Special Chemicals, Organism, Materials, Equipment and Technologies (SCOMET); Brief Overview;

  1. What is the meaning of SCOMET?

SCOMET is an acronym for Special Chemicals, Organisms, Materials, Equipment and Technologies.

  • What are dual-use goods and technologies?

Dual-use items are goods, software, technology, chemicals etc. which can be used for both civil and military applications. Such items require an authorization for exporting out of the country. India’s list of items which need an export license is known as the SCOMET list.

  • Is export of SCOMET items regulated?

Yes, export of items in the SCOMET list is regulated as per India’s Foreign Trade Policy. Export is either prohibited or is permitted under an authorization.

  • Where can I find the list of SCOMET items?

Appendix 3 of Schedule 2 of ITC (HS) Classification contains the control list of India which is also referred to as the SCOMET list. You can go to the DGFT website to see the complete list.

In the list as appearing in Appendix 3 of Schedule 2 of ITC (HS) Classification, SCOMET items are listed under eight (9) categories as follows:

  • Category 0: Nuclear material, nuclear-related other materials, equipment and technology.
    • Category 1: Toxic chemical agents and other chemicals
    • Category 2: Micro-organisms, toxins
    • Category 3: Material, Materials Processing Equipment, and related technologies
    • Category 4: Nuclear-related other equipment, assemblies and components; test and production equipment; and related technology, not controlled under Category 0
  • Category 5: Aerospace systems, equipment including production and test equipment, related technology and specially designed components and accessories thereof.
    • Category 6: Munitions List
    • Category 7: Electronics, computers, and information technology including information security.
    • Category 8: Special Materials and Related Equipment, Material Processing, Electronics, Computers, Telecommunications, Information Security, Sensors and Lasers, Navigation and Avionics, Marine, Aerospace and Propulsion

Each category contains exhaustive listing of items covered under that category. Special conditions applicable to items under different categories are mentioned under each category.

5.            What is the purpose of Notification No. 5 dated 24th April 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.

6.            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.

  • What is the licensing jurisdiction of DGFT in the SCOMET list?

Export of items specified in Categories 1, 2, 3, 4, 5, 7 and 8 of the SCOMET list may be permitted against an authorization issued by the DGFT.

  • Who gives license for Category 0 items in the SCOMET list?

Licensing authority for items in Category 0 in Appendix 3 to Schedule 2 of ITC (HS) is Department of Atomic Energy. Applicable guidelines are notified by the Department of Atomic Energy under Atomic Energy Act, 1962. For certain items in Category 0, formal assurances from the recipient State will include non-use in any nuclear explosive device. Authorizations for export of certain items in Category 0 will not be granted unless transfer is additionally under adequate physical protection and is covered by appropriate International Atomic Energy Agency (IAEA) safeguards, or any other mutually agreed controls on transferred items.

Export of items specified under the Note 2 of the ‘Commodity Identification Note’ of the SCOMET list would also be permitted against an authorization granted by the Department of Atomic Energy.

  • What are the guidelines for Nuclear Exports?
  • Guidelines   for       Nuclear              Transfers   (Exports)    are available at h ttp://www.dae.nic.in/?q=node/147
  • List of “Prescribed Substances, Prescribed Equipments and Technology” can be seen at h ttp://www.dae.nic.in/writereaddata/pres_subs_0516.pdf
  1. What is the new category 6 of SCOMET list?

SCOMET Category 6 titled ‘Munitions List’ that was hitherto ‘Reserved’ has been populated. The Military Stores list notified vide Notification No. 115(RE-2013/2009-2014 dated 13th March 2015 stands rescinded. It

  1. Who is the licensing authority for ‘Munitions List’ i.e. Category 6 items in the SCOMET list?

 Export of items specified in Category 6 of SCOMET list (Munitions List), (except those covered under Note 2 and 3 of Commodity Identification Note of the SCOMET list) is governed by the extant Standard Operating Procedure issued by the Department of Defence Production in the Ministry of Defence. Unless prohibited, export may be permitted against an authorization issued by the Department of Defence Production.

  1. What is the new category 8 of SCOMET?

The new Category 8 of SCOMET is titled ‘Special Materials And Related Equipment, Material Processing, Electronics, Computers, Telecommunications, Information Security, Sensors And Lasers, Navigation And Avionics, Marine, Aerospace And Propulsion’. It has been populated with Wassenaar Arrangement(WA) Dual use list items to harmonize India’s export control list with the WA.

13.What is the new category 8 of SCOMET?

The new Category 8 of SCOMET is titled ‘Special Materials And Related Equipment, Material Processing, Electronics, Computers, Telecommunications, Information Security, Sensors And Lasers, Navigation And Avionics, Marine, Aerospace And Propulsion’. It has been populated with Wassenaar Arrangement (WA) Dual use list items to harmonize India’s export control list with the WA.

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

  1. The list of Military Stores (Notification No. 115(RE-2013/2009-2014 dated 13th March 2015) 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

15.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:

  • Software and Technology in the public domain is excluded from the purview of regulations.
  • 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.

16.                        How do I apply for an authorization to export SCOMET items?

Application for grant of Export Authorisation has to be made to DGFT through , for any support and services please contact http://www.dgftconsultancy.com or call AJAY CHOPRA AT +91-9811088422.

17.                        What are the documents to be submitted for the application for SCOMET Authorization?

The following documents need to be uploaded online while making the application.

  • End Use-cum-End User Certificate(s)(EUC) from all the firms/entities involved in the supply chain of the product(s) (to be furnished on their letter head duly signed by the authorised signatory);
  • Copy(ies) of Purchase Order(s) of firm(s) involved in the supply chain of the item/product;
  • Aayat Niryat Form (ANF)-1 (Profile of Exporter);
  • Elaborate technical specification relating to item of export;
  • Copy(ies) of supply contract/agreement {if documents are bulky only the relevant portion containing contract reference and parties to the contract and the portion indicating the item(s) to be supplied and quantity thereof not exceeding 10 pages shall be uploaded);
  • Copy of DGFT authorization letter for the same product, if any in case of application for repeat orders;

Hard copy (Paper copy) of the following documents are required to be submitted to DGFT (HQ):

  • Original End Use-cum-End User Certificate (EUC);
    • Copies of Bills of Entry into the destination country for items exported during the last one year.

18.                        What is the process to obtain the license?

You need to first make an application to DGFT, Headquarters for obtaining the approval for issuance of license. All applications for licence for export of SCOMET items are considered on case-by-case basis by an Inter-Ministerial Working Group (IMWG) in the DGFT under the Chairmanship of Additional Director General of Foreign Trade as per guidelines and criteria laid down in Para 2.49 of the Handbook of Procedure Vol. 1. Once the case is approved by the IMWG, the DGFT issues the authorization to the exporter.

19.                        Is an authorization required even for export of SCOMET items for display or exhibition purposes?

  • Yes, an authorization is required.
    • Licences for export of items in this List for display or exhibition abroad are subject to a

condition of re-import within a period not exceeding six months.

  • Exporters are entitled to apply for an export licence for such items exhibited abroad if exhibitor intends to offer that item for sale during exhibition abroad. Such sale shall not take place without a valid licence.
    • The export of items in SCOMET List (other than those under Category 0, 1 and 2) solely for purposes of display or exhibition shall not require any end-use or end-user certification.
    • However, no export Authorisation for display or exhibition shall be issued for ‘Technology’ in any category.

20.                        Do I need a license to supply SCOMET Items from DTA to SEZ?

  • No export authorisation is required for supply of SCOMET items from DTA to SEZ. However, all supplies of SCOMET items from DTA to SEZ will be reported to the Development Commissioner of the respective SEZ by the supplier.
  • Export authorisation is, however, required if the SCOMET items are to be physically exported outside the country from SEZ i.e. to another country (Refer Rule 26 of the SEZ Rules, 2006).

21.                        Do I need an authorization to supply SCOMET Items from SEZ to any other country?

Export permission is required if the SCOMET items are to be physically exported outside the country from SEZ i.e. to another country (Refer Rule 26 of the SEZ Rules, 2006). (Inserted vide Notification No.93(RE-2010)/2009-14 dated 6.1.2012)

22.                        What is the procedure for Applications for entering into an arrangement or understanding for Site Visits, On-site Verification and Access to Records / Documentation?

An application shall be made in ANF 2P to DGFT (Hqrs.), New Delhi along with documents prescribed therein. These applications shall be considered by an Inter-Ministerial Working Group (IMWG) in DGFT (Hqrs.) for grant of approval.

23.                        Do I need an authorization for repeat orders of same product?

Applications for grant of authorisations for repeat orders for export of SCOMET items shall be considered by IMWG on automatic basis. However, only the applications submitted within two years from the date of approval by IMWG of the original SCOMET authorisation will be eligible for repeat authorisation.

It is also subject to other conditions i.e All of the following should be the same i.e. (a) the product along with the technical specification (b) the exporter (c) the foreign buyer (d) the consignee or the intermediaries, if any (e) the end user (f) the end use and (g) the country of destination.

Moreover, the permitted quantity against repeat export authorisations shall not be more than two times of the quantity in original authorisation, subject to the annual manufacturing capacity of the end user in respect of the relevant product, as certified by the end user.

24.                        What are the restrictions on export of chemicals as per SCOMET list?

  • Export of Category 1A chemical is prohibited.
    • Export of chemicals listed in Category 1B is permitted only to States party to the Chemical Weapons Convention after obtaining an authorization from DGFT. The list of State Parties to the Chemicals Weapons Convention (CWC) and countries which are not State Parties is available on the OPCW website http://www.opcw.org.
    • Export of Chemicals in Category 1C is allowed to State Parties to the CWC without an export licence subject to the condition that the exporter shall notify within 30 days of export to the National Authority, Chemicals Weapons Convention, Cabinet Secretariat; the Ministry of External Affairs (D&ISA); the Department of Chemicals & Petro-chemicals, and the DGFT of such exports in the prescribed format (Aayat Niryat Form ) along with the End- Use Certificate and submit to the DGFT a copy of the bill of entry into the destination State Party within 30 days of delivery. Export of chemicals in Category 1C to states not party to the Chemical Weapons Convention shall continue to be restricted and shall continue to be restricted and will be allowed only against an export licence and a Government signed End- Use-Certificate, and in that case also exporters shall submit to the DGFT a copy of the bill of entry into the destination country within 30 days of delivery.
    • The sub-category 1D of SCOMET titled ‘Other Chemicals’ contains 25 AG controlled chemical precursors.
      • Export of chemicals in this category is allowed to countries specified in Table 1 ( given in category 1D) without an export licence subject to the condition that the exporter shall notify within 30 days to specified departments
      • Export of chemicals in this category to other countries shall be restricted and will be allowed only against an export licence, and in that case the exporter shall submit to the DGFT a copy of the bill of entry into the destination country within 30 days of delivery.
      • Countries in Table 1 include Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Republic of Korea, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, United States.
    • Notification no. 56(RE-2013)/2009-14 dated 12.12.2013 has been rescinded since the three chemicals covered in the notification are now included in Category 1D.

25.                        Can I get an advance authorization where the export item is a SCOMET item?

Yes. As per para 4.27 of the HBP 2015-20, the export of SCOMET  items  shall  not  be permitted against an Authorisation until and unless the requisite SCOMET Authorisation is obtained by the applicant.

26.                        Can I get export permission for “stock and sale” purpose?

Yes, but Export shall be permitted only from the principal company/the wholly owned subsidiary in India to their subsidiaries/principal company/warehouse abroad on the basis of an EUC from the latter for ‘stock & sale’ purposes, when considered appropriate from the point of view of security and other critical consideration.

27.                        What is the requirement for export for spare parts for SCOMET items?

Request for export permission for spare parts covered under SCOMET may be considered by IMWG along with the application for the main item/ equipment. Applicant may indicate the requirement of spares after judicious and reasonable assessment thereof, and provide the justification for the same.

28.                        Is there is a validity period of the license? Can it be extended?

Yes, there is a validity period of the license of 24 months. It can be extended for six months at a time and maximum upto 12 months through revalidation by DGFT regional office on the approval of DGFT Headquarters.

29.                        What is the provision regarding maintenance of records for a SCOMET authorization holder?

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 24th April 2017.

30.                        What are the penalties for exporting SCOMET items without an authorization?

Section 14E of the Foreign Trade (Development & Regulations) Amendment Act, 2010 delineates the offences and penalties:-

14E. Offences and penalties.—

  • In case of a contravention relating to specified goods, services or technologies, the penalty shall be in accordance with the provisions of the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (21 of 2005).
  • Where any person contravenes or attempts to contravene or abets, any of the provision(s) of this Chapter in relation to import or export of any specified goods or services or technology, he shall, without prejudice to any penalty which may be imposed on him, be punishable with imprisonment for a term stipulated in the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (21 of 2005).
  • No court shall take cognizance of any offence punishable under this Chapter without the previous sanction of the Central Government or any officer authorised in this behalf by the Central Government by general or special order.]

In addition, Section 8 of the FTDR Act specifies suspension or cancellation of IE Code of the person who imports or exports specified goods services or technology in contravention of any provision of the Act or any rule or orders made thereunder.

31.                        What are the penalties specified in the WMD Act, 2005?

Sections 14 to 22 are relevant for understanding penalties and offences under the WMD Act, 2005. They can be briefly summarized as follows. For the legal version, see the WMD Act, 2005.

  • Offences and penalties.-Any person who contravenes, or attempts to contravene or abets, the provisions of section 8 or section 10 of the WMD Act, shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to imprisonment for life, and shall also be liable to fine.
    • Punishment for aiding non-State actor or terrorist.- Any person who, with intent to aid any non-State actor or terrorist, contravenes the provisions of section 9 of this Act, shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to imprisonment for life, and shall also be liable to fine.
    • Punishment for unauthorized export:-
  • Any person who knowingly contravenes, abets or attempts to contravene, the provisions of subsection (4) of section 13 of this Act, shall be punishable with fine which shall not be less than three lakh rupees and which may extend to twenty lakh rupees.
  • If any person is again convicted of the same offence under subsection (1), then he shall be punishable for the second and every subsequent offence with imprisonment for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine.
    • Punishment for violation of other provisions of the Act.-
      • Where any person contravenes, or abets or attempts to contravene, any provision of this Act other than the provisions under sections 8, 9, 10 and 13(4) of this Act, he shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine.
      • For the second and every subsequent offence with imprisonment for a term which shall not be less than one year but which may extend to seven years and shall also be liable to fine.
  • Penalty for using false or making forged documents, etc. Punishable with fine which shall not be less than five lakh rupees or five times the value of the materials, equipment, technology or services, whichever is more.
    • Punishment for offences with respect to which no provision has been made. Punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

32.                        In the case of offences by a company, who is liable?

Section 20 of the WMD Act, 2005 clarifies this. It says that where an offence has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. For the legal version, see WMD Act, 2005

33.                        What are catch-all controls?

Section 14C of the FTDR Act, 1992 as amended deal with Catch-all controls. It says that no person shall export any material, equipment or technology knowing that such material, equipment or technology is intended to be used in the design or manufacture of a biological weapon, chemical weapon, nuclear weapon or other nuclear explosive device, or in their missile delivery systems.

Para 2.72(b) of the Handbook of Procedures, as amended provides that an 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.

34.                        What is the meaning of Technology?

Para 2(m) of the Foreign Trade (Development & Regulations) Amendment Act, 2010 defines technology as follows:-

  • “Technology” means any information (including information embodied in software), other than information in the public domain, that is capable of being used in—the development, production or use of any goods or software;the development of, or the carrying out of, an industrial or commercial activity or the provision of service of any kind.

Explanation.—For the purpose of this clause—

  • when technology is described wholly or partly by reference to the uses to which it (or the goods to which it relates) may be put, it shall include services which are provided or used, or which are capable of being used in the development, production or use of such technology or goods;
  • “public domain” shall have the same meaning as assigned to it in clause (i) of section 4 of the Weapons of Mass Destruction and their Delivery System (Prohibition of Unlawful Activities) Act, 2005 (21 of 2005).]

Note:- Clause (i) of section 4 of WMD Act, 2005 defines Public Domain as

“Public domain” means domain that has no restrictions upon dissemination of information within or from it; the existence of any legal rights to intellectual property in that information does not remove such information from being in public domain;”

35.                        Is there a prohibition on transfer of Technology related to SCOMET items?

Section 13(2) and 13(3) of the WMD Act, 2005 provide restrictions on transfer of technology. Section 13(2) clarifies that any transfer of technology of an item whose export is prohibited under this Act or any other relevant Act relating to relevant activity shall be prohibited. Note that it talks about “transfer of technology” and not “export of technology”. Section 13(3) specifies that when any technology is notified under this Act or any other relevant Act, as being subject to transfer controls, the transfer of such technology shall be restricted to the extent notified thereunder.

Transfer of technology may take place through either or both of the following modes of transfer, namely:-

  1. by a person or from a place within India to a person or place outside India;
  2. by a person or from a place outside India to a person, or a place, which is also outside India (but only where the transfer is by, or within the control of, person, who is a citizen of India, or any person who is a resident in India).
  • What are the restrictions on transfer of technology to foreign nationals?

Transfer of any controlled technology is not allowed from

  1. by a person or from a place within India to a person or place outside India;
  2. by a person or from a place outside India to a person, or a place, which is also outside India. (but only where the transfer is by, or within the control of, person, who is a citizen of India, or any person who is a resident in India).

Hence, transfer of controlled technology to foreign nationals is barred by any person who is a citizen of India, or any person who is a resident in India even if it happens outside India.

CONTACT; http://www.dgftconsultancy.com

Or

CONTACT;

AJAY CHOPRA

AT

MOBILE NO;

+91-9811088422

chopraajaycpa@gmail.com
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