Export Compliance Programs Are Prerequisites to Obtaining Certain Licenses, India Says

India's Directorate General of Foreign Trade this week issued new guidelines for how companies should develop and operate export control compliance programs for dual-use goods. The guidance states that companies must have export compliance programs in order to be eligible for certain export licenses, including India's "Global Authorisation for Inter-Company Transfers" scheme, which issues licenses for exports to company affiliates in certain third countries, and the country's "Open General Export License" scheme, which issues one-time export licenses for a specific time period.

Having an internal compliance program is a "pre-requisite for obtaining" licenses under those schemes, the directorate said. It added that "effective control of exports to prevent proliferation of dual-use items is possible only if all the stakeholders, including manufacturers of dual-use items, exporters" and others recognize "the need for such controls and support their compliance with all the resources available to them."

The guidelines outline how companies should craft a "compliance management system" and stress that senior leadership should build a company "compliance culture" that prioritizes export controls, including by featuring a "formal statement" on the company's letterhead, dated and signed by senior management. This statement should specify that the company doesn't allow any illegal exports or transfers of dual-use items and should include information on "action taken in case of non-compliance," including a potential voluntary disclosure to the government. It should also include information about the company's chief export control officer "in case of export control compliance questions by employees."

India also said companies should carry out compliance training to "educate all personnel" on their responsibilities, adding that open communications "foster a collaborative environment where ethical conduct thrives." Exporters should also have a process in place to classify all their items as either requiring an export license or not, and they should carry out a "transaction risk assessment" and evaluate possible red flags for each export. That should include:

• Screening the end use to make sure the item will not be used for purposes other than the "declared use," and screening the end user against U.N. sanctions lists.
• Screening the risk of diversion of items from authorized end users to unauthorized end users.
• Determining if there is "information of concern" about the stated end use, and if there is, the transaction shouldn't proceed "without clarifying the points of concern."
• Screening for warning signs, such as whether the customer is unclear about the end-use or end user, is willing to pay cash for an expensive item that would normally involve financing, the shipping route is abnormal, and more.

The guidelines include a case study of an electronics manufacturer, ETSL, which India says operates in the country and exports controlled semiconductor testing equipment to the U.S., Europe and East Asia. The company designed an export compliance program with a designated export compliance officer, employee training and mandated quarterly compliance reports, and it runs a denied party screening system. India said it "successfully obtained" an approval under the country's Global Authorization for Inter-Company Transfers scheme, "reduced average export licensing delays by 40%, and avoided potential penalties by proactively identifying one end-use violation through internal reporting." This shows how a company "can adapt compliance systems to meet international best practices and national regulations while enhancing operational resilience and global trust."

India said it's accepting public comments and recommendations for 10 days from July 14 to scometdgft@gov.in.