Obtaining import and export licences in India

Imports and exports in India are governed by the Foreign Trade Development & Regulation Act, 1992, (FTDR). Under the act, imports of all goods are free except for those regulated by government policy and by other applicable laws currently in force. Section 4 of the act provides that it is essential for any person, including corporate entities, to have an Importer-exporter code number (IEC) granted by the director general, or the officer authorized by the director general on his behalf, in accordance with the procedure specified, before entering into the process of import and export.

Further, section 5 (2) of the act states that if an IEC granted to a person has been suspended or cancelled, that person shall not be entitled to import or export any goods unless prescribed by the director general.

Application process

Exercising the powers conferred by the act, the government has issued the Foreign Trade (Regulation) Rules, 1993, which regulate the application and granting of a licence (IE Code).

A person may submit an application to the licensing authority for the grant of a licence to import or export goods in accordance with the provisions of the policy, or under section 3 of the FTDR. Every application for a licence to import should be accompanied by a fee which is deposited as specified in the schedule.

Payments are not required to be made by the central or state government; any local authority for the bona fide import of goods required for official use; any institution set up for educational, charitable or missionary purposes requiring the import of goods; or any applicants wanting to import goods (other than vehicles) for personal use, unconnected to trade or manufacture.

In terms of licences for exports, individuals cannot transfer or acquire by transfer any licence issued by the licensing authority, except in accordance with the provisions of the policy. Additionally, goods for export, for which the licence is granted, will be the property of the licensee at the time of export.

The licensing authority may issue a licence for import, subject to the condition that:

1. The goods covered by the licence are disposed of in accordance with the manner specified by the licensing authority, or
2. If the applicant for a licence executes a bond for complying with the terms and conditions of the licence.

For licences pertaining to imports, no person should transfer or acquire by transfer any licence issued by the licensing authority except in accordance with the provisions of the policy; the goods for import should be the property of the licensee at the time of import and up to the time of clearance through customs; they should be new goods, unless otherwise stated in the licence; and they should not be exported without the written permission of the director general.

Reasons for refusal

The licensing authority may refuse to grant or renew a licence if:

1. The applicant has contravened a law relating to customs or foreign exchange;
2. The application for the licence does not substantially conform to provisions of these rules;
3. The application or any document used in support contains any false, fraudulent or misleading statements;
4. The central government decides to channel the export, import or distribution of goods through specialized agencies;
5. Any action against the applicant is pending under the act, rules or orders;
6. The applicant is a managing partner in a partnership firm, a director of a private limited company, or holding a controlling interest against which any action is pending under the act, rules and orders;
7. The applicant fails to pay a penalty imposed under the act;
8. The applicant has tampered with a licence;
9. The applicant, any agent, or employee of the applicant with his consent has been a party to corrupt or fraudulent practice for the purposes of obtaining other licences;
10. The applicant is not eligible for a licence in accordance with provisions of the policy;
11. The applicant fails to produce documents requested by the director general;
12. No foreign exchange is available for the purpose of import;
13. The application has been signed by an unauthorized person;
14. The applicant has attempted to, or has obtained cash compensatory support, duty drawback or cash assistance benefits allowed to registered exporters from any agency authorized by the central government in relation to exports made on the basis of fraudulent statements.

Licences will be suspended if any order of detention has been made against the applicant under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; or if the person referred to is a partner, a whole time director or managing director of a company.

Licences can be cancelled if the licence has been obtained by fraud, suppression of facts or misrepresentation; the licensee has committed a breach of any of the conditions of the licence; the licensee has tampered with the licence; or the licensee has contravened any law relating to customs, foreign exchange or the relevant rules and regulations.

Singh & Associates, Advocates and Solicitors, is a law firm based in New Delhi.