FAQs on Changes made in SCOMET on 24th April 2017

1.   What is the purpose of notification No. 5 dated 24.04.2017 issued by DGFT?

DGFT has amended SCOMET from time to time in order to implement India’s international commitments and obligations in the field of non-proliferation while simultaneously ensuring that trade facilitation is accorded the highest priority.

This notification to update SCOMET is part of India’s continuing obligations as a member of the Missile Technology Control Regime (MTCR) and as an adherent to the Nuclear Suppliers Group (NSG) Guidelines. Importantly, a significant number of changes to SCOMET have been carried out to adopt the regulations and lists of the Wassenaar Arrangement and the Australia Group, two multilateral export control regimes that India wishes to join.

2.   How will industry benefit by the adoption of these additional regulations?

Government and industry have a responsibility to ensure that Indian exports are not accessed by proliferators, terrorist groups and non-state actors. Any export that inadvertently lands up in the wrong hands may have implications for our national security and affect Brand India. These regulations are an important step to address such concerns.

Further, global supply chains are increasingly interconnected. India’s trading partners would like to be assured that India’s regulations are in line with the highest standards. Adoption of these regulations is expected to act as an enabler for a greater role for Indian industry in global supply chains for high technology and value added items and strategic sector items.

3.   When do these changes come into effect?

The changes come into effect on 1 May 2017. Please note that the entire SCOMET list has been re-issued and all previous notifications in this regard stand rescinded.

4.   What about contracts and purchase orders in the pipeline?

Any application filed with DGFT or Department of Defence Production on or after 1 May 2017 will be subject to the new regulations.

5.   How do I know whether my item now falls in the ambit of the amended SCOMET?

(1)  Trade and industry members are requested to study the notification No. 5 dated 24.04.2017 carefully and in particular the following:

·         Categories 1D, 3D, 6 and 8 of SCOMET and the exemptions and exclusions set out for relevant items;

·         Commodity Identification Note of SCOMET (for arriving at the proper classification and licensing jurisdiction)

·         SCOMET Glossary (for the definitions of terms)

(2)  Industry associations such as FICCI, CII and ASSOCHAM were made aware of the anticipated changes to Category 6 and 8. These associations as well as others are being requested to inform their members about the changes to the regulations.

(3)  DGFT in coordination with the relevant Government Departments plans to conduct industry outreach awareness events in the coming months to update the stakeholders.

6.   What are the specific facilitation measures that have been announced?

(1)  The time for processing SCOMET applications is being brought down further from 45 days to 30 days. (Please refer to para 2.82 of the Handbook of Procedures)

(2)  For chemicals covered in the new Category 1D, prior authorisation will not be required if the export is to forty-one notified countries. (Please refer to Category 1D of SCOMET)

7.   What are the specific changes with regard to defence exports?

(1)  The list of Military Stores (notification No. 5 dated 24.04.2017 has been rescinded. Please refer now to Category 6 of SCOMET (Munitions List) for the items that would now be under export regulations with effect from 1 May 2017.

(2)  Department of Defence Production (DDP) would continue to be the licensing authority for Category 6 items, subject to some exceptions.

(3)  DDP would be issuing a revised Standard Operating Procedure to clarify the implications

8.   What are the specific changes with regard to chemicals?

(1)  Export of chemicals specified in Category 1C to a country that is not a State Party to the Chemical Weapons Convention would now require a Government signed End-Use Certificate. This requirement is in keeping with India’s commitments under the said Convention.

(2)  Twenty-five chemicals have been notified under a new Category 1D. However, export of these chemicals to the forty one countries that are members of the Australia Group would not require a prior authorisation.

(3)  Notification no. 5 dated 24.04.2017 has been rescinded since the three chemicals covered in the notification are now included in Category 1D.

9.   There appear to be many changes with regard to the IT sector. Is it true that the IT sector will be affected?

At first glance, it may appear that there are many new regulations for the IT sector. But if you go through the provisions carefully, it may be noted that:

(a)  Software and Technology in the public domain is excluded from the purview of regulations.

(b)  There are specific exemptions and exclusions set forth in Category 8 of SCOMET.

DGFT is planning specific industry outreach for the IT sector. All concerns of the IT sector would be addressed.

10.       What is the new provision regarding maintenance of records?

Every SCOMET authorisation holder shall maintain the specified records in manual or electronic form for a period of 5 years. Please refer to para 2.73(c) of the Handbook of Procedures as amended vide Public Notice No.  4 dated 24.04.2017.

11.       Why has Government introduced regulations for non-SCOMET items?

Para 2.72(b) of the Handbook of Procedures as amended vide Public Notice No.  4 dated 24.04.2017 provides that export can be regulated if the exporter has been notified in writing by DGFT or he knows or has reason to believe that an item not covered in the SCOMET list has a potential risk of use in or diversion to weapons of mass destruction or in their missile system or military end use (including by terrorists and non-state actors). In such a case, the process for authorising export would be similar to the one for SCOMET.

The basis for this provision exists in the FTDR Act 1992 and the WMD Act 2005. It is a widely accepted and adopted international best practice that is in line with Government’s non-proliferation policy of ensuring that India’s exports do not inadvertently land up in the wrong hands for illicit use.