The Directorate General of Foreign Trade (DGFT), with the approval of the Ministry of Commerce and Industry, issued a regulatory update to clarify the applicability of QCOs. Notification No. 20/2026-27, on 2nd June 2026, amends Para 2.03(A)(iii) of the Foreign Trade Policy (FTP) 2023, which deals with the applicable Quality Control Order (QCO) and BIS Requirements rules applied to imports made by Special Economic Zone (SEZ) Units and SEZ Developers.
The primary goal is to provide the Foreign Trade Policy with a mechanism to address regulatory ambiguity and clarify QCO compliance. It also brings the FTP framework into closer alignment with the provisions of the SEZ Act, 2005, and Rule 27 of the SEZ Rules, 2006.
What Was the Earlier Rule for SEZ Imports?
Before the 2026 amendment to the Foreign Trade Policy, 2023, the QCO exemption for SEZ units primarily focused on goods such as capital goods, spare parts, and consumables used for authorised operations within the SEZ and did not extend the exemption to SEZ Developers, which often created confusion among importers regarding QCO applicability.
- The exemption fell under Para 2.03(A)(iii) of FTP 2023.
- Imported goods that are used for export production
- The products meant for physical exports
What Are Quality Control Orders (QCOs)?
A Quality Control Order (QCO) is a government-issued order that mandates compliance with specific Indian Standards for certain products, ensuring they meet safety, quality, and performance requirements. Manufacturers and importers must ensure that their products obtain BIS Certification before they are manufactured, imported, or sold in India. If products fail to comply with this standard, they can be seized and subject to penalties.
Products covered under QCOs require:
- BIS certification or registration
- Compliance with applicable Indian Standards
- Mandatory marking, such as the ISI Mark under mandatory BIS certification
- CRS for IT/Electronic products
Key Changes Under DGFT Notification No. 20/2026-27 on QCO Exemption for SEZ Imports
|
Aspect |
Earlier Provision |
Revised Provision (June 2026) |
|
Eligible Entities |
Only SEZs were covered. | Both SEZ Units and SEZ Developers are explicitly covered |
|
Scope of Goods |
Exemptions are primarily applied to inputs required for export production. |
Exemption applies to all permissible goods, which include raw materials, components, consumables, spares, and capital goods. |
|
Purpose of Import |
Limited to goods used for export production. | Applies to goods imported for authorised operations within the SEZ |
|
Capital Goods Coverage |
Not clearly specified. |
Covers goods including raw materials, components, consumables, spares, and capital goods |
|
Reference to SEZ Law |
No direct alignment with the SEZ Act and Rules. | Explicitly aligned with the SEZ Act, 2005 and Rule 27 of the SEZ Rules, 2006. |
|
Physical Export Condition |
Exemption was available only for physical exports. | The physical export condition is removed, and the exemption is linked to authorised SEZ operations. |
|
DTA Clearance |
DTA clearance of imported goods made from such inputs was generally not allowed. | DTA clearance is permitted subject to compliance with applicable QCOs, BIS requirements, and other laws at the time of clearance. |
|
QCO Compliance Trigger |
Not clearly defined for all situations. | QCO/BIS compliance becomes mandatory when goods move from SEZ to DTA. |
Key Benefits for SEZ Units and Developers
The benefits of the QCO exemption for SEZ imports in 2026 are:
- Reduces Compliance Burden: SEZ units are now exempt from mandatory Bureau of Indian Standards (BIS) and Quality Control Orders (QCOs) before import.
- Operational Flexibility: The revised exemption now covers a broader range of goods required for authorised operations within the SEZ.
- Greater Legal Clarity: SEZ units can now operate under a single set of rules. By clarifying the confusion around QCO, the exemption now covers a broader range of goods required for SEZ operations.
- Support for Export Manufacturing: SEZ units can now focus on their production and exports rather than focusing on unnecessary import restrictions, thereby eliminating the costs of domestic taxes from export prices.
Impact of the Notification on BIS Compliance
The revised provision by the Directorate General of Foreign Trade does not permanently remove BIS requirements; it only provides a conditional exemption for SEZ operations before the imports. When capital goods and machinery enter the Indian domestic market from an SEZ, they need to comply with:
- BIS certification requirements are applied.
- Relevant QCO provisions in force at the time of DTA, any removal, transfer, or clearance of goods.
- Businesses should secure all regulatory approvals before moving goods into the DTA.
Conclusion
The new guidance for QCO represents an important step toward simplifying compliance and providing relaxation to importers, effective from 2 June 2026. The amendment to Paragraph 2.03(A)(iii) of the Foreign Trade Policy 2023 brings an important clarification to India’s regulatory framework for SEZ units and developers by expanding the QCO exemption to cover all permissible goods imported for authorised operations for SEZ imports. The revised provision enhances regulatory clarity, supports export-oriented businesses, and brings the Foreign Trade Policy into line with the SEZ Act, 2005 and SEZ Rules, 2006.
