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DGFT’s Voluntary Disclosure Guidelines for Non Compliance/Violations related to Export of SCOMET items
DGFT’s Voluntary Disclosure Guidelines for Non Compliance/Violations related to Export of SCOMET items

January 29, 2025

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On January 15, 2024, the Directorate General of Foreign Trade (DGFT) has notified the Standard Operating Procedure/ Guidelines for Voluntary Disclosure of Non Compliance/ Violations related to Export of SCOMET Items and SCOMET Regulations. This SOP is designed to improve compliance by allowing exporters to voluntarily disclose any breaches. Importantly, it represents a key step up, providing exporters with an opportunity to correct past infractions and reduce the risk of severe penalties for failing to comply with export control laws.

In an era where global security and compliance are paramount, the Government of India has strengthened its export control mechanisms, particularly concerning Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) items. To ensure compliance with international commitments under conventions like the Weapons of Mass Destruction (WMD) Non-Proliferation Agreement and the Chemical Weapons Convention, India has made export control a critical focus in its Foreign Trade Policy (FTP) 2023.

Background: Why is Compliance with Export Controls Important?

Ensuring compliance with export regulations has been a significant focus of FTP 2023. The Indian government, in coordination with customs authorities, has been actively monitoring exports of dual-use items that could potentially be misused for prohibited purposes. Given India’s commitment to global disarmament and non-proliferation, exporters are expected to strictly adhere to these regulations.

To streamline this process, FTP 2023 introduced the Voluntary Disclosure Scheme, allowing businesses to proactively report compliance breaches. Such disclosures are assessed by the Inter-Ministerial Working Group (IMWG), which recommends necessary actions to DGFT under the Foreign Trade (Development & Regulation) Act, 1992 (FTDR Act).

The latest Public Notice No. 40/2024-25 expands on these efforts by introducing a structured SOP for voluntary disclosures, outlining the process for self-reporting and subsequent assessment by the authorities.

Scope of Self-Disclosure and Kinds of Violations:

Exporters can report past violations involving unauthorized exports or other breaches of the SCOMET guidelines. These violations may include:

  1. Export of goods/software/technology listed under SCOMET and undertaken without prior authorization
  2. Export to UNSC-sanctioned entities and individuals without knowledge
  3. Export of items not controlled under SCOMET and used/diverted for or manufacture of weapons of mass destruction or their delivery systems
  4. Use of an Export authorization issued in the name of an entity, by a new entity(s) after name change, merger, de-merger etc. without prior approval/amendment from the licensing authority
  5. Failure to obtain permission from the licensing authority by the company/entity registered or operating in India, which is involved in the manufacture, processing and use of SCOMET items, for facilitating or undertaking site visits, on-site verification or access to records/documentation by foreign organizations either directly or through an Indian party
  6. Failure to comply with reporting, record-keeping requirements, etc.
  7. Unauthorized access to technical data
  8. Unauthorized provision of technical assistance
  9. Any other violation relating to SCOMET items not listed above in terms of

FTDR/FTP/HBP

 

Key Considerations for Imposing Penalties in the Case of Voluntary Disclosures:

The VSD acknowledges that, even with voluntary self-disclosure, the parties involved may still be subject to penalties. However, it grants the IMWG the authority to take voluntary disclosure, along with the necessary supporting documents, into account as a mitigating factor when determining the extent of penalties. In addition, the VSD prescribes that the IMWG may inter alia consider:

− Whether the violation was intentional or inadvertent, systematic or not; 

− the reasons for violation;  

− whether an internal compliance has been instituted or improved; the degree of familiarity with export control laws; past violations; 

− And/or knowledge of senior management about the violation.

Procedure:

The process for voluntary self-disclosure broadly involves the following steps:

− The Indian exporter should file Appendix 10M informing the DGFT of the violation immediately after such a violation is discovered and confirmed internally.

− If the concerned authority confirms that such violation exists, and show cause issued by the DGFT, the Indian exporter must provide full disclosure and necessary documents within 30 days or extended deadline as provided. 

DGFT Actions on Voluntary Self-Disclosures

All voluntary disclosure cases submitted by exporters will be presented by the Directorate General of Foreign Trade (DGFT) before the Inter-Ministerial Working Group (IMWG) in its next scheduled meeting. This will occur only after the exporter has provided all necessary and supporting documentation. The IMWG will evaluate each case based on its merits, in accordance with the Export and Import Policy established by the Central Government and the applicable Indian laws and regulations.

The IMWG will review and make recommendations to the DGFT on the following actions:

  1. No Further Action: If the disclosed facts, supporting documents, and review findings are satisfactory, the exporter may be informed that no additional action is required.
  2. Issuance of a Show Cause Notice: If necessary, the exporter may be issued a Show Cause Notice for further clarification or response.
  3. Adjudication Order: If an adverse report is received regarding proliferation concerns, violations of export control laws and regulations, failure to submit mandatory documents within the prescribed timelines, or non-compliance with SCOMET policy conditions, an Adjudication Order may be issued. In such cases, the exporter may face legal consequences under the Foreign Trade (Development & Regulation) Act, relevant rules and orders, the Foreign Trade Policy (FTP), and other applicable laws.
  4. Follow-Up by DGFT: The DGFT will subsequently update the IMWG on actions taken, which may include regularizing the previous export or implementing appropriate measures based on the recommendations in points (1), (2), or (3) above.

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Public Notice No. 42.pdf

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