REVISED POLICY ON GLOBAL AUTHORISATION FOR INTRA-COMPANY TRANSFER (GAICT)

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REVISED POLICY ON GLOBAL AUTHORISATION FOR INTRA-COMPANY TRANSFER (GAICT)

Garima Prakash

@GarimaP

June 14, 2022

Public Policy

697

The Directorate General of Foreign Trade (DGFT) has notified the revision to the General Authorisation for Intra-Company Transfers (GAICT) policy.

The GAICT policy was first introduced in 2019. Under this policy, eligible exporters were allowed to obtain a bulk licence for intra-company re-export of imported SCOMET items, software, and technology under certain SCOMET categories. After the policy was introduced and the industry started availing this bulk authorisation, it was observed that certain aspects of this policy were limiting the industry from taking full advantage of this policy.

NASSCOM has extensively engaged with the industry and the DGFT to help update the policy and make it more useful. The revised policy contains most of the suggestions made by us.

A major change is that the policy has expanded the scope of transactions to cover intra-company transfers of multiple items to multiple destinations for a period of 3 years. Overall, the policy is expected to make it easier for the industry to manage their export control compliances. Specifically, the policy will benefit the industry in the following manner:

India headquartered companies can now avail of GAICT for export and re-export transactions with their foreign subsidiaries. Earlier, only transfers between an Indian subsidiary of a foreign company and its foreign parent/foreign subsidiary were covered under the scope of the GAICT policy. This significantly increases the scope of the transactions for which this bulk authorisation can be obtained, which in turn means that more Indian companies and a greater number of intra-company transactions are now eligible for obtaining a bulk authorisation under GAICT.
The requirement that the imported item should be imported under a licence exception has been done away with. A license exception is a type of authorisation issued by the US government to allow export/re-export of controlled items under certain conditions. In the earlier GAICT policy, only certain items imported into India from the US were covered, as there was a requirement that imported items should be imported under a licence exception. Removing this requirement significantly increases the scope of transactions for which this bulk authorisation can be obtained, as now items imported from many other countries can also avail the benefit of GAICT.
GAICT authorisation can now be obtained for transactions that involve a non-group company to perform the job, if the end-user is a group company of the exporter. This will significantly ease the licencing process for group companies that often contract the job (partly or fully) to be performed in India to a third-party entity. The transaction will be eligible for GAICT if the third-party is being engaged through the group company. Consider a transaction between A (foreign company), Company B (Indian subsidiary) and Company C (third-party entity, sub-contracted by A). B can now ship eligible SCOMET items to C under GAICT authorisation based on the end-user certificate issued by A. B can ship to C under GAICT authorisation based on the end-user certificate issued by A, even if A is the foreign subsidiary and B is the Indian parent company.
GAICT can now be obtained for carrying out any service in India, subject to approval on a case-by-case basis. Earlier, GAICT could be obtained for performing only certain services in India, such as, design, research, development, testing etc. Increasing the scope of services for which GAICT can be obtained will result in more companies being able to benefit from this bulk authorisation.
Applicants can now put in a generic description of all the items to be exported, as against specific descriptions of each item for which a GAICT is to be obtained. This is expected to make the previously tedious process of filling the application form much easier.
Technical drawings and technical specifications/data sheets/brochures now need to be submitted only where applicable. This will make it easier for companies to fill the application form, especially in cases where items do not have technical drawings, such as, software.
The declaration under Appendix 2S (iv) has now been amended to make it consistent with the applicability of export control laws of foreign countries in case of further re-export/transfer of item from the foreign parent or subsidiary company. For example, an item exported from India to Germany under GAICT, now does not need an authorisation of the Government of India for further modification and re-export from Germany to any other country.
Transfers under GAICT are still eligible only to certain notified countries, these include WA Participating States. However, exporters have now been given the option for a case-by-case approval by the Inter-Ministerial Working Group (IMWG) for export to any other country under the GAICT policy.
Validity of GAICT will now be for a period of three years from the date of issue of GAICT, irrespective of the expiry of the validity of the MSA, intra-company contract or licence exception (where applicable). Earlier, the validity of GAICT for three years was subject to the validity of the MSA, intra-company contract or licence exception. Making the validity of GAICT for three years will significantly ease the export control management process for companies.
The revised GAICT policy accepts the submission of a self-certified Internal Compliance Program (ICP). Earlier, self-certification of ICP was not expressly allowed. The revision will make it easier for companies to submit the national or internationally aligned ICPs to the DGFT by self-certifying it, instead of having an external audit/certification.
GAICT policy is now applicable only to SCOMET Category 8 items, software, and technology (except for certain items, such as, materials that absorb electromagnetic radiation, certain microwave transistors, certain radio equipment, certain sonars/sensors, certain unmanned submersible vehicles, certain robots, along with software and technology used for producing such items etc.). This limitation in applicability of GAICT is likely to not impact our industry as most of the transactions by our industry fall under this category. Moreover, there are other bulk authorisations policies issued by relevant government authorities for export of items under certain other SCOMET categories.
An undertaking needs to be submitted by the application allowing for on-site inspection by government of India. Moreover, applicant will not be eligible for GAICT if he knows or has reason to believe that an item may be intended for military end-use. These are safeguard mechanisms put in place to minimise the risks associated with bulk licences and ensure adequate compliance.

Our previous representations on the revision of GAICT can be found here and here. For more information, kindly write to garima@nasscom.in.

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Garima Prakash

Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech