Introduction
Granting of export control licences
Comment
Control of exports in India has hitherto been implemented through a wide range of legislation, including the Atomic Energy Act 1962, the Chemical Weapons Convention Act 2000, the Environment Protection Act 1986, the Foreign Trade (Development and Regulations) Act 1992, the Customs Act 1962, the Unlawful Activities (Prevention) Amendment Act 2004 and the Explosives Act 1908.
In 2000 a single, unified control list of all dual-use items whose exports are restricted - namely, special chemicals, organisms, materials and technologies (SCOMET) - was introduced under the Foreign Trade (Development and Regulations) Act. The directorate general of foreign trade at the Ministry of Commerce is responsible for the implementation and administration of the act, in line with foreign trade policy and the Handbook of Procedures.
Exporters must apply for a licence to cover dual-use goods, services or technologies that fall under the SCOMET list. The list is drafted broadly and puts the onus on the applicant to decide whether its product falls within the list. This has resulted in violations in some surprising situations.
Granting of export control licences
Paragraph 2.49 of the Handbook of Procedures broadly lays down the procedure and criteria for the application and granting of export licences. All applications for SCOMET licences are scrutinised by the Export Facilitation Committee and the inter-ministerial working group at the directorate, according to the following considerations:
- the end user's credentials;
- the credibility of the declaration of end use of the item or technology;
- the chain of transmission of the item from supplier to the user;
- the potential of the item or technology to contribute to end uses that are a threat to India's national security, foreign policy, objectives of global non-proliferation or treaty obligations;
- the risk of exported items falling into the possession of terrorist organisations;
- the export control measures instituted by the recipient state;
- the capabilities and objectives of programmes of the recipient state relating to weapons and their delivery; and
- an overall assessment of the items' end use.
One issue that affects contractual trade between parties is the absence of defined timelines for the issuance of a licence. The process of examining the licensing requirements involves background checks of the entity - into both the technical and commercial aspects of the items to be exported - and relevant national security issues. These validation checks, whether conducted internally within the Ministry of Commerce or in consultation with other ministries, must be conducted within a reasonable time-bound process.
Legislation in other jurisdictions is more specific than that in place in India. For example, in the United States, legislation pertaining to export control on dual-use items is governed by Part 750 of the Export Administration Regulations, which lays down the procedure for application processing, issuance or denial, as monitored by the Bureau of Industry and Security, detailing specific timelines for every step.
However, other Indian legislative acts do prescribe time limits for various licences and approval. For example, the Companies Act 1956 lays down prescribed time periods to which the registrar must adhere when registering and certifying certain cases. Furthermore, the merger control regulations detailed under the Competition Act lay down a time-bound schedule within which the Competition Commission must consider a corporation's application for a merger.
The courts have considered the issuance of licences where there are no prescribed timelines. In Ganesh Chandra Bhatt v District Magistrate, Almora (AIR 1993 All 291), the court considered the grant of a licence application for a revolver under the Arms Act 1959. An application had been made for a licence, but an unreasonable period of time had passed with no reply being given by the concerned authority on the status of the application. The applicant filed a writ petition. In its judgment the High Court of Allahabad held that a reasonable period for refusal or grant of a licence, as stated by the act, should be three months. Therefore, if such communication is not forthcoming within three months, the licence should be deemed to have been granted.
The aforesaid practices and guidelines clearly call for the licensing authority to prescribe time limits for grants of licences and to seek certifications that are reasonable. If India is to collaborate with licensing authorities and security agencies globally to facilitate the smooth transition and flow of dual-use items, establishing a timeframe for the grant or denial of such licences will be a good step towards demonstrating an efficient and transparent system of governance and demonstrating its commitment to non-proliferation treaties and agreements.
For further information on this topic please contact Sanjay Nathani or Aman Bhalla at Economic Laws Practice by telephone (+91 22 6636 7000), fax (+91 22 6636 7172) or email ([email protected] or [email protected]).