TRACE Initiative: Empowering Indian MSMEs for Global Trade Compliance and Export Growth

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Dated: 23.02.2026

TRACE Initiative: Empowering Indian MSMEs for Global Trade Compliance and Export Growth

The Government of India has launched an innovative initiative under the Export Promotion Mission (EPM) – NIRYAT DISHA, called Trade Regulations, Accreditation & Compliance Enablement (TRACE). This program is designed to support Micro, Small, and Medium Enterprises (MSMEs) involved in international value chains by helping them meet the regulatory requirements of importing countries. Here’s a detailed overview of TRACE and its significance for Indian exporters.

What is TRACE?

TRACE is a forward-looking initiative aimed at strengthening India’s quality and technical compliance ecosystem. It provides financial assistance to MSMEs to help them meet internationally recognized standards and regulatory requirements for market access. This support is crucial for enhancing product quality, ensuring compliance with safety and technical standards, and boosting India’s export competitiveness.

Objectives of TRACE 

Quality and Compliance Support: The primary goal of TRACE is to assist MSMEs in meeting quality, safety, and technical requirements for international trade. This includes obtaining mandatory or voluntary certifications, inspections, and audits.
Capacity Building: TRACE aims to enhance the capacity of MSMEs to demonstrate conformity with global standards, upgrade product quality, and comply with legitimate importing-country regulations.
Non-Export Performance Linked Assistance: The initiative ensures that the assistance provided is not linked to export performance, making it accessible to all eligible MSMEs.

Scope and Coverage 

Under TRACE, MSMEs can avail partial reimbursement for eligible expenses incurred in the following areas:

Testing and Inspection: Costs related to product testing and inspection to meet importing-country requirements.
Certification and Audits: Expenses for obtaining certifications, factory audits, and market-specific licenses.
Traceability Systems: Implementation of systems to ensure product traceability.
Conformity Assessment: Costs for demonstrating compliance with international standards.

The program covers both one-time costs (e.g., initial certifications and audits) and recurring costs (e.g., ongoing compliance certifications and buyer-mandated voluntary certifications).

Eligibility Criteria

To qualify for TRACE, MSMEs must meet the following conditions:

Hold an active Importer–Exporter Code (IEC) and a valid MSME Udyam Registration Number.
Be involved in international value chains and not listed in the Denied Entity List.
Undertake eligible activities (e.g., certifications, testing, inspections) on or after February 20, 2026.

Financial Assistance

TRACE provides financial support in the form of partial reimbursement of actual costs (net of applicable taxes) or notified costs, whichever is lower. The assistance is uniform across all MSMEs, regardless of their classification as Micro, Small, or Medium enterprises. Key highlights include:

Positive List Certifications: Up to 60% reimbursement of eligible costs.
Priority Positive List Certifications: Up to 75% reimbursement of eligible costs.
Annual Ceiling: Maximum reimbursement of ₹25 lakh per IEC per financial year.

Merchant MSMEs are eligible for support only for specific tariff lines notified under Annexure-VII, where exports are predominantly aggregator-based.

Application Process

TRACE features a two-stage online application process:

Intent-to-Claim (IC): MSMEs must file an online IC before obtaining certifications, test reports, or compliance documents.
Reimbursement Claim (RC): After obtaining the required certifications or compliance documents, MSMEs can file an RC online, tagging the relevant IC and submitting necessary documents such as certificates, invoices, proof of payment, and evidence of compliance requirements.

The IC remains valid for two years, and reimbursement is processed only after the MSME has successfully obtained the required certification or inspection outcome.

Governance Structure

The implementation of TRACE is overseen by the Sub-Committee on Export Quality and Technical Compliances, which is responsible for:

Advising on regulatory and procedural bottlenecks.
Recommending financial assistance levels and ceilings.
Revising the Positive and Priority Positive Lists of certifications.
Monitoring the impact of the initiative and supporting capacity-building programs.

The Directorate General of Foreign Trade (DGFT) is tasked with operationalizing and implementing TRACE, including managing online systems, disbursing funds, and coordinating sub-committee meetings.

Dynamic Positive Lists

TRACE includes Positive List and Priority Positive List certifications, which are dynamic and subject to periodic review. These lists cover certifications, inspections, and testing requirements for various sectors and products, including medical devices, food products, electronics, chemicals, textiles, and more. Some examples include:

FDA Certification (United States): For medical devices, food products, and pharmaceuticals.
CE Marking (European Union): For electronics, machinery, medical devices, toys, and personal protective equipment.
ISO Certifications (Global): For quality, environment, and food safety standards.
Rainforest Alliance Certification (Global): For agricultural products like bananas, cocoa, coffee, and tea.

Benefits of TRACE for MSMEs 

Cost Reduction: By reimbursing a significant portion of compliance costs, TRACE reduces the financial burden on MSMEs, enabling them to focus on improving product quality and expanding their global reach.
Enhanced Market Access: Meeting international standards and regulatory requirements opens doors to new markets, boosting export opportunities for Indian MSMEs.
Capacity Building: TRACE fosters institutional learning and data-driven refinements, helping MSMEs stay competitive in the global market.
Support for Merchant Exporters: Specific tariff lines eligible for support ensure that merchant exporters can also benefit from the initiative.

Stakeholder Feedback

The guidelines for TRACE are open for stakeholder feedback, as per Paragraph 1.07A of the Foreign Trade Policy (FTP) 2023. Stakeholders can submit their comments and suggestions within 30 days of the issuance of the Trade Notice via email at epm-dgft@gov.in.

Conclusion

TRACE is a transformative step by the Government of India to empower MSMEs and enhance their global competitiveness. By providing financial assistance for compliance and certification costs, the initiative addresses a critical challenge faced by exporters in meeting international standards. With its dynamic approach and focus on capacity building, TRACE is set to play a pivotal role in driving India’s export growth and strengthening its position in the global trade ecosystem.

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Source: DGFT

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