DGFT announces relief for exporters, VSF imports exempt from QCOs

In a move welcomed by the textile industry, the Directorate General of Foreign Trade (DGFT) has granted an exemption from Quality Control Orders (QCOs) for viscose staple fiber (VSF) imports under the advance authorization scheme. This exemption applies specifically to VSF used in export-oriented production, not for the domestic market.

This decision comes after industry concerns regarding the impact of VSF QCOs, implemented earlier in 2023, on import processes and export competitiveness. The Ministry of Commerce and Industry (MCI) initially rejected a blanket exemption for all QCO-covered goods under the advance authorization scheme. Instead, they opted for a sector-wise approach, forming committees to address concerns.

The notification clarifies the QCO exemption for VSF is conditional. It applies only to Export Oriented Units (EOUs) and units in Special Economic Zones (SEZs) that meet pre-import conditions and utilize the imported VSF solely for manufacturing export products.

This exemption aims to address the challenges faced by exporters who struggle to source specific input materials due to buyer stipulations on material origin. By streamlining the import process for VSF, the DGFT hopes to benefit both exporters and their overseas suppliers. The exemption process involves consultations with relevant ministries, including the Ministry of Textiles, and the Bureau of Indian Standards (BIS). Safeguards are in place to prevent misuse, including penalties for non-compliance with the conditions set for utilizing the imported VSF.

Industry associations, particularly those representing the textile sector, have welcomed the move. They believe this exemption will boost India's textile exports. However, calls continue for similar exemptions for other QCO-covered products like polyester fiber, highlighting the ongoing needs of the industry.

The rationale behind QCOs is to regulate the import of low-quality goods, often originating from specific countries. However, the DGFT's recent action acknowledges the potential conflict between quality control and smooth functioning of export-oriented industries.

The advance authorization scheme itself has a compliance mechanism. Exporters must utilize imported materials within 18 months, facing penalties for non-compliance. Any unutilized VSF beyond this period needs to be destroyed, with additional financial obligations imposed on the authorization holder. This move by the DGFT signifies a recognition of the need to balance quality control with export competitiveness. While the VSF exemption is a positive step, industry stakeholders may continue to advocate for similar exemptions for other QCO-covered goods.