemption and import is executed at concessional rates based on these details.

Utilization of Bond 

After the bill of entry is cleared for home consumption, the bond amount is debited through the automated IGCR system. 

Intimation of Goods Received 

The receipt of goods at the premises of the importer and the worker is recognised by IGCR rules. However, if the goods are received at any other place or if there is a short receipt of a portion of the goods, then it shall be intimated by the importer through the common IGCR portal. 

Conditions for the Usage of Goods 

The same goods shall, therefore, be used for the same purpose if the importer has claimed the benefit under the IGCR exemption. The period of utilization of such goods is six months. Utilization shall, however, be done in accordance with the conditions specified only. If there is any defect in the goods, the same shall be re-exported or cleared for home consumption within six months. 

How to Re-Export or Clear Goods for Home Consumption?

The unused or defective goods shall be reported and re-exported to the origin. The importer also has an option to clear goods for home consumption. In both cases, the applicable duty shall be paid by the importer. This duty payment is calculated based on the exemption claimed and the actual duty chargeable on such goods without exemption.  

The goods are cleared after due payment of the duty with interest. At present, importers must make necessary payments through challan. The interest is calculated from the date of import to the date of actual payment of the total duty applicable on such goods.  

The importer also needs to put the information regarding such clearances and duty payments in the monthly statement. 

 Reporting Compliance for the IGCR Goods

 The Importer needs to file the monthly return of the utilization of the goods imported under the IGCR (Import of Goods at Concessional Rate of Duty) Rules. These returns shall be filed in accordance with the following procedure- 

1. Importers must submit a monthly statement by the 10th of the following month, using the form IGCR-3 on the common IGCR portal. 

• Importers are required to maintain accounts including separate accounts for inter-unit transfers of IGCR goods. These accounts should be presented to the Deputy Commissioner or Assistant Commissioner of Customs upon request. 

• Job Workers must maintain accounts which should be presented to the customs officer as and when required. 
• Importers or job-workers who violate these rules will face penalties as specified in rule 8A of the IGCR rules. This penalty is separate from any actions taken under the Customs Act, 1962 for duty recovery.”  

Conclusion 

The IGCR Rules are implemented by the Central Board of Indirect Taxes and Customs. In a nutshell, these rules are the most important way that an importer can seek duty concession for certain goods. It has been laid down that intimation in advance, a continuity bond, and detailed documentation on the bill of entry insisted upon on the ICEGATE portal make the procedure clear and more streamlined.  

This makes it imperative for the importer to ensure that the goods are used for the declared purpose within the stipulated time; otherwise, he will have to face penalties. This becomes very important in terms of compliance under the framework. If these regulations set the tone for the import of goods, adherence to the laid-down procedure becomes necessary and properly uses and manages the goods under the regime of IGCR. 

 This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not Curated Exim, and have not been evaluated by Curated Exim for accuracy, completeness, or changes in the law.” 

Under the Advance Authorisation scheme, eligible exporters are granted permission to import materials required for manufacturing or processing goods that will be eventually exported. This exemption from customs duties on imports helps reduce production costs and enhances the competitiveness of domestically produced goods in the international market. 

In this blog, we will discuss the extension of the Export Obligation (EO) Period and Import Validity period under Advance Authorisation. 

As you all know, the initial Export obligation period under Advance Authorisation is 18 months, and the initial Import validity period is 12 months. This means that from the license issue date, you have 12 months to complete the import and 18 months to complete the export. 

If your Import or Export is not completed within the validity period, you can seek an extension according to the policy provisions. 

So, how many times and for how long can you get an extension? How and where do you apply for an extension? What documents are required? We will discuss all these topics in this blog. So, let’s get started. 

Revalidation of Advance Authorisation License 

We often discuss about extending the time when we can bring in imports. But in official terms, this is called “Revalidation of Advance License” as per the rules. 

The initial validity is 12 months from the License issue date, and you can apply for a one-time extension for an additional 12 months. This means a total of 24 months. 

To apply for revalidation, you need to submit an online application to the Regional Authority of DGFT. The application/government fees for revalidation are Rs.500. The required documents include a Request Letter, a Justification Letter, and Application Form ANF 4D. 

If even after 24 months have passed, you still have a remaining portion of imports to complete, you cannot obtain further extension from the RA DGFT. For this, you need to approach the PRC Committee in Delhi. The PRC Committee approves further extension of 6 months only in cases of genuine hardships. 

Export Obligation [EO] Period Extension of Advance Authorisation Licenses issued for Restricted/Prohibited Items 

Advance Licenses can come in various types. For instance, some licenses are meant for General/Normal products, while others are issued in accordance with Appendix 4J. There are also licenses specifically for restricted or prohibited items. 

In each of these cases, the Export Obligation (EO) period and the terms for extensions differ. We will go through each type with examples. 

For instance, the government recently announced that it would permit the export of Wheat flour [Atta] under Advance Authorisation. If an Advance License is obtained for Wheat flour, the initial Export obligation period is 180 days from the date of clearance of each Import consignment. In this case, no further extension of the EO period will be granted. 

This means that the normal validity for importing will remain 12 months. However, as your imports are being cleared, the proportionate quantity should be exported within 180 days. No extensions will be provided beyond this 180-day period. If your exports are not completed within this timeframe, you will be required to pay duty and interest on the excess imports. 

Export Obligation [EO] Period Extension of Advance Authorisation Licenses – General Type 

Advance Licenses that do not fall into the categories of Appendix 4J/Restricted/Deemed Project supplies will be referred to as General licenses. 

For these licenses, the initial Export Obligation (EO) period is 18 months, and you can apply for two further extensions of 6 months each through the Regional Office of DGFT. 

The first EO extension will be for 6 months, and the second EO extension will also be for 6 months. 

You can see the composition fees for the first EO extension in the image provided. 

Composition Fees for 1st EO Extension of Advance Authorisation 

So, initially, the fees that were calculated as a percentage have now been converted to flat fees by DGFT under the ease of doing business initiative, based on the CIF value of the Advance License. 

For the second EO extension, the previous requirement was that a minimum of 50% of the Export Obligation should be completed for eligibility. However, as per the new Handbook of Procedures (HBP) 2023, this condition has also been removed. The composition fee for the second EO extension is separate, as shown in the provided image. 

Composition Fees for 2nd EO Extension of Advance Authorisation 

You can see that the composition fees for the 2nd EO extension are double that of the 1st EO extension. 

After these two extensions, you cannot get any further extensions from the Regional Office of DGFT. If you still require an extension, you would need to approach the Policy Relaxation Committee (PRC) in New Delhi. 

Export Obligation [EO] Period Extension of Advance Authorisation Licenses – issued under Appendix 4J condition 

Appendix 4J is a comprehensive list of import items for which, if you obtain an Advance License, the Export obligation period is significantly reduced. 

You can view the list of Appendix 4J in the provided image 

Appendix 4J of Export Obligation Period for Specified Inputs with Pre-import conditions under Advance Authorizations 

You can observe that mainly this category covers items such as drugs imported from unregistered sources and precious metals like gold, silver, and platinum. 

For drugs imported from unregistered sources, the Export Obligation (EO) period is 12 months from the date of clearance of each import consignment, while for gold, silver, and platinum, it is 120 days from the date of clearance of each import consignment 

Advance Licenses issued under the conditions of Appendix 4J are eligible for only one EO extension, which is limited to half the duration of the initial EO period. 

For drugs, you can receive an EO extension of 6 months, and in the case of gold, silver, and platinum, you can obtain a single EO extension of 60 days beyond the initial 120 days. 

The composition fees for EO extension can be seen in the provided image 

Composition fees in case of gold, silver, and platinum 

Once again, if you require an additional EO extension beyond the mentioned limits, you will need to reach out to the Policy Relaxation Committee (PRC) in New Delhi. 

Documents Required for EO Extension of Advance Authorisation 

In the image, you can see the list of documents that are required for extending the Export Obligation (EO) period of Advance Authorisation: 

• • Covering Letter 

• • ANF-4D 

• • Declaration as per para 4.42 

• • Justification letter 

• • Import & Export Statement 
  

The required documents for extending the Export Obligation (EO) period of Advance Authorisation are as follows: 

• • Covering letter or Request Letter: This is a letter explaining the purpose of the extension request. 

• • ANF-4D Application Form: This form needs to be properly filled and submitted. 

• • Declaration as per para 4.42: In this declaration, you self-declare that the duty-free raw materials you imported under Advance Authorisation are still available. 

• • Justification Letter: This letter explains the reason for requesting the extension. 

• • Duly-certified Import and Export Statement: A statement detailing the imports and exports must be certified and submitted. 
  

These documents are necessary for the process of extending the Export Obligation period for Advance Authorisation. 

What is the Advanced Authorization Scheme (AAS)? 

The Foreign Trade Policy of India contains the Advanced Authorization Scheme (AA), also known as Advance Authorization. If exporters meet certain conditions, they can import inputs free of customs duty. The scheme is designed to encourage exports through the duty-free importation of components, raw materials, and intermediates required to produce export goods. 

The Key Components for Advanced Authorization Scheme Compliance 

Application Process 

The following are the steps involved in obtaining Advanced Authorization: 

1. Submission of Application: Submit your application with all required documents to the designated authority. 

2. Verification: After ensuring the guidelines are followed, the authority verifies and issues the authorization. 

Fulfilling Export Obligations 

Exporters who have received an Advanced Authorization must comply with their export obligations before: 

• Exporting goods within the specified timeframe. 
• Exporting the required quantity and value. 
  

The Advantages of the Advanced Authorization Scheme 

Duty Exemption 

This scheme exempts importers from paying duty on imported inputs. It reduces production costs and increases competitiveness in international markets. 

Export Competitiveness Increased 

The Advanced Authorization Scheme allows exporters to compete on price by enabling them to access duty-free inputs. This increases their market reach and profits. 

Simple Compliance Procedures 

The scheme simplifies compliance procedures by providing a framework for import and export transactions. This reduces bureaucratic obstacles and administrative burdens to businesses. 

Compliance requirements under the Advanced Authorization Scheme 

Record-keeping 

To comply with the scheme, exporters are required to keep accurate records of their imports, production, and exports. 

Reporting Obligations 

Reporting regularly on export performance and the use of imported inputs is necessary to ensure accountability and transparency in trade. 

Compliance with Export Obligations 

If you fail to comply with your export obligations, you may be penalized or lose the benefits of the Advanced Authorization Scheme. This emphasizes the importance of meeting your commitments on time. 

The conclusion : 

The Advanced Authorization Scheme is a valuable tool that exporters can use to expand their global footprint and optimize their operations. Understanding and adhering to the compliances associated with this scheme will allow businesses to leverage its benefits to drive growth, competitiveness, and compliance for international trade.