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 “Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 05.01.2025

Import of Steel Products in India- Import by “Captive Consumers” against the Steel Products QCO, 2024

India, being one of the largest consumers and producers of steel globally, has seen its import dynamics shift significantly in recent years. For the fiscal year 2023-24, India imported approximately 6.5 million metric tons of various steel grades, including 2 million metric tons of hot-rolled coils, 1.5 million metric tons of cold-rolled sheets, and 1 million metric tons of alloy steels. With a focus on ensuring the quality and safety of steel products entering the country, the Indian government has implemented the Quality Control Order (QCO).

This regulatory framework aims to curb the influx of substandard steel products, safeguard domestic industries, and ensure public safety. By enforcing stringent quality standards and certification processes, the QCO has become a critical tool in regulating steel imports effectively.

Objectives of the QCO:

1. Enhance Product Quality: The QCO ensures that imported steel meets the prescribed quality standards set by the Bureau of Indian Standards (BIS).

2. Protect Domestic Manufacturers: By preventing the import of low-quality steel, the QCO supports Indian steel producers who adhere to stringent quality norms.

3. Promote Public Safety: Substandard steel products pose risks in construction and infrastructure. The QCO minimizes these risks by ensuring only certified products enter the market.

4. Streamline Trade Practices: The QCO promotes fair trade practices by creating a level playing field for domestic and international players.

Mechanism of Implementation:

The QCO mandates that all steel products intended for import must comply with BIS standards. Importers are required to obtain certifications (NOC and SIMS registration) and ensure that their products align with the quality parameters defined in the order. Non-compliance results in the prohibition of entry for such goods, thereby discouraging the inflow of inferior quality materials.

In India there has been a slew of QCO issued in the last few months and many more are yet to come. One can keep a track of the same from the Bureau of Indian Standard (BIS) website https://www.bis.gov.in/upcoming-qcos-notified-and-due-for-implementation/.

The office of the Directorate General of Foreign Trade (DGFT) issued the Public Notice No 04/2024-2025 dtd 10^th May 2024 that clarified which agencies are currently issuing the Quality Control Orders (QCO). They are namely Ministry of Steel, Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Textiles and Ministry of Mines, Govt of India. There are few other Line Ministries/Departments which are issuing the Quality Control Orders (QCO), apart from the ones stated in the DGFT Public Notice as cited above.

The Quality Control Orders (QCO) issued by the above Department/Ministry is a legally binding factor to enforce the Bureau of Indian Standards (BIS) standards in India as per Section 16 (2) of the BIS Act, 2016. The power to Notify is derived from Section 16(1) of the BIS Act, 2016.

The provisions of QCO/BIS shall be applicable only on the “scheduled industry” which shall have the meaning assigned to it in the Industries (Development and Regulation) Act, 1951. A “scheduled industry” means any of the industries specified in the First Schedule as per sub section (i) of section 3 of the Industries (Development and Regulation) Act, 1951.

It is to be noted here that, BIS standards are ‘Voluntary’ in nature as per the proviso sub section (1) of section 24 of The Bureau of Indian Standards Rule, 2018, unless and until enforced through a Quality Control Order (QCO).

Impact of the Steel Product QCO, 2024 on Import Customs Clearance Across Indian Ports

The implementation of the Steel Product QCO, 2024 has introduced significant changes to the import customs clearance process across all Indian ports. These changes aim to enforce stricter quality checks and streamline the import procedures.

Key Changes in Customs Clearance:

1. Mandatory BIS Certification: Importers must provide valid BIS certifications for their steel products at the time of customs clearance.

2. Increased Scrutiny: Customs officials are now required to perform detailed inspections to ensure compliance with the QCO.

3. Documentation Requirements: Importers need to furnish additional documentation, including the Mill test certificates (MTC) and compliance declarations.

4. Delayed Clearance for Non-compliance: Goods that fail to meet QCO standards face delays in clearance or are rejected outright.

Challenges Faced by Importers:

1. Increased Costs: Complying with the BIS certification process adds to the operational costs for importers.

2. Extended Timelines: The additional checks and documentation requirements have resulted in longer clearance times.

3. Limited Awareness: Many importers face challenges due to a lack of awareness about the QCO requirements.

Steel Product QCO, 2024: Overview

The Steel Product QCO, 2024 is a landmark regulatory framework aimed at enhancing the quality of steel products imported into India. This order covers a wide range of steel products and enforces stringent BIS standards.

Key Features:

1. HSN Codes Covered: The QCO encompasses over 3163 Harmonized System of Nomenclature (HSN) codes, ensuring comprehensive coverage of steel product categories.

2. BIS Standards Enforced: A total of 158 BIS standards are mandated under this QCO, addressing various aspects of product quality and safety.

3. Applicability: The QCO applies to all imports of covered steel products, irrespective of their country of origin.

Excluded Steel Grades:

Certain steel grades are yet to be covered under the QCO, primarily due to their specialized applications or ongoing standardization efforts. These include:

1. High-performance alloy steels for aerospace applications.

2. Special stainless steel grades used in medical equipment.

3. Niche grades for defense and nuclear applications.

The Exemptions, generally notified, in most of the QCOs are as follows:

a. Goods manufactured in India for Export purposes shall not attract the provisions of QCO and thus shall remain exempted from BIS standards enforcement. Technically not applicable on EOUs/SEZs/FTWZ Units.

b. Extended timelines for enforcement of the QCOs are granted to the Micro, Small and Medium units under the MSME Act, 2006. This timeline extension is granted to support the MSME sector to adhere and comply with the provisions of BIS standards in due course as most of them are very small units and cannot readily enforce BIS quality standards immediately.

c. In the recently issued The Bolts, Nuts and Fasteners (QCO), 2023 dtd 21^st July 2023 the exemption has also been granted to goods or articles imported as a part of any finished goods or sub-assembly or component.

d. DGFT has issued Notification No. 69/2023 dtd 07^th March 2024 and Notfn. No 71/2023 dtd 11^th March 2024, exempting Advance Authorization License Holders and EOUs from the Mandatory QCO compliances.

Functioning of the SIMS Portal: A Step-by-Step Guide

The Steel Import Monitoring System (SIMS) is an online platform that facilitates the registration and monitoring of steel imports into India. Here is a stepwise guide to using the SIMS portal:

Step 1: Registration

1. Visit the official SIMS portal https://sims.steel.gov.in/Index.aspx
2. Create an account using your importer credentials- IEC Code plus Registered email ID plus Registered Mobile Number are needed for this stage.
3. Verify your account through the OTP sent to your registered email and Mobile phone number.

Step 2: Filing an Application

1. Log in to the portal with your credentials.
2. Navigate to the “Apply NOC Section”
3. Once NOC application is submitted copy the NOC application acknowledgement number
4. Now go to the “New Application” section on the main page and initiate the SIMS registration application
5. Select the relevant HSN code for your steel product and complete the self-explanatory online Form
6. Fill in details such as importer name, product description, and country of origin

Step 3: Upload Documentation

1. Upload necessary documents, including BIS certifications or exemption letter copy, import invoice, and mill test certificate and MBL/MAWB copy.
2. Ensure all documents are in the prescribed format.

Step 4: Submit Application

1. Review your application for accuracy.
2. Submit the application and note the acknowledgment number.

Step 5: Receive Registration Certificate

1. Upon successful submission of the required information & after the payment of the Government Fee i.e. INR 500 at this moment, you will receive the SIMS registration certificate.
2. The issued SIMS registration can be viewed in the “Complete” Tab under the “View My registration” section on the SIMS Portal itself.
3. Download the PDF version from “View” section under “View Application” segment.
4. Use this PDF certificate during customs clearance.

CBIC, Customs Order/Trade Notice: Mandatory NOC or SIMS Registration

1. Mandatory Compliance: Importers must secure an NOC and complete SIMS registration before customs clearance. Refer to the Ministry of Steel Circulars dtd 20^th October 2023 and CBIC, Dept of Revenue letter dtd 09^th November 2023.

2. Verification Process: Customs officials will verify the authenticity of the SIMS registration and BIS certification or the NOC as applicable.

3.Consequences of Non-compliance: Non-compliant shipments will face penalties, delays, or rejection.

Steps to Be Taken Prior to Filing on the SIMS Portal

1. Understand QCO Requirements: Familiarize yourself with the HSN codes and BIS standards applicable to your product. Refer to the Steel Product QCO, 2024 dtd 29.08.2024.

2. Obtain BIS Certification: Ask the overseas OEM/Manufacturer of the Steel Product to apply and Complete the BIS certification process under the FMCS scheme of BIS for the product that you intend to import in India.

3. Prepare Documentation: Gather all necessary documents, including mill test certificate and other test reports, invoices, and compliance declarations.

4. Estimate Timelines: Account for the following timelines:

a. BIS certification: 6-8 months (applicable on Foreign Manufacturers only & not on Indian Importers)

b. NOC Filing: 1 working day

c. SIMS registration: 1 working day

d. Customs clearance: 1-2 weeks depending on the size and complexity of the import shipment

Case Study:

An automobile manufacturer, having their manufacturing unit in India is selling Finished goods in India as well as Exporting Finished goods across the globe. The entity imports finsihed steel products for “Captive consumption” for “Actual Use”. The entity had imported certain Steel Products, finished goods, which was not cleared at the Indian customs port. Goods Imported by “Captive Consumer” does not attract the Quality Control Order (QCO). Read the previous article for a better understanding https://sjexim.services/2024/11/13/technical-barrier-to-trade-tbt-understanding-quality-control-order-and-bis-on-captive-consumption-in-india/

Under the provision of the Foreign Trade Policy (FTP) 2023 and Handbook of Procedure (HBP), the Government of India, through the O/o DGFT, has been authorised to fix the Standard Input Output Norms (SION) under Para 4.06, 4.07 & 4.07A of the Handbook of Procedure (HBP).

In view of and existing SION under Para 4.06/4.07/4.07A the Indian Importer can still import finished steel products for “Captive consumption” to manufacture finished goods meant for “Export”, as per the exemption already provided in the Steel Products QCO, 2024.

The above provision of the FTP 2023 & HBP is also commensurate with Sction 11-G (Goods for Personal use) of the Indian Customs Act, 1962. However, the said Indian manufacturer importer still has to mandatorily apply & obtain NOC and SIMS registration as per the law.

The Legal Consultant informed them that they can file for the NOC even before the actual shipment starts from the origin port in the form of “Advance Clarification” or while in “Transit”. Based on the NOC filing acknowledgement the SIMS registration can be initiated and obtained at ease.

They were also informed by the Legal Consultant that to Import any Steel products in India the Indian Importer must follow the Circular issued by the Ministry of Steel in October 2023 and again in November 2023. Alongside the said Ministry of Steel Circular the Importers also have to comply with the requirements CAVR Order No. 02/2023 dtd 15.11.2023 and CAVR Order No. 02/2024 dtd 13.11.2024 issued by the Central Board of Indirect Taxes and Customs (CBIC).

Learnings and Key Takeaways:

1. Importance of Compliance: Adhering to the QCO and SIMS requirements is crucial for smooth customs clearance.

2. Proactive Documentation: Preparing documentation in advance minimizes delays and ensures timely processing.

3. Awareness of Regulations: Staying updated on trade notices and QCO amendments is vital for importers.

4. Collaboration with Experts: Engaging with Legal consultants specialized in QCO & BIS and trade specialists can simplify compliance procedures.

5. QCO & BIS is exempted for EOU/SEZ units completely. However, even they must obtain the NOC/SIMS registration for every shipment they import in India for their Actual use purposes.

Sources referenced include:

1. Official notifications from the Bureau of Indian Standards (BIS) on https://www.bis.gov.in/

2. Trade notices issued by CBIC, Customs- https://taxinformation.cbic.gov.in/content-page/explore-orders

3. The Steel Import Monitoring System (SIMS) portal guidelines- https://sims.steel.gov.in/Index.aspx

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