SCOMET Items: Updated Stock & Sale Authorization Norms – Amendments to Para 10.10 of HBP 2023

Understanding the Revised Stock and Sale Policy for SCOMET Items in India

The Director General of Foreign Trade (DGFT) in India has recently amended Paragraph 10.10 of the Handbook of Procedures (HBP) 2023, introducing significant updates to the “Stock and Sale” policy for Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) items. Effective immediately, these changes aim to streamline export processes while ensuring compliance with international trade regulations. Below, we explore the key amendments, their implications, and what exporters need to know.

What is the Stock and Sale Policy for SCOMET Items?

The Stock and Sale policy allows Indian exporters to export SCOMET items (excluding Category 0, Category 3A401, Category 6, and technology transfers) in bulk to a designated entity abroad, referred to as a “Stockist.” The stockist then transfers these items to ultimate end-users, subject to specific conditions. The Inter-Ministerial Working Group (IMWG) evaluates applications for such export authorizations, ensuring alignment with national and international regulations.

Key Amendments to Paragraph 10.10 of HBP 2023

1. Expanded Definition of ‘Stockist’

The revised policy broadens the definition of a stockist to include:

• Subsidiary or parent companies of the Indian exporter.
• Affiliates of the Indian exporter.
• Indian or Foreign Original Equipment Manufacturers (OEMs), Electronic Manufacturing Services (EMS), or Contract Manufacturers (CM).

EMS is defined as a service where companies manufacture, assemble, test, and sometimes design electronic products for OEMs at a cost-effective price. Contract Manufacturers may qualify based on additional documentation, such as Authorized Economic Operator (AEO) certification or contracts with OEMs.

Implication: This expansion allows greater flexibility for Indian exporters to collaborate with a wider range of international partners, fostering global supply chain integration.

2. Application Requirements

Exporters must submit applications in the prescribed proforma (ANF-10B) along with:

• Documentary proof of the corporate relationship with the stockist.
• An End-Use/End-User Certificate (EUC) from the stockist for stock and sale purposes (Appendix-10J(iii)).
• A list of countries to which the stockist will export the items.
• Purchase orders, invoices, or equivalent documents.
• Technical specifications of the products.
• Internal Compliance Program (if available).
• AEO certificate (for OEMs/EMS/CMs).
• An undertaking declaring that the exporter will not use the items for military purposes or weapons of mass destruction (WMD) without separate DGFT authorization.
• Corporate/business registration or certificate of incorporation of the stockist.

Note: The IMWG may relax certain conditions based on the item’s description, end-use, or end-user.

Implication: The detailed documentation ensures transparency and traceability, reducing the risk of misuse while aligning with global non-proliferation commitments.

3. In-Principle Approval for Exports and Re-Exports

• The IMWG will assess applications for export authorization to the stockist and grant in-principle approval for re-exports to specified countries.
• No additional authorization is required for transfers within the stockist’s country or to pre-approved countries, subject to the stockist’s local export control regulations.
• Transfers within an economic or customs union (e.g., the EU) do not qualify as “same country transfers.”

Implication: This simplifies the process for intra-country transfers and pre-approved re-exports, reducing administrative burdens for exporters and stockists.

4. Post-Reporting Requirements

For transfers within the stockist’s country or re-exports to pre-approved countries, the Indian exporter must submit:

• Details of transfers in ANF-10B.
• EUCs from ultimate end-users (Appendix-10J(i) or 10J(ii)).
• Bills of Entry for exports outside the stockist’s country.
• Submission is required within 3 months of each transfer.

For re-exports to non-pre-approved countries, exporters must apply separately to the SCOMET Division via email, providing EUCs, purchase orders, and technical specifications (if value addition occurs).

Implication: Robust post-reporting ensures accountability and compliance, with timely submissions critical to maintaining authorization.

5. Repeat Orders

Applications for repeat exports to the same stockist and re-exports to pre-approved countries will be reviewed by the IMWG Chairman without requiring full IMWG consultation.

Implication: This streamlines the process for recurring transactions, saving time for compliant exporters.

6. Annual Reporting

Exporters must submit an annual statement by January 31 of the following year, detailing:

• Exports to the stockist.
• Transfers to end-users.
• Inventory held by the stockist as of December 31.

Failure to comply may result in penalties or cancellation of the authorization.

Implication: Annual reporting reinforces oversight, ensuring that SCOMET items are tracked throughout their lifecycle.

7. Authorization Validity and Revalidation

• Items must be transferred to end-users within the authorization’s validity period (as per Paragraph 10.17 of HBP).
• Authorizations can be revalidated per Paragraph 10.20 of HBP.

Implication:

Clear timelines encourage efficient supply chain management while maintaining regulatory control.

Why These Changes Matter

The amendments to the Stock and Sale policy reflect India’s commitment to balancing trade facilitation with stringent export controls. By expanding the definition of stockists and streamlining processes for repeat orders and pre-approved re-exports, the policy supports Indian exporters in accessing global markets. Simultaneously, the rigorous documentation, reporting, and compliance requirements align with international non-proliferation frameworks, such as the Wassenaar Arrangement and the Missile Technology Control Regime.

What Exporters Should Do Next

1. Review Eligibility: Ensure your stockist qualifies under the expanded definition and prepare necessary documentation.
2. Strengthen Compliance: Implement or update Internal Compliance Programs to meet DGFT requirements.
3. Monitor Deadlines: Track reporting timelines (3 months for transfers, January 31 for annual reports) to avoid penalties.
4. Consult Experts: Engage with trade consultants or legal advisors to navigate complex SCOMET regulations.

Conclusion

The revised Stock and Sale policy for SCOMET items marks a significant step toward modernizing India’s export framework. By fostering flexibility while upholding stringent controls, the DGFT aims to empower Indian exporters while safeguarding national and global security. Exporters must stay informed and proactive to leverage these opportunities effectively.

 Notification Reference: DGFT
 Public Notice No.: 04/2025
 06/05/2025